Apr 09, Colombo: The Sri Lankan economy is expected to maintain a high growth momentum in the medium term with the support of an increased investment, a favorable macroeconomic environment and a continuing recovery in the global economy, according to the country's Central Bank.
However, economic progress in the medium term is not without challenges, and structural adjustments are necessary for sustaining the growth momentum over the medium term and beyond, the Central Bank said yesterday.
Presenting the 64th Annual Report of Central Bank's Monetary Board to the Sri Lankan President Mahinda Rajapaksa, who is also the Minister of Finance and Planning, on Tuesday (April 08) the Governor of Central Bank Ajith Nivard Cabraal said the policies are required to meet the challenges in meeting the medium term target of taking the country beyond US$ 4,000 per capita income while avoiding the Middle Income Trap.
The Central Bank projects a US$ 4,825 GDP per capita with a 8.3 percent economic growth in 2016 while keeping inflation around 4.0 percent.
However, in order to successfully realize these goals, many challenges, such as an aging population, reduction in higher interest rates and private sector credit growth that remain in the country's path towards prosperity need to be addressed ,the head of the monetary authority said.
The Governor said a 5+1 hub strategy has been designed to meet these challenging medium terms targets and pointed out the need to implement appropriate policies in order to address these challenges.
He said policies are needed to modernize the Agriculture sector to enhance its productivity and profitability since low productivity raises cost of production and reduces competitiveness.
Similarly, policies are needed to promote high value added manufacturing via innovation and Research and Development, diversify export products and markets and promote the country’s brand identity as a stand-alone strategy as well as a viable outsourcing destination.
The gradually ageing population is another challenge, the Central Bank governor said while pointing out that a reasonable standard of living for the aged needs to be ensured. The issue requires policies to promote alternative saving and pension products such as annuities and promote health and life insurance.
A greater involvement of the private sector in economic activity is required to maximize this enhanced growth potential, the Governor said.
(Photos by Sudath Silva)