The FinancialExpress/Dhaka

Sri Lanka's economy grew by 1.6 per cent in the quarter fromJuly to September, official data showed on Friday, as the country claws its wayback from its worst financial crisis in more than seven decades following arecord fall in foreign exchange reserves, reports Reuters. 

The expansion was the first since the end of 2021, with the upturn driven bya lower base, moderating inflation, a strengthening currency and lower interestrates, Sri Lanka's Census and Statistics Department said in a statement.

Sri Lanka's agriculture sector grew 3 per cent from a year earlier, with anincrease of 0.3 per cent in industrial output, while services grew by 1.3 percent, the department said.

Helped by a $2.9 billion IMF bailout in March, Sri Lanka's economy began apainful path towards growth. It locked down a second tranche of $337 millionthis week, although the IMF has warned the island is not yet out of the woods.

Sri Lanka's economy is expected to contract by 3.6 per cent this year, theIMF says, after shrinking 7.8 per cent in 2022.

Full-year growth will return next year, with the Sri Lankan economyprojected to grow 1.8 per cent, but challenging reforms lie ahead, such ashigher taxes, reforms to loss-making state enterprises and a completerestructuring of its foreign debt.

The Central Bank of Sri Lanka has slashed interest rates by 650 bps sinceJune to boost growth, in parallel with inflation shrinking to 3.4 per cent inNovember from a high of 70 per cent last September.

"Economic recovery really took root in the last three months of 2023with stronger recovery in the services and manufacturing segments," saidDimantha Mathew, head of research at First Capital. "This means growthcould be as much as 7 per cent-8 per cent for the fourth quarter," Mathewadded.

Photo caption:A farm worker drives a harvester through paddy fields, amid thecountry's worst economic crisis, in Kilinochchi district, Sri Lanka, Jul 28,2022. REUTERS