Forecasting the Economic Crisis of Sri Lanka: Application of Machine Learning Algorithms for Time Series Data

Abstract

The economic crisis in Sri Lanka began in 2019 and reached a crisis point in 2022 when protesters stormed the presidential palace in Colombo. Acute food, fuel, and other item shortages, soaring inflation, prolonged power outages, and a collapsing economy with few job opportunities all contribute to the populace's unrest. Sri Lanka still faces severe economic difficulties, and no one can say when they will be resolved. This country has seen the most prominent financial collapse since its independence in 1948. Unexpected inflation levels, a close to complete exhaustion of foreign currency reserves, a shortage of medical aid, and a rising price of essential commodities are the results. Numerous compounding reasons, including tax cuts, printing money, a countrywide regulation to move to natural or biological agriculture, the 2019 Sri Lanka Easter bombings, and the repercussions of the COVID-19 epidemic, have been cited as the root cause of the disaster. As early as 2022, these protests in Sri Lanka might be traced back to the country's economic woes. The primary driver of the current financial crisis in Sri Lanka is inflation. This article will look into Sri Lanka's inflation rates beginning in 2021. The inflation Rate of Sri Lanka has been forecasted for the next 6 months (through September 2023) using time series data. We used numerous Time Series Forecasting Algorithms for this multi-step ahead forecast. The results generated by these time series forecasters were in accordion with each other. Thus, we put forward the normalized results from each of these forecasting paradigms to get a better prediction on the inflation Rates, that Sri Lanka is supposed to face shortly (6 months), keeping in consideration of the current scenario being unaltered. The authors hope the Sri Lankan Administration will use the paper's predictions to take charge, which could lead to positive changes.