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Sri Lanka central bank seen cutting rates to boost growth after Easter attacks: Reuters poll

Reuters |  29 -05 -2019

COLOMBO (Reuters) – Sri Lanka’s central bank is widely expected to cut its key interest rates at a meeting on Friday, a Reuters poll showed, to support the economy after tourism and investment plummeted in the wake of Easter Sunday bombings.

Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the bomb attacks, junior finance minister Eran Wickremeratne told Reuters last week.

A Reuters poll has predicted growth would slump to its lowest in nearly two decades this year.

The attack has badly hurt Sri Lanka’s tourism sector – the country’s third-largest and fastest-growing source of foreign currency – while many corporates have put their investment and expansion plans on hold, analysts say.

The central bank has yet to assess the economic impact of the Easter bombings, which killed more than 250 people. Militants Islamic State has claimed responsibility for the attack.

The economy is already struggling with growth slowing to a 17-year low of 3.2% in 2018 as a protracted political crisis and past policy tightenings sapped business confidence and cooled investment.

Seven out of 14 economists surveyed expected the Central Bank of Sri Lanka to cut both of its standing deposit facility rate (SDFR) and standing lending facility rate (SLFR) by 50 bps to 7.50% and 8.50%, respectively.