- GDP growth for 2Q 2017 was better than expected, grew by 4.0%YoY in the 2Q2017 with the industrial and the services activities recorded higher growth rates of 5.2%YoY and 4.5%YoY respectively.
FC Research upgrades private sector credit growth for 2017E to 16% from 14% amidst a possible pickup towards year end. In spite of a high private sector credit figure in June 2017 we believe overall credit is likely to continue to remain under check.
We believe inflation will be upward pressure toward October and beyond with the floods in May 2017 affecting the supply in the current growing season. As a result there could be possible supply side shortages towards October and beyond but may continue to remain around the 6.0% mark throughout the year.
- Sri Lanka’s forex reserves rose to USD 7.7Bn in Aug 2017 from USD 6.7Bn in July, helped by USD 550Mn syndicated loan and dollar purchases by the CBSL. The CBSL had net purchased USD 975Mn from currency markets so far this year. FC Research believe Foreign Reserves are now at comfortable levels.
- During last two months CBSL bought down its holding in Government Securities from LKR 138Bn to below LKR60Bn as at 21st Sep 2017.
- Economists said the Fed will still pencil in three hikes for 2018, but with the first of those not projected until June, versus March in the Fed’s previous set of forecasts. Sep-17 survey shows Fed expects to raise policy rates in Dec-17 and no further hikes are expected after Dec-17 until after May-18.
FC Research believes that considering the current economic conditions with better than expected GDP growth level and the considerable improvement in the Economic Health the current monetary policy is appropriate and no change is required
Read the full report here: Pre-Policy Analysis
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