ECONOMYNEXT – Sri Lanka gross domestic product (GDP) contracted 1.6 percent in the first quarter of 2022 the state statistics office said as monetary instability took its toll in the worst currency crisis in the history of the country’s intermediate regime central bank.

Agriculture contracted 6.8 percent, industry shrank 4.7 percent but service grew 0.7 percent.

The economy started slow compared to 2021 “due to adverse effects of some factors such as inflation, foreign exchange devaluation and dollar deficit,” the statistics office said.

Forex shortages are a problem associated with intermediate regime central banks (flexible exchange rates).

Sri Lanka ‘s central bank started to employ increasingly aggressive open market operations after 2015 with the adoption of a highly discretionary flexible inflation targeting coupled with output gap targeting (printing money for growth) three currency crises in a row.

The GDP deflator was 19.3 percent and the national consumer price index grew 18.6 percent as the central bank inflated the economy.