Macroeconomic Forecast Sri Lanka

Headline consumer price inflation recorded a 1.3 percentage point (pp) drop to 5.1% y-o-y in October - hitting a 14-month low. Core inflation, which remained above the headline rate for the sixth straight month, fell to 5.6% y-o-y (from 6.9%). Food inflation continues to aggressively head lower, coming in at 3.8% y-o-y, while non-food inflation held steady at 6.3% y-o-y. At the moment, we expect disinflation to continue into 2012, with our year-end inflation forecast currently at 4.1%. Inflation through H112 is expected to be much lower than in the latter half of 2012.

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