July 01, Colombo: Sri Lanka today raised its growth forecast for 2009 as it recorded the slowest ever inflation rate for the month of June favoring growth prospects of the economy.

The Central Bank of Sri Lanka today projected the economy to grow at a range of 3.5 to 4.5 percent from an earlier prediction of 2.5 percent for 2009 under a pessimistic scenario.

The Bank expects the opening up of the Northern and Eastern Provinces for economic activities due to the end of war and expectations of a global economic recovery in the later half of the year pave the way for economic recovery and further growth.

The annual inflation grew only 0.9 percent in June falling from a year-on-year rate of 3.3 percent for the month of May. The decline was continuing for the twelve months from a high of 28.2 recorded in June 2008.

The Central Bank attributed the decline to the tight monetary policies of the Bank that targets the reserve money to keep the inflation checked and falling commodity prices in the international market.

However, the Bank expects inflation to move gradually upwards during the remainder of the year, while remaining at single digit levels throughout the period.

The Central Bank says the annual average inflation rate which continued to decelerate since November, 2008 to reach 12.5 percent in June, 2009 compared to 14.7 percent in the previous month, will continue to decelerate reaching low single digit levels by the year end.