President forecasts eight per cent growth despite terrorism

President Mahinda Rajapaksa said the LTTE terrorism was no threat to growth as he forecast that the island's economy would grow by eight percent in 2007.

President Rajapaksa also said he expected annual eight percent average growth over the next five years despite government forces battling Tamil Tigers in the island's northeast.

"If we are to raise the living standards of our people to match those of the developed world even to some extent, it is essential to maintain an average growth rate of eight percent for the next five years," he said.

The statement of Rajapaksa, who is also the Finance Minister, came after the release of Central Bank figures showing that the economy grew by 7.4 per cent in 2006, up from 6.0 percent in 2005. Last year's performance was the best since 1978 when the economy expanded by 8.2 per cent.

However, the Central Bank figures were lower than the economic growth estimate of 7.7 per cent for 2006 issued by the Department of Census and Statistics.

"Our 10-year plan is prepared with this (eight percent growth) target in mind," Rajapaksa said.

Officials said the two sets of figures differed because they used different yardsticks and moves were under way to harmonise the numbers.

Rajapaksa said the main challenge faced by the country during the past three decades was terrorism in the North and East and the search for a political solution to the Tamil separatist conflict which has claimed over 60,000 lives.

"During the last year the government's policy was to fearlessly combat terrorism and develop the economy, without making terrorism an excuse to delay development," Rajapaksa said.

He said the government was also forced to deal with rising fuel prices. His remarks came hours after the government announced a seven percent increase in the retail price of gasoline.

Official figures showed agriculture, industry and services contributed to growth in 2006.

"Economic expansion was broadbased in 2006 as all sectors grew at healthy rates," the Central Bank said in a statement.

Heavy fighting between troops and Liberation Tigers of Tamil Eelam (LTTE) guerrillas erupted in December 2005 and official figures show that at least 4,000 people have been killed since then.

On the downside, inflation rate jumped to 13.7 per cent in 2006, up from 11.6 per cent in 2005. The year-on-year inflation rate hit 20.5 per cent in January.