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Sunday, 13 April 2014

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Inflation at single digit in 2013

Sri Lanka's economy rebounded recording 7.3 percen t growth in 2013, while inflation remained at single digit levels for the fifth consecutive year, gradually declining to mid-single digit levels by end of 2013.

Economic growth was broad based with positive contributions from all sectors, supported by favourable weather conditions and improved global demand.

With the steady rise in economic growth, GDP per capita income rose to US $ 3,280 in 2013. In spite of cost reflective upward adjustments to domestic energy prices, prudent monetary management and improved domestic food supply led to a gradual decline in headline inflation while core inflation moderated to its lowest level.

Monetary aggregates decelerated towards desired levels by end 2013, while the lagged effect of the previous year’s tight monetary policy measures and the steep decline in gold backed loans lowered credit disbursements to the private sector.

Low inflation enabled the Central Bank to ease monetary policy further to facilitate economic growth.

The improvement in the trade account and higher receipts from workers’ remittances and trade in services, with increased inflows to the financial account as a result of improved investor confidence resulted in a significant improvement in the balance of payments (BOP) enabling a build up of foreign reserves and supporting exchange rate stability. Continued commitment of the government to fiscal consolidation resulted in a further reduction in the fiscal deficit and debt to GDP ratio during the year. The financial sector remained sound and resilient amidst uncertainties that increased volatility in the global financial markets during 2013.

The realisation of the objectives of the macroeconomic policy package that was adopted in 2012 coupled with favourable inflation outcomes and expectations, allowed the Central Bank to ease monetary policy further during the year.

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