Sri Lankan inflation falls to nine-year low as economy stabilizes Magic Post

Sri Lanka’s inflation rate fell to minus 1.7% year-on-year in November, following a decline to minus 0.7% in October, according to official data released on Monday.

The decline marks a significant recovery for the country after enduring its worst financial crisis in decades. The National Consumer Price Index (LKNCPI), which tracks general retail price inflation, showed that food prices remained stable at 0.0% in November, compared to 1.3% in October .

Prices in the non-food category fell to minus 3.1%, an improvement from minus 2.3% the previous month.

Analysts attribute the fall in inflation to various factors, including reduction in electricity tariffs, fuel prices and the appreciation of the Sri Lankan rupee. This is the lowest inflation rate Sri Lanka has seen in nine years, a sign of the stabilization of its economy.

Shehan Cooray, head of research at Acuity Stockbrokers, noted that inflation is expected to remain at these levels for the first two months of 2025. However, he also warned that if foreign exchange pressures were felt, particularly due to of the resumption of vehicle imports, inflation could gradually increase. , although it is unlikely to exceed 4%.

Sri Lanka saw record inflation in 2022, largely due to a financial crisis triggered by a sharp decline in dollar reserves.

The country began to stabilize after securing a $2.9 billion bailout package from the International Monetary Fund (IMF) in March 2023. Following the low inflation rate, Sri Lanka’s central bank set the month last a new key rate of 8%, easing monetary parameters to support a new economic recovery.

Sri Lanka’s economy is expected to grow by 4.5 to 5 percent in 2024, slightly exceeding the World Bank’s estimate of 4.4 percent, according to central bank data.