Sri Lanka’s economy could contract by -3.5 per cent or -4.0 per cent in 2023 after shrinking -11 per cent last year, President Ranil Wickremesinghe said. “From 2024, we will take this economy to positive growth. We are creating a strong country that does not bow down to anyone and is debt-free,” he said.

Speaking at a religious event, he said: “The growth rate of the economy in 2022 was -11 per cent and could be -3.5 per cent or -4.0 per cent this year.”

If economic programs which includes difficult changes in policy such as higher taxes, cuts in public expenditure and debt restructuring were not implemented then Sri Lanka could witness further political unrest, he said.

“No one can prevent the country from falling into crisis again similar to May and June last year,” Wickremesinghe said.

The island nation of 22 million people has struggled with challenges during the past year ranging from a shortage of foreign currency to runaway inflation and a steep recession - the worst such crisis since independence from Britain in 1948.

The government signed a preliminary agreement with the International Monetary Fund (IMF) in September for a $2.9 billion programme but has to put its debt on a sustainable path before disbursements can begin. Meanwhile Sri Lanka’s National Consumer Price Index (NCPI) eased year-on-year to 59.2 per cent in December, after a 65 per cent rise in November, the statistics department said on Monday.

Food prices were up 59.3 per cent in December from a year ago, while non-food inflation was 59 per cent higher, the Department of Census and Statistics of the island nation said in a statement.

“We are projecting inflation to hit about 51 per cent by March,” said Dimantha Mathew, head of research at Colombo-based First Capital Holdings. “It will take time because the government has announced energy price increases.”