Government Revenue Growth Surpasses Projections – Economic Boost

News Today: Government Revenue Collection Surpasses Expectations, Driving Economic Growth

According to First Capital Research, the Government revenue collections are meeting expectations, projecting that government revenue will reach 12.3% of GDP by the end of 2024, amounting to Rs 3.5 trillion, reflecting a 17% growth. For the first five months of 2024, from January to May, government revenue has already increased by 44%, reaching LKR 1.6 trillion, achieving 47% of the target.

Additionally, private credit shows signs of recovery after a year of declines due to high interest rates, with private credit growing by 2% in early 2024, on track to reach a 7.5% growth for the year. Business confidence has surged, reaching a 12-month high in June 2024, with all three PMI indices crossing the neutral threshold of 50 for the first time this year.

Tourism also presents a positive outlook, with tourist arrivals expected to reach 2.1 million by the end of 2024 and potentially surpass the 2018 peak in 2025 with 2.5 million arrivals. Tourism earnings are projected to exceed USD 3 billion by the end of 2024 and USD 4 billion by 2025. Meanwhile, the Balance of Payments is expected to show a surplus of USD 1.9 billion for 2024, though this may reduce to below USD 1.0 billion in 2025 due to resumed debt repayments.

Despite robust growth in early 2024, uncertainties and a high base effect may slow growth in the second half. GDP growth expectations are maintained at +2.0% to +3.0%. With elections approaching, investment decisions may be cautious, but a commitment to the IMF program by leading political parties could reduce policy uncertainties.