Saturday Dec 14, 2024
Saturday Dec 14, 2024
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The economy in 2022 suffered the worst ever contraction of 7.8% with the fourth quarter dealing a severe blow of 12.4% negative growth as per data released by the Department of Census and Statistics (DCS) yesterday.
The 7.8% negative growth in the economy in 2022 was in contrast to 3.5% growth in the previous year whilst 2022 marked the third annual economic contraction in recent history after 2019 and 2020. During 2022, all three major economic activities of Agriculture, Industrial and Services suffered contraction. Industry sector suffered the worst contraction of 16% followed by Agriculture 4.6% and services 2%. In 2021, agriculture grew by 0.9%, industries by 5.7% and services by 3.5%.
Services sector share of the economy in 2022 was 56.1%, followed by Industry 30.3% and agriculture 8.7% while the ‘Taxes less subsidies on products’ component contributed 4.9% of share to the GDP. The latter sector shrank by 27% in 2022.
As per DCS data, the economy's contraction worsened in 4Q at 12.4% as against 11.8% in 3Q. In 4Q, the industry sector contracted by 30.1% and services by 3.9% whilst agriculture saw a recovery with 0.7% growth. The latter was helped by growing of rice, freshwater fishing and aquaculture, growing cereals and rubber. Taxes less Subsidies on products component shrank by 32% in 4Q. Last year 4Q was the worst performance of the economy since COVID-hit 2Q of 2020 when GDP shrank by 17.1%.
DCS said the gradual recovery in economic activities which was observed in the year of 2021 when compared to the year 2020, along with the reduction of the COVID-19 pandemic, reversed the direction of performance of many economic activities and resulted in contraction of the whole economy.
“This is mainly caused by the deepening of the economic crisis and youth and social unrest which began in early part of the year 2022. In addition, frequent power disruptions, shortages in fuel, raw materials, foreign currency which affected supply chain disruptions, amidst price escalations in both domestic and global markets, adversely affected the whole production process of agriculture, industry and services,” DCS said.
It said the Agriculture sector recorded a contraction during 2022, owing to shortages in agricultural inputs, particularly fertilisers and agrochemicals, increased cost of inputs as well as fuel shortages.
The industry sector as a whole reported significant contraction due to the subdued performance in manufacturing and construction activities. Scarcity of raw materials, high input prices, import restrictions, prolonged power disruptions, fuel shortage, foreign currency shortage, deterioration of purchasing power parity of consumers have been caused by this contraction.
The services sector witnessed a marginal shrinkage in the year of 2022 along with the contraction in the agriculture and industrial activities.
DCS also said during the year 2022, the depreciation of the Sri Lankan Rupee at a notable rate, increase of interest rate to a high rate, supply side disruptions happened in both locally and globally, administrative price adjustments have been caused to record a high inflation domestically and as a whole the Sri Lankan economy reported a slower performance during the year 2022.
Performance in Agricultural Activities
In the year 2022, the agriculture activities have recorded 4.6% of decline in the overall agriculture sector when compared to the 0.9% of positive growth recorded in the year 2021. The contraction in the agriculture activities were mainly driven by the ‘Growing of cereals’ (21.6%), ‘Growing of tea’ (15.9%), ‘Marine fishing and Marine aquaculture’ (15.4%), ‘Growing of rice’ (13.0%), ‘Animal Production’ (12.9%), ‘Growing of other beverage crops (9.1%), ‘Growing of vegetables’ (8.4%) and ‘Growing of rubber’ (6.7%). However, some agricultural activities such as ‘Forestry and logging’ (16.1%), ‘Agriculture supporting activities’ (14.7%), ‘Fresh water fishing and Freshwater aquaculture’ (11.9%), ‘Growing of oleaginous fruits’ (8.6%) and ‘Plant propagation’ (8.3%) have recorded considerable positive growth rates during this year.
Performance in Industrial Activities
During the year 2022, the overall industrial activities have reported a considerable negative growth rate of 16.0% compared to the 5.7% expansion reported in the year of 2021.
The overall manufacturing industry collapsed by 12.6% during the year 2022 when compared to the previous year. The ‘Manufacture of textiles, wearing apparel and leather related products’ is the only manufacturing activity which has reported an expansion of 8.1% in this year. The main manufacturing activity of ‘Manufacture of food, beverages and tobacco products’ has recorded a decline of 14.2% with the highest share (7.1%) to the total GDP in the manufacturing sector. In addition, all the other manufacturing activities have reported contractions in the year 2022. This was mainly driven by some manufacturing activities such as ‘Manufacture of rubber and plastic products’ (30.7%), ‘Manufacture of other non-metallic mineral products’ (29.0%), ‘Manufacture of furniture’ (26.4%), Manufacture of basic metals and fabricated metal products’ (27.6%), ‘Other manufacturing and repair and installation’ (21.7%) ‘Manufacture of machinery and equipment’ (19.0%) and ‘Manufacture of chemical products and basic pharmaceutical products’ (14.0%).
However, the activity of ‘Manufacture of coke and refined petroleum products’ has reported 58.2% of negative growth rate in the year 2022.
Among the ‘Industrial activities’, the ‘Construction’ activity, which corresponds to 8.0% of share to the overall GDP, recorded a negative growth rate of 20.9% during the year 2022. Further, the ‘Mining and quarrying’ activity too recorded a negative growth rate of 31.0% during this year. Meanwhile the ‘Electricity, gas, steam and air conditioning supply’ activity has reported a negative growth rate of 5.9% while the ‘Water collection, treatment and supply’ activity has recorded 0.6% of positive growth rate in this year.
Performance in Services Activities
In the year 2022, the performance of the Service sector has shrunk by 2.0% when compared to the year of 2021.
During the year 2022, the ‘Financial service activities’ and ‘Insurance services’ have reported shortfalls by 11.0% and 47.2% respectively. In addition, ‘Real estate and ownership of dwelling activities’ (12.1%), ‘Programming and broadcasting activities’ (11.0%), ‘Human health services’ (8.4%), ‘Professional services’ (4.0%), ‘IT programming consultancy and related activities’ (2.3%) and ‘Wholesale and retail trade’ (0.2%) have reported negative growth rates when compared to the previous year.
However, among the services related activities ‘Accommodation, food and beverage serving activities’ (27.0%), ‘Postal and courier services’ (5.7%), ‘Transportation of goods and services’ (3.5%), ‘Education (3.8%), ‘Telecommunication’ (3.1%), ‘Public administration and defence’ (1.2%) and ‘Other personal services’ (0.4%) have reported positive growth rates during the year of 2022.
Detail information of GDP estimates for the fourth quarter and year of 2022 has been published in the DCS website: http://www.statistics.gov.lk/NationalAccounts/StaticalInformation/GDP2015
