Exports record growth in first quarter
IMPROVEMENTS IN SECTORS: The improvements in the external and
monetary sectors of the economy continued further in 2007.
In the external front, exports during the first four months of the
year increased by 11.5 per cent.
This was supported by the strong performance of the agriculture
exports led by tea and industrial exports. Cumulative imports for the
first four months grew at a relatively lower rate of 7.4 per cent.
The resulting trade deficit declined compared with the same period in
2006. These developments, further strengthened by the 17.4 per cent
increase in private remittances and inflows on Treasury bond sales to
non-residents by the Government, resulted in an estimated Balance of
Payments surplus of US dollars 250 million by end May 2007.
Within the monetary sector, reserve money, which is the operational
target of the monetary policy, was maintained within the targeted level
thus far in 2007 and it is poised to be well within the second quarter
target as well.
A gradual decline was also observed in the expansion of the broad
money supply, which recorded a 16.8 per cent growth in April 2007. This
was supported by a decline in net credit to the Government by the
banking sector.
However, credit to the private sector continued to grow at a higher
rate. Market liquidity has remained broadly in balance and volatility in
the short-term interest rates, particularly in the interbank call rate,
has declined, reaching a stable level. These favourable trends are
expected to continue further.
The impact of the tight monetary policy stance pursued by the Central
Bank since end 2004 and the resulting deceleration in the growth of
monetary aggregates is evident in the declining trend in inflation
during the recent months.
Inflation, as measured by the point to point change in the Colombo
Consumers' Price Index (CCPI) decelerated further to 13.7 per cent in
May from 16.3 per cent in April 2007. It is expected to continue this
decelerating trend during the remainder of the year. |
