If there is clear stability in the country by November, the disruption may not be significant, Central Bank Governor, Dr. Indrajit Coomaraswamy told CNBC last week.
He said it was too early to forecast the impact on the economy of the Easter attacks. “There is a seasonality attached to the tourism sector when it comes to arrivals.
“The peak season is November through March. May to June tends to be fairly down months relatively speaking. The fact that we are going through the off-season will help mitigate the effects.
“It depends on how quickly we stabilise the situation,” the Governor said. Dr. Coomaraswamy said, “The extent of the disruption would depend on how quickly we can stabilise the situation.
“If one is able to bring normalcy and also to give confidence to the people and businesses that the situation is under control then it is possible that the impact can be contained.” Based on the data, previous incidents of violence had a negative impact only on the following tourist season.
Responding to a question on the downside risks to the growth forecast, Coomaraswamy said, “Tourism is roughly about 5% of GDP.”
He also explained that the low base effects of last year combined with the buoyant IT and industrial exports placed the country favourably on growth trajectories.
“In an inflation targeting framework, the exchange rate is the first line of defence and it has to be flexible. We will manage the exchange rate flexibly. We will intervene if there is a disorderly adjustment. In the last couple of days, we intervened a little in the market due to the shock that has come out of the blue.
“The exchange rate should not move in a way that is misaligned with the underlying fundamentals,” he said. - DP