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The country's economy is showing signs of a marginal recovery and investor confidence is showing a gradual return, according to figures released by the Colombo Stock Exchange and the Central Bank yesterday.

The CSE announced that the bourse recorded the highest monthly turnover in eight years in March this year, notching up a total turnover of Rs. 5,204.7 million. The highest-ever monthly turnover was Rs. 5,510.3 million in February 1994. The average daily turnover for June, Rs. 273.3 million is also the second highest ever.

The market numbers were matched by a marginal growth in the country's economy, according to the Central Bank. In the first quarter of this year the economy grew by 0.1 percent, rerunning to positive territory after a disastrous last quarter in 2001.

Last year, the economy contracted overall by 1.4 percent, the worst performance since independence. In the last quarter, the contraction was a severe 3.7 percent. A combination of political instability, heightened military activity, the prolonged drought and an adverse global economic environment were the reasons for the negative growth, the Central Bank said.

The Bank also noted that the first quarter figures this year however showed a deceleration as in the comparative period last year there was a 1.9 percent growth.

The Bank was cautiously optimistic saying "the performance of the first quarter of 2002 indicates that the country is recovering, but will take further time to record a full recovery." These encouraging results were achieved despite a continuing drought and prolonged power cuts, the Bank said.

"The first quarter economic performance signifies that the most difficult period is past and Sri Lanka can look forward to a reasonable positive growth in 2002, particularly during the second half of the year," the Bank said.

The Chairman of the Ceylon Chamber of Commerce Chandra Jayaratne, told the Daily News yesterday that according to current projections the economy should show grow by around 3 percent for the year. Jayaratne says if the United States pulls completely out of it's current economic slump, it would help Sri Lanka's export volumes to grow and increase industrial output.

The power crisis, and the global slump impacted on the industrial sector, which contracted by 4.2 percent in the first quarter. This wiped out the gains made by the agricultural sector, which grew by 2.4 percent and the services sector, which went up by 1.4 percent.

Paddy production went up by 6.1 percent and there were notable increases in the production of vegetables and subsidiary food crops, but the Plantation sector suffered from the drought with tea production dropping 9.4 percent.

However the bank warned that the fiscal situation remained tight, and that "greater competition for goods and services can be expected from the global environment."

"Hence a concentrated effort by all stakeholders to enhance efficiency and productivity is required for the economy to recover fully and move to a higher growth path," the Bank's report further said.

The Banking sector also suffered, recording a growth of only 0.3 percent as against 6.6 percent during the first quarter of last year.

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