According to a Purchasing Managers’ Index, manufacturing activity in Sri Lanka fell in April 2023, following the Sinhala and Tamil new year holidays, owing primarily to production slowing by the end of the festival season.
As the festival season came to an end, all sectors, primarily food and beverages, saw a drop in new orders, while the textile industry continued to see a drop in demand due to economic recession in its main markets in Europe and the United States, according to a central bank survey of purchasing managers.
New orders in April dropped to 33 from 55.9, and Production fell to 24.5 from 55.8.
The employment rate fell to 42 from 45.2 due to declines in new orders and production compared to March 2023.
The manufacturing PMI moved to 34.7, down from 51.4 in March 2023.
“Expectations for manufacturing activities for the next three months indicated an improvement, anticipating a favourable development in the economic environment,” a statement said.
Sri Lanka’s rupee has started to appreciate after lifting a surrender rule in March which had kept the rupee down.
The central bank had earlier hiked rates to reduce domestic credit and phased out money printing, generating a balance of payments surplus before the surrender rule was lifted.
The service PMI also went down to 49.6.
“…Led by the decreases observed in New Businesses, Employment and Backlogs of Works,” the statement said.
“New Businesses declined in April 2023 compared to March 2023, particularly with the decreases observed in insurance, transportation and postal and courier activities sub-sectors. Business Activities in the services sector continued to grow, yet at a slower rate, in April.
“…[B]usiness activities related to wholesale and retail trade sub-sector remained stagnant despite festive demand and seasonal discounts.”
International Monetary Fund mission currently in Sri Lanka will update the macro framework on which a 3.0 billion US dollar program, but initial observations do not indicate a major deviation from earlier expectations.
Business activities for the next three months remained improved in April driven by positive sentiments regarding improvements in macro-economic conditions, the statement said.