Sri Lanka's Q3 GDP grows 2.7% as Easter attacks weigh

Sri Lanka's economy grew 2.7% in the third quarter of 2019, showing signs of recovery from the Easter Sunday attacks earlier this year on the island nation that killed over 250 people and crippled the country's fastest-growing tourism sector. The country's services sector, accounting for about 60% of the economy, grew at 2.8%, compared with 4.3% last year, data issued by the statistics department showed on Wednesday.

Accommodation, food, and beverage service activities fell 7.5% in the September quarter, compared with the same period a year ago. Separately, Fitch Ratings said it had revised the outlook on Sri Lanka's long-term foreign-currency issuer default rating (IDR) to "negative" from "stable" while maintaining the IDR at 'B'.

"Revision of the Outlook to Negative from Stable reflects rising risks to debt sustainability from a significant shift in fiscal policy and the potential for roll-back of fiscal and economic reforms in the aftermath of November's Presidential elections," the rating agency said. Last month, Sri Lanka's former civil wartime defense chief Gotabaya Rajapaksa won the presidential election, after promising to secure the country against militant threats following Easter bombings.

The Easter attacks on luxury hotels and churches on April 21, for which Islamist militants claimed responsibility, killed over 250 people. Fitch said it expects growth to pick up to 3.5% in 2020 and 3.7% in 2021, from 2.8% in 2019.

"These forecasts reflect our expectation of a boost to growth in the short-term from the tax cuts, higher agricultural output and an ongoing recovery in tourism following last April's terrorist bombings," it added.