Friday, 12 February 2021 21:54

Sri Lankan Banks affected by sluggish economic activity Featured

Sovereign’s weakened credit profile will affect Sri Lankan Banks Sluggish economic activity, external and domestic vulnerabilities.

This was muted private credit growth and the sovereign’s weakened credit profile are significant downside risks to the operating environment for Sri Lankan banks, Fitch Ratings says.

Fitch lowered its assessment of the operating environment score for Sri Lankan banks to ‘ccc’ with negative outlook from ‘b-‘ with a negative outlook, after the Sri Lanka sovereign rating was downgraded to ‘CCC’ from ‘B-‘ in November 2020.

The weaker sovereign credit profile could affect the banks’ operating environment, which is already weak due to the coronavirus pandemic.

Fitch expects Sri Lanka’s real GDP to expand in 2021 by 4.9% in 2021, albeit off a lower base, following a contraction of 6.7% in 2020.

However, Fitch forecasts are subject to a high degree of uncertainty regarding the evolution of the pandemic globally and in Sri Lanka.

 

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