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Main sectors to provide an impetus to growth :
Economy diversifies GDP grows 1.8 percent
Charumini DE SILVA
Central Bank Assistant Governor, Dr. P. Nandalal Weerasinghe said the
economy has been diversified and as a result Sri Lanka recorded a 1.8
percent growth in Gross Domestic Production (GDP) on a year on year
basis in the first half of this year.
The three main sectors of agriculture, industry and services grew by
3.7 percent, 2.4 percent and 1.1 percent and with the rehabilitation in
the Northern and Eastern provinces it is expected to provide an impetus
to growth. He was speaking at a seminar on Statutory and Regulatory
Requirements for Registered Finance Companies (RFCs) and Specialized
Leasing Companies (SLCs) on “Recent Economic Developments and Future
Prospects for Financial Services” on Tuesday.
With the dawn of peace, the Colombo Stock Exchange has rallied across
the board since April this year and it is amongst the best performing
national stock exchanges globally. International investors have
purchased Sri Lankan Government securities amounting to US$ 1,646
million from May to October 2009, which shows that foreign investors are
confident in investing in the country. Investor confidence is also
expected to promote growth in the industry and service sectors with the
global economic recovery, he said.
He said the Sri Lanka Development Bonds (SLDB’s) offered were
oversubscribed and the yields tightened continuously.
The US$ 500 Sovereign Bond offered in October 2009 was oversubscribed
more than thirteen times. Private remittance inflow increased
significantly with the post conflict, leading to an appreciation of the
exchange rate and considerable increase in foreign exchange reserves.
During the past six years, Sri Lanka’s exports grew on an average of
10 percent, which was facilitated by enhanced market access at
bilateral, regional and multilateral levels. The apparel sector in Sri
Lanka has acquired a number of strengths over the years and has a
reputation of being a reliable supplier of high quality products to
world-renowned brands, which shows much scope in enhancing the country’s
exports especially in the apparel sector.
Earnings from tea exports, which surpassed the US$ 1 billion
benchmark in 2007 are expected to record US$ 2 billion in a few years,
Dr. Weerasinghe said.
In 2008 the Central Bank modified its quarterly reserve money
approach by basing it on the quarterly averages of daily reserve money
to ensure a more disciplined growth and this has been successful in
dampening inflationary pressures on the economy. We expect the inflation
rate to remain at single digits in the medium term, he said.
He said the banking system has been extremely resilient amidst many
challenges and has maintained its performance amidst internal and
external shocks.
Though there were financial institution failures recorded in
developed countries, not a single financial institution in the country
collapsed during the global financial crisis. Key financial soundness
indicators were maintained at healthy levels.
Asset quality deteriorated marginally. However, the reduction in
interest rates is expected to bring about an improvement in the asset
quality of banks. At present all banks report capital adequacy ratios
under the Basel II framework. The economy re-entering the high growth
path with the positive developments in the economy, strengthened by the
policy stimulus has created vast opportunities for the financial sector,
Dr. Weerasinghe said.
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