Economy showing signs of growth momentum - CB

COLOMBO: The economy has shown early signs of continuing its high growth momentum experienced in 2006 and 2007 as well with improved performance in all the key sectors the Central Bank said.

The improvement in the agricultural sector in 2006 will continue in 2007, benefiting from the lagged impact of favourable weather conditions that prevailed during the last few months.

The industrial sector output is also expected to benefit from the sustained external demand, the expansion in capacity and improved market access.

The robust performance in the Services sector in 2006 with the continuous performance in port services, telecommunication, construction and trade is expected to continue in 2007 supported by major infrastructure projects commenced in the recent past, the CB said in its March review.

The improved performance in the external sector in 2007 reflected in both trade and financial flows. The exports and imports grew by 11.2 per cent and 15.8 per cent, respectively, in January 2007.

An inflow of around US dollars 100 million by way of foreign investments in Treasury bonds and the highly oversubscribed issue of Sri Lanka Development Bonds indicate the continued foreign and local investor confidence.

Consequently, the Balance of Payments (BOP) is expected to record a surplus of around US dollars 200 million, reaching original annual target of the gross official reserves within the first quarter.

The growth in monetary aggregates has been decelerating due to the tight monetary policy measures adopted by the Central Bank. Accordingly, the end month reserve money targets have been met in both January and February, 2007 and the growth in broad money has decelerated from 17.8 per cent at end 2006 to 16.1 per cent at end January.

Inflation, as measured by the point to point change in the Colombo Consumers’ Price Index (CCPI), declined from 20.5 per cent in January to 19.2 per cent in February, while the annual average of the CCPI increased from 14.8 per cent in January to 15.8 per cent in February.

The current high point to point inflation is expected to continue until April 2007 and it will decline thereafter.