The Sri Lankan economy has contracted by 3.1% in the second quarter of this year against the value reported in the same quarter in the previous year, according to data released by the Department of Census and Statistics (DCS).

Outlining the background of the analysis the Department of Census and Statistics stated that, in the second quarter of year 2023, the pressure on short-term and long-term investments caused by high interest rates in the economy remained effective. 

Furthermore, the Department pointed out that high input costs have led to the deterioration of international competitiveness in terms of exports and as a result, it has led to a decrease in export volumes.

Along with those developments, the consumption pattern of the general public was limited to consuming mainly consumer goods due to the pressure exerted through the reduction in real income. 

Further, as an aggregate, expectations of domestic producers on the economy were at a lower level and continued to grow slowly. 

A key driver of those expectations was the uncertain situation related to exchange rates, it added.

Moreover, the high input costs have led to the deterioration of international competitiveness in terms of exports and as a result, a decrease in export volumes was also noted by the Department of Census and Statistics. 

According to the report, the Agricultural sector of the economy contributed by 10.4% while the Industrial and Services sectors contributed their share to the GDP at current prices by 27% and 56.8% respectively. 

The ‘Taxes fewer subsidies on products’ component contributed 5.8% to the GDP in the second quarter of the year 2023, according to the relevant department.

The department further highlighted that during this quarter, agricultural activities have expanded by 3.6% while Industrial and Services activities have contracted by 11.5% and 0.8% respectively.