Industrial production down sharply in March stoking recession fears

The industrial production in the country recorded a massive pullback in March, days after the Purchasing Managers Index reported a big contraction in activities of manufacturing and services in April, in a forerunner to a likely recession in 2022 as a result of hyperinflation, power and energy crises, commodities shortages and harsh demand destruction policies instituted since April onwards.

The Central Bank which presented the two dismal high frequency numbers last week hinted at a potential recession, less than a month after it projected 1 percent growth for the year, cutting down sharply from an earlier projection of 5.5 percent growth.

“Economic growth is expected to record a setback this year…,” the Central Bank said last week.

The latest Index of Industrial Production Index (IIP) for March showed 10.2 percent plunge in the index between the two periods with apparel and food product manufacturing sectors ebbing the most.

The index recorded 107.3 index points in March 2022 compared to 119.6 index points in the same month a year ago when there was a burst in economic activity as the economic activities recovered after virusrelated restrictions.

An analysis of the major subdivisions of the IIP for March showed wearing apparel contracting as much as 20.4 percent while the food products manufacturing declining 16.8 percent from their year earlier levels.

Meanwhile, beverages was the only subdivision which recorded an expansion by 12.0 percent in March among the major categories of industries.

Unless there is a tiered system for interest rates and taxes for small and mediumsized industries and cut down on red tape in Sri Lanka, it will be a pipe dream for the country to attain industrialisation.

This is because while stability matters, stability without growth will pull back any economy into abyss.

The Central Bank last week acknowledged that the current inflation, barring the effects of the botched rupee float in March, cannot be contained through any more rate hikes.