Rising oil prices will hamper economic growth - Economist

by Indeewara Thilakarathne

The demand driven rising oil prices will hamper the global economic growth said Dr. Dushni Weerakoon launching the Economic and Social Survey of Asia 2005 briefing held at the UN Compound in Colombo yesterday.

Dr. Weerakoon said that the report predicts a steady increase in the aging population in the Asia and Pacific region putting extra burden on the economy compelling the Government to spend more on healthcare and social safety nets.

"The Government will increasingly be under pressure not only to devise innovative mechanisms to deal with issues arising from an aging population but also to ensure the long-term viability of social welfare programs, while minimising negative effects on the economy.The severity and complexity of such challenges will be depend on the stage of economic development , the stage of ageing and the level of preparedness " she observed.

This will not only affect the healthcare system of the country but also the supply of labour and reduces the level of savings which in turn reduces the investments. In the back drop of global fall in the economic growth , most countries are expecting inflation and raise interest rates to cushion out the effect.

Despite several adverse internal and external shocks, according to earlier estimates as recorded in the Survey, the slowdown in economic growth in Sri Lanka was slight, from 5.9 per cent in 2003 to 5.2 per cent in 2004.However , the latest estimates put GDP growth at 5.4 per cent in 2004 against 6 per cent in 2003.

Towards the end of 2004, Sri Lanka suffered huge human and economic losses as a result of Tsunami disaster. More than 36,000 people lost their lives or are missing.The infrastructure in the affected coastal areas was severely damaged. The fishery and tourism industries suffered major damage. The negative impact on economic growth in 2005 may be up to 1 percentage point.

The report also predicts an inflation rate of 7.6 per cent for 2005. Dr Weerakoon also said that the UN has declared 2005 as the International Year of Micro Credit.