Lankapage Logo CP 17 YEARS
Go Home Home Serving the Sri Lankan community globally since 2000
go to LankaPage.com

Leading News from Sri Lanka::

* World Bank expects Sri Lanka's growth to pick up to 5.3 percent for next 3 years despite monetary and fiscal tightening
Wed, Jun 8, 2016, 11:25 pm SL Time, ColomboPage News Desk, Sri Lanka.

June 08, Colombo: In its latest Global Economic Prospects report, the World Bank predicts Sri Lanka's economic growth will pick up to 5.3 percent in this year and in both 2017 and 2018 despite monetary and fiscal tightening.

"Growth will be supported by infrastructure spending financed by sizable FDI flows as part of the government’s Port City and Western Province Megapolis initiatives. Also, recent policy measures to curb imports will contribute to growth," the World Bank's flagship report the Global Economic Prospects June 2016 said.

The report notes that an expansionary fiscal policy has contributed to the increased deficit and debt levels in Sri Lanka but efforts are underway to address the deterioration in public finances, including the increase in the VAT rate from 11 to 15 percent.

In Sri Lanka, rising core inflation and high credit growth have compelled the Central Bank to tighten policy.

Noting that fiscal deficit is on the rise in Sri Lanka, which received a sovereign rating downgrade in 2016, In Sri Lanka, the report says the expansionary fiscal policy has contributed to the increased deficit and debt levels. In Sri Lanka, government debt levels are above 70 percent of GDP.

While reserve buffers remain comfortable or improved in most countries in the South Asia region, in Sri Lanka, along with its fiscal situation, import cover ratios deteriorated to an estimated 3.5 months, as the country, along with other emerging and frontier market economies, experienced significant capital outflows. Gross official reserves in Sri Lanka fell to $6.3 billion in March 2016 from $7.3 billion in December 2015.

The World Bank forecasts that weaker-than expected growth in advanced economies will dampen export growth for countries in South Asia. Fiscal consolidation in Gulf Corporation Council (GCC) countries will slow remittance flows, mainly affecting the outlook for the smaller economies that rely heavily on remittances such as Bangladesh, Nepal and Sri Lanka.

Remittance flows have been broadly steady in Sri Lanka but if the ongoing fiscal consolidation in Gulf countries is sharper than expected, remittance flows to the region could slow sharply, in particular to Bangladesh, Nepal, and Sri Lanka, the global lender predicts.

Gradually tightening financing conditions will increase external borrowing costs for economies with access to international capital markets, notably corporate public sector borrowing in Sri Lanka.

The World Bank report says against the backdrop of a fragile global economy, the priority for fiscal policy is to build fiscal buffers and reduce debt, and measures to raise direct tax revenues, which are low in Sri Lanka even by emerging market and developing country standards, will free fiscal space for much-needed public investment.

For Sri Lanka, such measures include broadening the tax base, reducing exemptions and improved tax administration.

Efforts to raise revenue would benefit Sri Lanka if they are complemented with better quality of spending and to this end, appropriate measures should include strengthened public financial management, the report suggests.

Growth in South Asia is expected to remain robust at 7.1 percent in 2016, picking up to 7.3 percent in 2018. (ColomboPage)

 


ColomboPage - Recent 10 Stories ::
Sri Lanka Foreign Minister leaves for Geneva to attend 34th UNHRC session
-- [3 hours ago]
President leads special walk to prevent stroke
-- [4 hours ago]
Sri Lanka Police say no interest in hunting Sri Lankan asylum seekers who sheltered Snowden
-- [5 hours ago]
Five police officers arrested in Sri Lanka over death of a suspect in custody
-- [6 hours ago]
UAE's Al Ansari Exchange and SriLankan Airlines signs agreement to facilitate ticket payments
-- [6 hours ago]
Consumer Affairs Authority raids errant traders violating MRP for rice
Sri Lankan President reiterates stance of no foreign judges in war crime probes
Sri Lanka PM seeks international assistance to create a stable economy
Top Indian politician arrested for gold smuggling from Sri Lanka sacked from post
IMF Managing Director Christine Lagarde to visit Sri Lanka

Copyright © 2000, 2016 by LankaPage.com (LLC) :
The news and other contents on ColomboPage are copyrighted property of LankaPage.com, LLC. Any unauthorized use of any information on ColomboPage may constitute a violation of copyright laws. You need written permission to reproduce, republish, post, transmit, broadcast or distribute, material from this site from LankaPage.com, LLC. However, news organizations or broadcasters in Sri Lanka may republish the news items in ColomboPage with proper acknowledgment to ColomboPage.