Comment: Facing 2007 with renewed courage

Year 2006 ends today. Tomorrow, a new year dawns and people are ready to face the New Year with new hopes. All citizens expect peace, prosperity and relief. To plan the coming year we have to take stock of last year and learn lessons from the mistakes of the past.

Considering the economy and the business environment of the country, in 2006 the country faced tremendous challenges. It was the second year after the tsunami disaster and the main sectors of the economy, fisheries and tourism were recovering. However, some victims of the tragedy are still suffering after two years without permanent shelter and basic needs.

Not only internal factors, external factors beyond our control also caused a negative impact on our economy during 2006. The crude oil price reached a historic high during the year. It affected all sectors of the economy. The high oil price coupled with all other factors caused inflation to rise to double digits. By the end of 2006 consumer prices in Colombo rose to 19.8% and this was the largest gain since October 1996.

Responding to soaring inflation the Central Bank raised its key interest rates four times last year, and today we have the highest interest rates among the 14 Asia-Pacific economies.

With all these negative factors in 2006, Sri Lanka's economy grew at a satisfactory rate. The economic growth rate was 7.6 percent for the second quarter of this year while it was 7 percent in the third quarter.

The GDP growth in 2006 is expected to be around 7 per cent. In 2006 the unemployment rate recorded its lowest in the recent past. In addition there was political stability in the country while a broader political consensus is emerging. Crude oil prices went down during the latter part of 2006.

Sri Lanka's rupee was stable up to the third quarter of the year mainly due to the foreign funds received as tsunami aid. The apparel industry was struggling to survive under the new competitive environment it faced in the post MFA era.

The Government took a very bold decision to go ahead with long delayed mega infrastructure projects. The opposition to the Upper Kotmale hydropower project and Norochcholai coal power project was resolved by political and environmental organisations successfully.

Work on the Weerawila international airport project commenced. The Colombo Port expansion project was launched two weeks ago. A large-scale rural road development project, Maganeguma is now under way.

We enter 2007 amidst challenges we faced in 2006. If we do not find immediate solutions to these issues they will cause a multiple negative impact on our economy. Again peace is on the top of the agenda in the new year. Peace would definitely address most of the challenges our economy faces.

The economic forecast for the fourth quarter is doom and economic analysts expect a slower rate as a result of high interest rates and increased defence spending.

The Central Bank also confirmed this last week and said the fourth quarter performance would be lower than the growth in the first three quarters, with the lower than expected performance in tea, external trade and tourism sub sectors.

However, we know the untiring efforts made by the government to achieve peace. If this is the reality we will have to look for alternatives. This may be the objective of the newly appointed Economic Council by President Mahinda Rajapaksa.

In addition the apparel sector of the country seems to face a greater challenge in 2007. Our largest apparel exporters are now moving to India. These investments could be retained in the country.

The depreciation of the rupee would continue as tsunami funds decrease. The depreciation of the US dollar will ease this trend temporarily.

Though there are many challenges the nation has to face in the new year, as there is a correct leadership, the nation should stand together, overcome all challenges and give the future generations a better tomorrow. So let's rise to the occasion sinking petty differences, and do our duty for the betterment of the nation.