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Sri Lanka's economy to grow with restoration of peace, Central Bank says
Mon, Apr 5, 2010, 08:12 pm SL Time, ColomboPage News Desk, Sri Lanka.
Apr 05, Colombo: With the restoration of peace in the country following the three-decade long conflict, the Sri Lanka economy supported by appropriate policies, is poised to grow, the Central Bank said today.
Submitting the 60th Annual Report of the Monetary Board of Central Bank for 2009 to the President Mahinda Rajapaksa in his capacity as the Finance Minister, the Bank said the economy of Sri Lanka was resilient growing at 3.5 percent in 2009 amidst challenging domestic and external conditions.
The economy affected by the intense fighting earlier in 2009 steadily recovered since the second quarter of the year, resulting in a notable growth of 6.2 percent in the final quarter.
The report said all the major sectors of the economy contributed positively to economic growth in 2009 despite being slower than previous year.
The Agriculture sector grew at 3.2 percent down from the 7.5 percent in 2008 due to the decline in tea and paddy output. The Industry sector slowed down to a growth rate of 4.2 percent compared to a growth of 5.9 percent in 2008 while the Services sector grew by 3.3 per cent in 2009 contributing 55 per cent to the overall economic growth.
External trade, which contracted in 2009 due to the impact of the global economic crisis, improved towards the latter part of the year, the Bank said.
However, the inflation declined sharply in 2009 due to the stringent monetary policies adopted by the Central Bank over the last two years and due to the significant decline in global commodity prices.
Average inflation rate which reached 28.2 percent in June 2008 dropped to 3.4 percent in 2009, the lowest since 1985. The drop in inflation allowed the Bank to maintain its interest rates down and relax its monetary policy stance to support the domestic economy, which was affected by the global economic crisis.
In looking ahead the Central Bank said the low inflation and interest rates provide an environment conducive to boost the economic growth.
Infrastructure projects, already commenced and planned, need to be accelerated to expand the productive capacity of the economy and to improve the efficiency and productivity of economic activities, the Bank said in its report.
It suggested the government to implement much needed structural and institutional improvements, including the enhancement of the profitability and productivity of public enterprises that are a significant drain on public finances.
Among other recommendations were strengthening the fiscal consolidation process, increasing the contribution of the private sector to overall economic development and strengthening the regulatory framework.
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