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| Tuesday, 14 September 2004 |
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Current trends will maintain 5 - 6 percent GDP growth by Ramani Kangaraarachchi The Government expects a continuation of the broadbased GDP growth of 5-6 per cent in agriculture, industry and services sectors for the year 2005 based on current trends in the country and international market said Assistant to the Governor, Central Bank Y.M.W.B.W. Weerasekara. He was addressing the Financial Information Systems in Asia program at Hotel Intercontinental on Wednesday. Speaking on Sri Lanka's Economic Prospects 2005 Weerasekara said that 1.2 per cent growth of paddy, tea and rubber is expected due to the favourable weather conditions whereas coconut production is expected to decline due to adverse weather conditions. All sub sectors in industry are projected to increase exports. A five per cent growth in the industrial sector with continuous improvement in quality is expected with an increased output in food and beverage, textile and apparel, chemical and non metallic mineral industries while a seven per cent growth is expected in the services sector specially in tourism and telecommunication, he said. Meanwhile, private sector investment would lead the growth while the public sector investment would focus on infrastructure, such as road development, power and energy projects and water supply projects. According to Weerasekara higher inflation is expected due to the lagged effects of administrative price increases, depreciation of the currency, higher wages and demand side factors. Supply side factors could ease some pressure on prices due to the expected improvements in weather conditions in 2005. Consumption also would be higher due to economic growth. The savings would not be sufficient to maintain the expected higher investment. However the expected foreign savings would fill the investment savings gap. In the fiscal sector, a lower overall budget deficit of 7.5 of GDP would be targeted but a consolidated fiscal path would be consistent with the Economic Policy Framework of the government. Some slow down in garment exports due to the phasing out of Multi-Fibre Agreement (MFA) is expected in the external sector but a steady growth in worker remittances, tourist arrivals and higher global demand would cushion any adverse impact on lower garment exports and high oil prices. In the monetary sector interest rates are likely to move up if inflationary pressure is higher and with continuation of rising global interest rates. However, the monetary policy would be focussed to contain inflationary pressures while accommodating the growth momentum. Speaking about downside risks to prospects 2005 Weerasekara pointed out that adverse development, the peace front, continuation of high oil prices, delays in implementation of structural reforms would be major threat to the prospects. |
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