Sri Lanka's economy shrank by 3.7 percent in the September quarter from a year earlier, partly due to fallout from a terrorist attack against the country's international airport, the central bank said Monday.

The central bank said gross domestic product (GDP) contracted 0.7 percent in the first nine months. This stood in stark contrast to an expansion of 6.4 percent in the corresponding period last year.

The sharp contraction in the third quarter compared with 0.4 percent growth in the second quarter.

"Several adverse factors that confronted the Sri Lankan economy during this period were responsible for this unusual negative growth," the bank said in a statement.

It said a Tamil Tiger attack against the island's only internationa airport in July contributed to the slowdown.

The rebel strike caused a loss of

some 1.5 billion dollars to the war-battered economy, which relies heavily on tourism, officials have said.

Deputy Finance Minister Bandula Gunawardena said the economy is expected to shrink 0.5 percent in the full year, sharply lower than the 6.0 growth seen last year.

Gunawardena's United National Party came to power at the December 5 elections promising an economic revival and an end to the island's dragging Tamil separatist war.

The poor economic news came a day after the government warned the country is also facing a major debt crisis.

Gunawardena said Sunday debt servicing in the first three months of 2002 would be 46 billion rupees (500 million dollars) while anticipated revenue was much less.

"There will be no money for any other government expenditure after we service the debt, " Gunawardena told reporters.

Debt servicing next year was seen at 295 billion rupees (3.2 billion dollars) compared with estimated government revenue of 275 billion (2.9 billion dollars).

It will be the first time that Sri Lanka's debt servicing exceeded total state revenue, Gunawardena said.