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| Tuesday, 6 January 2004 |
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GDP grows 5.6% in Q3 2003 The Gross Domestic Product (GDP) grew 5.6 per cent in the third quarter of 2003. This confirms that the economy has continued to maintain the growth momentum seen since the second half of 2002, that was supported by a conducive macro-economic environment. The Central Bank of Sri Lanka said that this was the fifth consecutive quarter in which the growth exceeded 5.5 per cent. This growth rate compared with 5.7 per cent recorded in the third quarter of 2002, which was on a low base, as the GDP contracted by 3.9 per cent in the third quarter of 2001. The economic growth during the first three quarters of the year was well on target with the projected growth of 5.5 per cent for 2003. Since mid 2002, growth rates have been relatively stable, in a range of 5.5 to 5.7 per cent throughout 2003, thus far. This indicates initial longer term sustainability of a stable economic growth trend in response to improved macro economic fundamentals. If this trend can continue, it augurs well for steady growth during the longer term. In the sectoral analysis, the highest growth of 8.3 per cent was recorded by the services sector. The industry sector did not perform as expected and recorded only a growth of 2.8 per cent. Since economic liberalisation in 1977, the industry sector has emerged as the fastest growing sector of the economy. After the recession recorded in 2001, this sector recovered slowly compared with the other two sectors. In the second quarter of 2003, the industry sector recorded the highest growth of 8.9 per cent, but this growth rate decelerated again in third quarter. Meanwhile, the agriculture sector recorded a growth of 2.1 per cent under favourable weather conditions, which helped expand cultivation activity. The growth achieved during the first three quarters reflects the positive response of the economy to improved macroeconomic conditions which commenced in the latter half of 2002. The main contributory factors to this recovery were the continuation of the ceasefire and the peace initiative, improved macro-economic management with greater fiscal discipline, declining interest rates, a stable foreign exchange market, falling inflation amidst prudent monetary management, increased capital flows, strong foreign donor support, a stable power supply, improved business confidence, and recovery in the world economy, albeit slowly. The growth in the first three quarters was consistent with the expected economic performance for that period and the growth predicted for year 2003. The challenge now is to achieve the medium term growth target of over 6 per cent. Without such a higher expansion in economic activity, it will be difficult to improve education and employment opportunities, income generation, living conditions and the quality of life of the average citizen on a sustainable basis. The envisaged higher growth would require higher investment to expand existing capacity in most sectors of the economy. Future expansion in investment will ultimately depend on numerous factors such as political stability, securing a lasting peace to the civil conflict, further improvements in macro-economic management, including even greater fiscal discipline, acceleration of structural reforms, reducing economic policy uncertainties and effective utilisation of external assistance to improve infrastructure facilities, particularly power and roads, all leading to greater investor confidence in the future potential of the economy. |
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