|
|
 |
 |
 |
 |
| Tuesday, 27 April 2004 |
 |
|
 |
Business | |
| News Business Features Editorial Security Politics World Letters Sports Obituaries
|
Lanka experienced strong expansion of external trade in 2003 - Economic and Social Survey The Economic and Social Survey of Asia and the Pacific - 2004, a United Nations publication, handled by the Economic and Social Commission of Asia and the Pacific (ESCAP) Secretariat in Bangkok, was launched in Colombo on Wednesday. Sri Lanka also experienced a strong expansion of external trade in 2003 from the relatively subdued performance in 2002. Export earnings grew by 9.2 percent as against a drop of 2.4 percent in 2002. The strong performance was driven by the earnings from the apparel industry which exceeded 6 percent in the face of improvements in both domestic and external conditions. The report however sounds a note of caution with regard to Sri Lanka's over reliance on garments, particularly because of the phasing out of the textiles and garments quota system by January 2005. The report argues that it could therefore be an opportune moment to diversify the production base towards services to exploit Sri Lanka's strategic location and skilled labour force. The survey said that the Sri Lankan economy grew at a healthy rate of 5.5 percent in 2003 up from 4 percent growth recorded in 2002. The report notes that domestic economic activities benefited from the ceasefire agreement between the government and the LTTE as investment both domestic and foreign improved. In particular, the survey notes sharp improvements in tourism, international trade and financial services. The recovery was fairly broadbased. Agricultural production is estimated to have expanded by 1.7 percent despite floods in some parts of the country and was also assisted by the resumption of farming activities in war-affected areas in the North and East. The services sector provided an important stimulus to GDP, growing by almost 7 percent in 2003 as the tourism sector rebounded with an increase of nearly 27 percent in tourist arrivals. The industrial sector is estimated to have grown by 5.8 percent, with a much-improved performance in exports of textiles and apparel. The report notes that tighter monetary policy, improved domestic supply conditions and stability in the exchange rate have helped to moderate consumer prices quite considerably with the rate of inflation falling to an estimated 6.3 percent at the end of 2003 compared to 9.6 percent in 2002. While the decline in inflation is a considerable achievement in macroeconomic management, it is in line with a generally low inflationary environment in most of the ESCAP countries. According to the survey the rate of inflation of developing economies of the ESCAP region declined from 5.5 percent in 2002 to 3.6 percent in 2003. Sri Lanka's neighbours in South Asia such as India and Pakistan also managed to maintain lower rates of inflation with India having an inflation rate of 4.8 percent and Pakistan 3.1 percent. Import expenditure increased by 9.3 percent in 2003, up from the 2 percent expansion seen in 2002. Improved consumer confidence, the economic recovery and positive prospects of higher growth are argued to be behind the rise in import spending of 13 percent on investment goods, 12 percent on consumer goods and 9 percent on intermediate goods. Financial flows showed a significant improvement during 2003 mainly as a result of a sharp rise in long-term concessional borrowing by the government for its donor supported rehabilitation and reconstruction work, the Poverty Reduction and Growth Facility arrangement with the IMF as well as support from the World Bank and ADB for the implementation of structural reform. FDI inflows into the country are estimated to be around US$ 200 million in 2003, a reflection of the positive influence of the ceasefire agreement and policy framework under the PRGF. Meanwhile, the rupee was by and large stable during most of 2003 against the backdrop of a weaker dollar. There was, however, some appreciation against the dollar after September 2003, in part owing to the continuing weakening of the dollar and higher capital inflows to the country. The report notes that the level of total debt dropped from over 105 percent of GDP in 2002 to around 100 percent at the end of 2003. However, the report cautions that despite improvement as a result of fiscal consolidation efforts directed at better debt management, the country's overall debt still remains at a relatively high level. The report highlights the need for tax reforms to increase revenue through broadening and deepening the tax base and improvements to tax administration. On the assumption of no major internal or external shocks and continuation of the ceasefire agreement, the survey forecasts a projected growth of 6 percent. According to the policy issues, the survey said the current risks in the global economy, principally the large current account imbalances, require that governments remain vigilant and take appropriate measures to shield their economies from financial market and exchange rate volatility. Despite relatively robust growth in the global economy the danger of protectionist measures cannot be ruled out. The possible emergence of assets bubbles in stock markets and in real estate should be given due attention by policy makers. The survey also said initiatives and efforts involving cross-border stakeholders would be helpful in promoting and speeding up the development of deeper and more efficient financial markets in the region. There is also a need for fiscal consolidation and reform to stabilise the rising levels of public debt and ensure a more equitable and efficient fiscal system. The survey examines the program of reform of the corporate and financial sectors which continue to remain in focus. Without a stronger pace of reform both investor confidence and medium-term growth could be jeopardised. Likewise, governments in the region should strive to enhance standards of governance, take action to reduce corruption and focus on the long-term development of human resources through investment in education at the primary and secondary levels. - (IR) |
|
News | Business | Features
| Editorial | Security
Produced by Lake House |
