The contraction is the largest in the crisis-hit island nation’s 75 years of independence.

Sri Lanka’s crisis-hit economy shrank by a record 7.eight % final year, official information shows, as the nation struggles with its worst economic crisis in seven decades.

The island’s fourth-quarter gross domestic item (GDP) contracted by 12.four %, according to the figures released by the state-run census and statistics division on Thursday.

Sri Lanka’s development is anticipated to shrink by three % this year, Moody’s Investors Service stated on Monday but development is anticipated to rebound in 2024.

An unprecedented financial crisis sparked substantial protests in the island nation, culminating final July when a mob stormed the household of then-President Gotabaya Rajapaksa, forcing him to flee the nation and resign.

Due to the fact then, a new government has worked to repair Sri Lanka’s battered public finances and safe a sorely required International Monetary Fund (IMF) bailout.

Final year’s contraction – the largest in the country’s 75 years of independence – compared with three.five % development in 2021 and a four.six % contraction in 2020 as the coronavirus pandemic hit.

It was “caused by the deepening of the financial crisis … frequent energy disruptions, shortages in fuel, raw components, (and) foreign currency”, the census and statistics division stated in a statement.

The information showed some improvement in Sri Lanka’s fiscal position with inflation moderating to about 50 % in February, down from a record higher of 69.eight % in September.

President Ranil Wickremesinghe has raised taxes and ended generous subsidies on fuel and electrical energy to enhance government income soon after his predecessor defaulted on Sri Lanka’s $46bn foreign debt final year.

The reforms are a precondition of a $two.9bn rescue package from the IMF, which Sri Lanka expects to finalise subsequent week.

But the tax and price tag hikes have been roundly unpopular, triggering protests and industrial stoppages about the nation.

About 40 trade unions warned on Thursday they planned a basic strike subsequent week if their demands for concessions on the austerity programme have been not met.

Sri Lanka aims to announce a debt-restructuring approach in April and step up talks with industrial creditors ahead of an IMF overview of a bailout package in six months, its central bank governor stated final week.

Wickremesinghe has stated Sri Lanka can anticipate to stay bankrupt till at least 2026 and insisted his government has no choice but to implement the reforms demanded by the IMF.

The census and statistics division stated the agriculture sector shrank four.six % final year, even though industries contracted 16 %, and solutions dropped two % from a year earlier.

Sri Lanka’s economy shrank 11.eight % in the July-September quarter from a year ago, the second-worst quarterly contraction ever for the nation.

“These numbers are broadly in line with expectations. In the final 3 months of 2022, Sri Lanka was hit by quite higher inflation, fuel shortages and higher interest prices,” stated Sanjeewa Fernando, senior vice president of investigation at Asia Securities.

“For the rest of this year, with IMF funds anticipated, the central bank ought to be in a position to preserve the currency strengthened, ultimately minimize interest prices, and continue to see inflation ease.”