Economy rebounds in 1Q with 4.3% growth

•  ​Agriculture up 6.1% and Industry up 5.5%; key contributors as activities were not overly impacted by COVID but services lagged with 3% growth

Amidst the pandemic, the first quarter has seen the economy rebound by 4.3% reflecting a strong start for 2021 though the ongoing third wave of COVID-19 is likely to have waned the momentum thereafter. 

The positive growth comes on the back of a 1.8% contraction in the economy in the first quarter of last year and a 1.3% improvement in the fourth quarter.

The Department of Census and Statistics (DCS) yesterday released the January-March 2021 Gross Domestic (GDP) data, after a delay of several weeks, also a result of the third wave.

During the first quarter of 2021, among the three major economic activities, Agriculture (accounting for 7.8% of GDP) grew by 6.1% and Industrial (accounting for 29.2% of GDP) improved by 5.5%.

DCS said this was possible because all agriculture and industrial related activities were permitted to continue their businesses throughout the country even during the period of imposed restrictions. The Services sector (accounting for 57.4% of the GDP) expanded at a moderate rate of 3% during this quarter, when compared to a year earlier.

The fourth major component of the economy ‘Taxes less subsidies on products’ accounted for 5.7% and grew by 11%.

DCS said the performance of the economy even in the first quarter of 2021 was affected to some extent due to the spread of the second wave of the pandemic which started in October last year.

“Though, amidst the second wave, the economy continued to carry out most of the business activities, even under the COVID-19 imposed restrictions, except very few; such as tourism and entertainment-related activities. Further, throughout the first quarter of this year, we observed a new normalisation of lifestyles of people amidst the pandemic, and has been supporting economic activities to carry out their businesses at a satisfactory level,” DCS said in its statement.

Gross Domestic Product for Sri Lanka for the first quarter of 2021 at the constant price has increased up to Rs. 2,393,922 million from Rs. 2,295,432 million which was recorded in the first quarter of 2020. In addition, the Gross Domestic Product for Sri Lanka for the first quarter of 2021 at the current price has increased up to Rs. 4,173,783 million from Rs. 3,844,079 million, which recorded in the first quarter of 2020 registering 8.6% change in the current price GDP.

DCS recalled that the 1.8% contraction in 1Q of last year was mainly due to the risk carried with the spread of the global pandemic for the first time in Sri Lanka in early March 2020. To prevent the spread of this disease, the Government imposed a full lockdown period for the whole country, and as a result, all of the economic activities, except very few, totally collapsed.

“The economic growth rate of the first quarter of this year is calculated with respect to the declined GDP in the first quarter of last year. Hence, the first quarter of 2021 increased GDP will be reflected in the recovery of the economy which was being contracted as a result of the negative impact of the first wave of the pandemic,” DCS said.

Following is a brief analysis of the sectoral performance as furnished by the DCS.

In the first quarter of 2021, the agriculture activities as a whole have reported a substantial expansion by 6.1% when compared to the 6.5% negative growth recorded in the first quarter of 2020. Most of the agriculture activities have reported positive growth rates. Especially, ‘Growing of tea’ (37.9%), ‘Growing of cereals’ (34.8%), ‘Freshwater fishing’ (27%), ‘Growing of rubber’ (16%), ‘Growing of vegetables’ (14.5%), ‘Growing of fruits’ (6.9%), ‘Growing of oleaginous fruits; including coconut’ (6.4%), ‘Animal production’ (5.5%), ‘Forestry and logging’ (5.4%), ‘Growing of spices’ (4.9%). However, during this quarter, ‘Marine fishing’ (16%) and ‘Growing of rice’ (6.3%) have contracted significantly.

During the first quarter of 2021, the overall industrial activities have reported a considerable level of growth by 5.5%. This positive growth is basically underpinned by the expansion in the manufacturing, construction, mining and quarrying activities during this quarter.

The overall manufacturing industry grew by 6.8% during the first quarter of 2021 when compared to the same quarter in the previous year. The ‘Manufacture of chemical products and basic pharmaceutical items’ (20%), ‘Manufacture of other non-metallic mineral products’ (15.3%), ‘Manufacture of rubber and plastic products’ (12.9%), ‘Manufacture of textiles, wearing apparel and leather related products’ (8.4%), ‘Manufacture of food, beverages and tobacco products’ (6%), and ‘Manufacture of machinery and equipment’ (8.1%) have reported positive growth rates during this quarter.

Among the ‘Industrial activities’, the ‘Construction’ activity, which corresponds to 6.3% of share within the industry sector, recorded a moderate growth of 3.4%. Following that growth in the construction activity, the ‘Mining and quarrying’ activity, too, recorded a positive growth rate of 3.7% during this year. Meanwhile ‘Electricity, gas, steam and air conditioning supply’ activity has reported a positive growth rate of 2.7%. Further, the ‘Water collection, treatment and supply’ activity has recorded 3.5% of positive growth rate in this quarter.

The Service sector, too, reported a moderate growth of 3%. This expansion in the services sector was supported especially by the sub-activities of ‘Telecommunication’ (19.1%), ‘IT programming consultancy and related activities’ (14.9%), ‘Financial service activities’ (13.1%) and ‘Insurance’ (11.4). In addition, the ‘Wholesale and retail trade’ (3.7%), Transportation of goods and passenger including ware housing’ (1%), ‘Other personal services’ (2%), and ‘Professional services’ (3%) were expanded. However, during this quarter ‘Accommodation, food and beverages services’ related activities further showed a downturn by 31.9%, when compared to the first quarter of 2020.

Detail information on GDP estimates for the first quarter of 2021 is available on the DCS website: www.statistics.gov.lk/NationalAccounts/StaticalInformation/GDP.