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| Wednesday, 30 June 2004 |
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GDP grows 6.2 per cent in Q1 2004: Highest growth rate in past seven quarters - CB Deputy Governor Sri Lanka has recorded a positive growth of 6.2 per cent in the first quarter of 2004. This is the highest growth rate recorded in the past seven quarters, Deputy Governor, Central Bank, W. A. Wijewardane, told a press briefing at the Central Bank headquarters yesterday. "This augurs well for growth in the remainder of the year," he said. In the first quarter of 2004, Gross Domestic Product (GDP) grew in real terms by 6.2 per cent over the corresponding quarter of the previous year. This is a continuation of the growth momentum that began in the second half of 2002. This growth reflects the macro-economic stability that prevailed throughout that period. Although this growth is less than 6.9 per cent recorded during the last quarter of 2003, it exceeds the annual growth of 5.9 per cent attained in 2003. Also, this is the seventh consecutive quarter that Sri Lanka recorded an economic growth in excess of 5.5 per cent, he said. The macro-economic environment that had prevailed for the most part of these seven quarters and was conducive to achieving and sustaining this relatively high period of growth included greater fiscal discipline, declining interest rates, a stable foreign exchange market, and falling inflation, together with prudent monetary management. These factors impacted positively on aggregate demand. The continuous ceasefire between the government and the LTTE created an environment conducive to the expansion of overall economic activities across the entire country, boosting both consumer confidence and investor confidence. Hence, continuation of this growth momentum will depend heavily on a number of critical factors, particularly macro-economic stability and continuation of the ceasefire. The economic recovery that began since the second half of 2002 was stimulated by consumer confidence, as well as the pent-up consumer demand from the Northern and Eastern provinces following the ceasefire. Investors did not respond as rapidly. The expected boost to investor confidence was observed only from the second half of 2003. This renewed investor confidence continued during the first quarter of 2004. There was an upsurge in investment activities, particularly in the private sector, while total public investment, albeit small in comparison, also rose by 22 per cent. This was clearly reflected in the increase in imports of investment goods by 56 per cent during the first quarter of 2004, over the corresponding quarter of 2003. The garment industry, printing industry, telecommunications, information technology, transportation and leisure industry were the industries that attracted new investment during the period. Sectoral Analysis The Services sector maintained its buoyancy, growing by 9.5 per cent and contributing over 80 per cent of the overall growth. The Industry sector expanded by 5.8 per cent, exceeding the annual growth of 5.5 per cent that it recorded in 2003. However, the Agriculture sector contracted by 1.4 per cent, amidst adverse weather conditions that prevailed and thus mitigated the positive performance of the other two sectors. The continuous growth in the Services sector has further enhanced the relative importance of that sector in the overall economy. Services Sector The Services sector improved its relative importance in the economy and contributed most to the overall economic growth. Of services activities, the Transport, storage and communication sector recorded the highest growth of 14.3 per cent. According to provisional data, the telecommunication sub sector expanded by 31.8 per cent. The growth in this sub sector was mainly driven by the upward trend in mobile phone usage, which increased by 56 per cent over the first quarter of 2003. Port services expanded by 8.3 per cent in the first quarter of 2004 in comparison to a growth of 17.6 per cent in the corresponding quarter of the previous year. The wholesale and retail trade sector, the largest sector in terms of value added, grew by 9.5 per cent. The growth in external trading activities provided the impetus for this growth. The import trade sub-sector grew by 17.1 per cent with investment goods imports growing by 56 per cent, in volume terms. The Banking, insurance and real estate sector continued its growth momentum by expanding 9.8 per cent. The growth in the Banking sector was mainly responsible for this growth. During the quarter, interest income of the Banking sector contracted, but net interest earnings improved due to the decline in interest expenditure by a larger margin. The Services category, which includes all unclassified services such as private education, health, hotels and restaurants, advertising, private security, janitorial services, personal services and all other business services, grew by 6.3 percent against an increase of 5.4 per cent recorded in the same period of 2003. Industry Sector The Construction sector grew by 6.3 per cent in the first quarter of 2003. This sector was badly affected in 2001 and 2002 when investment expenditure declined. The recovery in investment activities since the latter half of 2003, has impacted positively on the construction industry. During the first quarter of 2004, public sector investment increased by 22 per cent compared with the corresponding quarter of the previous year. This investment was mainly concentrated in road development projects - Southern highway project and road network improvement project - and irrigation projects. Agriculture Sector The Agriculture, fishing and forestry sector contracted by 1.4 per cent during the first quarter of 2004 in comparison to 0.8 per cent growth in the corresponding quarter of the previous year. The dry weather conditions that affected domestic agriculture and tea output was the main contributory factor to this negative growth. |
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