Sri Lanka to sustain stronger growth throughout 2011-2015
Sri Lanka is expected to sustain a slightly stronger growth momentum
of 6.6 percent on average throughout 2011-2015, states a RAM Ratings
report titled “Economic Outlook Sri Lanka.”
It says that this would boost the country’s standing in terms of GDP
per capita among its peers rated the same or a notch or two higher and
in turn strengthen Sri Lanka’s financing ability while attracting more
foreign investment thereby boosting the progress of its economic
development.Although inflationary pressures have increased this year
they are expected to moderate next year.
However, Sri Lanka is highly susceptible to volatile commodity prices
(for energy and food) unexpected supply shocks remain of utmost concern
to policy makers and industry players.
Moving forward the country anticipates to show strong improvement in
its management of price stability while its average consumer price
inflation is expected to be halved over the next five years.
The persistent uncertainties plaguing the global economy remain a key
downside risk for developing economies. Currently more than half the
nation’s exports are still centered on the US and EU markets. Given this
a shift away from its present dependence will help cushion growth due to
the apparent downside risks.
From the domestic viewpoint further policy initiatives are needed, to
rationalise the Governments moderately high budget deficit to maintain
sustainable growth and achieve medium term growth estimates for
continued economic development. On a positive note both current account
and fiscal deficits are expected to be reduced as brighter economic
prospects will shift the burden of growth and employment creation to the
private sector on the assumption that the government maintain its fiscal
consolidation, states the report.
The report says that the sudden rise in preference for consumer
durables formally viewed as luxury items and properties is a welcome
boon that indicates revived optimism on political and economic
stability. The report says that “ We anticipate a full year’s growth of
12.5 percent for private consumption in 2011 which is seen to taper to a
more sustainable 8.8 percent in 2012. Public investments have helped Sri
Lanka's economy sustain through the war era that had also been
increasing foreign interest in the country largely led by India. Fiscal
consolidation efforts have underscored the government’s commitment to
macro economic stability while boosting investor confidence. Investment
activity is expected to accelerate 11.7 this year followed by 8.1
percent in 2012.