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| Sunday, 25 April 2004 |
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Sri Lanka's economy on the up Sri Lanka's economy appears to be on the upward trend despite recording a growth rate of 5.5 per cent last year, provided the political situation in the country remains stable and peaceful, according to a survey conducted by the United Nations Economic and Social Commission of Asia and Pacific. 'Economic and Social Survey of Asia and the Pacific 2004' is a publication of the Economic and Social Commission of Asia and the Pacific (ESCAP) Secretariat based in Bangkok. This survey was conducted, based on the assumption of major internal and external shocks coupled with the ceasefire agreement, which occurred in the recent past. Dr. Dushni Weerakoon of the Institute of Policy Studies, elaborating on the ESCAP 2004 forecast on the current survey, said that it was based on facts and figures from the latter part of last year (2003). According to the survey, the political standoff, which prevailed in November had an impact on the overall growth. However, this survey forecast would change on the basis of policy decisions taken by the newly elected government, which were not yet spelt out by anybody ,she added. She said that the report noted that domestic economic activities had benefited from the ceasefire agreement between the Government and the LTTE, which attracted the investors both domestic and foreign. The survey also revealed sharp improvements in tourism, international trade and financial services. Dr. Weerakoon said that agricultural production is estimated to have expanded by 1.7 per cent despite floods in some parts of the country, with the resumption of farming activities in war affected areas in the North and East. The service sector has also provided an important stimulus to GDP, growing by almost 7 per cent in 2003 as the tourism sector rebounded with an increase of nearly 27 per cent in tourist arrivals. The industrial sector is estimated to have grown by 5.8 per cent, with a much improved performance in exports of textile and apparels. She said that tighter monetary policy, improved domestic supply conditions and stability in the exchange rate have helped to moderate consumer prices quite considerably, with the inflation rate falling to an estimated 6.3 per cent at the end of 2003 compared to a rate of 9.6 per cent in 2002. In the ESCAP region, there was a noticeable decline in the inflation rate. The survey also revealed that the time was opportune to diversify the production base towards services to exploit Sri Lanka's strategic location and skilled labour force, without depending on the garment industry, particularly in the face of the phasing out of the textile and garments quota system by January 2005, she elaborated. The rupee reflected some appreciation against the dollar since September, relatively to the level prevailing at the end of 2002, partly due to the continuous weakening of the dollar, and higher capital domestic inflation rate, she added. Financial floor in the country significantly improved during 2003 as a result of a sharp rise in long term concessional borrowing by the government for its donor supported rehabilitation and construction work, she said. The report notes that the level of total debt dropped from over 105 per cent of GDP in 2002 to around 100 per cent at the end of 2003. However, the report cautions that despite the improvement as a result of fiscal consolidation efforts directed at better debt management, the country's overall debt still remains at a relatively high level. The Poverty Reduction Strategy Paper (PRSP) programme is identified as a direct response to these issues given that its core objectives are broadbased growth and poverty reduction. Sri Lanka is one of the 8 countries that had completed the PRSP by the end of 2003 in the ESCAP region. It is said that assessing practicality of this programme is not yet possible, since it had not been implemented still, she said. This report launched annually by the UNESCAP was released in Hong Kong last week. HHS |
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