First Capital Research in their Banking Sector 2021 report predicts that Sri Lanka’s GDP will recover back to 3.2% growth. This will be mainly supported by the recommencement of tourism activities.
The report also adds that the economy is in transition and poised for renewed growth. This is also driven by the vaccination drive. Sri Lanka has already got its first shipment in the last week of January 2021. This provides confidence for the Government to accelerate the relaxing of control measures.
It says that the Banking system has shown resilience in the time of COVID-19. The CBSL reduction of interest rates, enhancing market liquidity and financing by the government were aimed at supporting economic activity. “CBSL continuously injected liquidity supporting the financial system throughout and announced multiple moratoriums to provide breathing space for businesses.”
“Back-to-back moratoriums limit NPL shocks to record below expectations but banks take the safe zone with massive provisioning.”
The report also says that the digitization process launched by the banking sector has helped to save the banking sector from COVID-19 lockdowns building long-term resilience and using technology for strategic cost transformation.
Economic activity too will bounce back with a normalizing SME business cycle.
