SL in transition to upper middle income economy

The Sri Lankan economy made further consolidation towards strong growth in 2013 by achieving a 7.3 percent growth rate and achieving 7 percent annual average growth rate over the past ten years, according to the annual report 2013 of the Ministry of Finance and Planning which was released last week.

The report highlighted the improvements in the economic indicators and said inflation has moderated at single digit level of five percent, well below the past 10 years average of 12 percent. Around 99.5 percent of employment level of the labour force, higher income growth, decline of poverty headcount to 6.7 percent, a continuous downward trend during the past ten years from 15.9 are achievements in 2013, the report said.

According to the report, there has been a marked increase in access to public utilities in the recent past. Access to electricity increased to 96 percent and access to safe drinking water increased to 88.7 percent of the population.

Around 45 percent of the population have access to pipe-borne water.

By 2013, mobile phone use hit 20.3 million against 2.2 million in 2004 while internet and email subscribers increased to 2 million. Credit card users has increased to one million.

The total vehicle stock of the country increased to 5.2 million in 2013 compared to 2.3 million in 2004.

The report said that these indicators demonstrate rising demand for improved road network.

The widespread nature of transportation facilities are associated with growth in employment and middle income living.

Three main factors health, education and improved standard of living have contributed vastly to poverty reduction and inclusive growth policies followed by the government since 2005 have contributed to these developments, the report said.

The economy has gained its international competitive edge while registering sustained improvements in the rankings noted in the Ease of Doing Business Index, becoming 83rd from among 189 countries.

In the global competitive index Sri Lanka ranked 73rd out of 148 countries in 2013-14 while in the infrastructure index, 81st out of 185 countries.Sri Lanka is ranked 21st among the top 50 service locations for IT, BPO and other knowledge industries.

Consistent policies adopted by the Government over a decade within the Mahinda Chintana policy framework enabled these achievements, the report said.

The development experienced in a more stable economic environment today was achieved amidst many challenges such as global economic conditions, extreme weather conditions, policy changes towards creating a value chain economy to address a structurally weak external trade balance and financing State enterprises.

The economy was confronted by the competitive pressure after abolition of GSP+ concession by the EU.

The global economic crisis affected exports, tourism, overseas employment and foreign investments.

The global economy was fragile in 2011-2012 and most of 2013. High oil price posed another challenge.

In responding to these multi-faceted challenges, the government encouraged greater flexibility in the exchange rate, imposed high tariff on the import of motor vehicles, credit ceiling in the banking system, increased Central Bank policy interest rates and imposed administrated price on petroleum, electricity, water and transport to regain their price to new cost structures and to address the extremely high trade deficit of 2011-2012.

The domestic economy was placed on price induced transitional adjustments to encourage local production, particularly in favour of food crops, dairy, fish, sugar to reduce import dependency.

The economy in 2013 demonstrated weaning risk, displaying signs of transition to an upper middle income economy, free of poverty, by sustaining high growth in excess of 7 percent with low inflation of around 6 percent, the report said.