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| Sunday, 10 October 2004 |
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| News Business Features Editorial
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Investments driving force behind economic growth Central Bank (CB) says that investments have been the driving force behind the economic growth of the year 2004 as a result of increased investor confidence. The economy is on a sustainable development path and in over eight consecutive quarters from year 2002 the economy has recorded a growth of over 5%. However in the year 2002 and 2003 the driving force behind the performance was consumer confidence supported by a recovery in exports. The cessation of hostilities since February 2002 and the resultant peaceful environment which prevailed in the country paved the way for growth driven by the consumer demand, CB said in a press release. During the year 2002 and most of 2003 investors have followed a 'wait and see' policy and a quick response of investors cannot be seen. Improvement in investor confidence was first seen in the latter half of 2003. During the first half of 2004 investment expenditure grew indicating that investment, rather than consumption would provide the impetus for the economic growth in 2004. This boost of the investor confidence is clearly witnessed by the sustained increase in the private sector credit and noticeable increase in imports of investment goods. CB also said that prevailing low interest rates had also stimulated investment expansion. " This is heartening, as consumer - driven demand is unlikely to be sustainable in the long term without a corresponding rise in investment. The performance in the Colombo Stock Exchange also reflected a positive investor sentiment. This increase in investment is reflected in the projected growth for 2004 and, if it continues in the second half of 2004 will augur well towards capacity expansion for achieving a higher growth in 2005 and beyond," CB sources said. In the first half of the 2004 the GDP growth was recorded at 5.7%. Based on the first half performance and taking account of the impact of the drought on yala agriculture production and the impact of the high oil price on all economic sectors in the second half of the year GDP growth of the whole year 2004 is projected in the range of 5.0-5.5%. |
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