Economy grew by 6 percent in Q1, 2013

by Gamini Warushamana

The Sri Lankan economy grew by 6 percent in the first quarter of the year according to national accounts data released by the Department of Census and Statistics last week.

The GDP growth rate in the corresponding period of the previous year was eight percent and a slow down can be seen in all three sectors but is significant in the agriculture sector.

The agriculture sector growth rate declined from 12 percent to two percent, industries from 10.8 percent to 10.7 and service from 5.8 percent to 4.3 percent compared to the first quarter of 2012.

In external trade, exports declined by 1.9 percent and imports by 10.5 percent. Imports of investment goods have declined by 5.4 percent. The total exports of the country has further declined to 14.6 percent of the GDP from 17.1 in the first quarter of the previous year. Total imports is 27.8 percent of the GDP, a decline from 35.7 in the first quarter of the previous year. The service sector contributes 56.4 percent of the GDP while the industrial and agriculture sectors account for 31.3 and 12.3 percent.Inflation as measured by the GDP deflater was 8.5 percent and according to the Colombo Consumer Price Index (CCPI) inflation was at 9 percent.

Economic analysts said that the slow down in growth was due to slow recovery in the global economy and adverse weather conditions during the period and resulting decline in the agriculture sector. The Central Bank maintained tight monitory policy from February 20012 to keep inflation low and balance the external sector deficit.

The growth is on par with Asian growth forecasts and broadly stable economic growth can be expected this year. According to IMF forecasts in April this year, economic growth in 2013 and 2014 will be 6.3 and 6.7, analysts said.

According to ADB Outlook 2013, Developing Asia's gross domestic product is forecast to expand by 6.6% in 2013 and 6.7% in 2014, following the slower 6.1% pace in 2012. According the 'Global Economic Prospects' of the World Bank, risks from advanced economies have eased and growth is firming, despite ongoing contraction in the Euro Area.

However, the pick-up in developing countries will be modest because of capacity constraints in several middle income countries, said the report.

Global GDP is expected to expand about 2.2 percent this year and strengthen to 3.0 percent and 3.3 percent in 2014 and 2015. Developing-country GDP is now projected to be around 5.1 percent in 2013, strengthening to 5.6 percent and 5.7 percent in 2014 and 2015.

Therefore analysts say that the Sri Lanka's first quarter economic performance is encouraging and on par with regional and global trends.