Sri Lanka Experiences Record Deflation
Sri Lanka has recorded its highest deflation rate since 1961, signaling a major shift in its economic trajectory.
According to the Department of Census and Statistics, the country’s inflation dropped to a remarkable -5.8% in November 2024, compared to 70.2% during the same period last year.
Sharp Decline in Inflation
The steep decline in inflation has been attributed to reduced food prices and stabilizing fuel costs, alongside tightened monetary policies implemented earlier this year. Officials noted that the easing of global commodity prices also contributed significantly to this economic shift.
Mixed Reactions to Economic Trends
While deflation can lead to increased purchasing power for consumers, economists warn of potential risks such as reduced investments and slow economic growth. “The focus now should be on balancing price stability with measures that stimulate economic activity,” said an economic analyst in Colombo.
Government’s Outlook
The Sri Lankan government welcomed the deflation as a step toward stabilizing its crisis-hit economy, which has been recovering from severe financial turmoil over the past two years. However, officials also emphasized the need to sustain reforms and maintain fiscal discipline to ensure long-term economic health.
The development highlights both the opportunities and challenges facing Sri Lanka as it navigates its path to economic recovery.
