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* World Bank forecasts Sri Lanka's economy to grow 6.8 percent this year
Fri, Jan 18, 2013, 09:24 am SL Time, ColomboPage News Desk, Sri Lanka.

Jan 18, Colombo: The World Bank projects Sri Lanka's economy to grow at 6.8 percent this year after slowing to a 6.1 percent in 2012 and to strengthen to 7.2 percent in 2015.

In a report on global economic prospects, the global lender said Sri Lanka's growth is forecast to rise to 6.8 percent in 2013 as external demand continues to improve gradually and agricultural production growth returns to normal rates.

Growth is expected to increase further to 7.2 percent by 2015 at a weaker pace compared with the more than 8 percent growth in 2010 and 2011 as the boom in investment and reconstruction experienced after the end of the conflict in 2009 wanes off implying a more sustainable pace of growth in line with underlying macroeconomic fundamentals, the World Bank said.

Sri Lanka, however, targets a 7.5 percent growth in the country's GDP for 2013.

The GDP growth slowed to an estimated 6.1 percent in 2012, partly due to the policy efforts adopted by the Central Bank and the government adopted earlier in the year to curtail excessive credit growth and the high import demand to contain the trade deficit and partly due to the weakening demand for exports and a drought.

With the implementation of tighter policies and currency depreciation the economic growth slowed down and the inflation rose. Further the power cuts resulted from the effect of prolonged drought on hydropower generation capacity adversely affected the economic activity, the World Bank noted.

"Although policy reforms in Sri Lanka acted as a drag on growth in 2012, they are also likely to boost growth outturns during the forecast horizon," the World Bank said in its outlook report.

Sri Lanka's Central Bank says in its roadmap for 2013 that it is in a position to steer the economy along a more stable and sustainable path while maintaining economic and price stability and financial system stability to support sustainable and inclusive growth this year.

According to the lender, the debt crisis in the Euro Area, South Asia's largest export market, had significant knock on effects on the export performance of South Asian countries.



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