Outlook of Sri Lanka’s economy positive for 2011 - Dr. Sirimal Abeyrathne

By Gamini WARUSHAMANA

Economic analysts say that the outlook of Sri Lanka’s economy this year is positive and the country will catch up on its three decades which were lost due to the conflict in the North and the East but long term sustainability of the growth is doubtful due to many reasons.

Dr. Srimal Abeyrathne of the Department of Economics, University of Colombo said that the post war economic revival will continue this year.

Agricultural and fisheries sector revival, improvement of economic activities, reconstruction and rehabilitation work, growth in tourism sector and increase of capacity utilisation are included in the post war economic revival.

Accordingly, the economy will grow between 7-8 per cent, he said.

Dr. Abeyrathne said that sustainability of the economic growth is doubtful because we have failed to do essential policy reforms. We have to improve the business climate, investment climate and facilitate growth by introducing vital policy reforms.

It is also important to prepare pre-conditions essential for achieving hub status in five sectors that government has targeted.

Agricultural sector growth in the recent past has to be reviewed and should redirect the policies because achievements are insignificant after spending so much of money and effort.

Agricultural output is still low and poverty remains high in the rural and state sectors.

Macroeconomic stability is another factor that determines the economic growth. At present the external sector and exchange rate stability is satisfactory.

However, sustainability will depend on government policies. Foreign investments are coming in as a result of high returns compared to other countries.

Still the country has not been able to earn stable foreign exchange by increasing our export revenue. We receive foreign exchange to our current account by foreign remittance and to the capital account by borrowing which are unstable. Therefore, any unexpected shock will be painful, he said.

External factors are also crucial to achieve the anticipated economic objectives. According to the IMF, global economic recovery is proceeding broadly as expected, but downside risks remain elevated.

Most advanced economies and a few emerging economies still face large adjustments.

Their recoveries are proceeding at a sluggish pace, and high unemployment poses major social challenges.

However, many emerging and developing economies are again seeing strong growth, because they did not experience major financial excesses prior to the Great Recession.