SL economy stable - SCB Global Research
The Standard Chartered Bank (SCB) Global Research has described Sri
Lanka as stable on the policy front and there was no pressing need to
adjust policy levers at present.
“Sri Lanka's macroeconomic environment remains stable and we see
pressing need to adjust the policy levers at present. With domestic
macro conditions expected to become more supportive as 2013 progresses,
the mood is one of cautious optimism,” according to SCB in its latest
Asia Focus research. Inflation continues to moderate, while growth
remains stable.
We maintain our 2013 GDP growth forecast of 6.5%, but with risks to
the downside due to the slower-than-expected export recovery in H1-2013,
the Bank said. Although domestic and global supply conditions are
expected to improve, inflation remains elevated and is still a risk,
owing to domestic factors. The expected moderation in headline inflation
to 6.5% in Q2-2013 and Q3 is largely due to base effects and
improvements in domestic supply.
We expect inflation to spike in Q4-2013 due to a pick-up in domestic
demand and private sector investment resulting from policy easing and
lower interest rates.We expect the external demand outlook to improve in
H2-2013 due to brighter growth prospects in Sri Lanka's key export
markets in EU and the US (which together contribute 50% of total export
earnings). We see the shortfall in tax revenue as a key risk to macro
stability.
The pick-up in domestic activity expected for the remainder of this
year is likely to generate higher tax revenue; however, our GDP growth
forecast of 6.5% suggests that tax revenue may fall short. |