Economic growth will be over 7 p.c. - CB

COLOMBO: Sri Lankan inflation will be no higher than 20 per cent at the end of 2008, although still well above target, and the economy can achieve a goal of growing 7 per cent this year, the Central Bank Governor told Reuters on Tuesday.

The Central Bank had estimated growth would be 7 percent in 2008 and inflation at 10-11 per cent, based on an average oil price of $85 per barrel, but crude hit a record of over $145 per barrel last week.

“Inflation will not moderate as much as we originally expected. So we won’t be finishing the year at 12 percent. It won’t be over 20 percent,” Governor Ajith Nivard Cabraal said in an interview.

Tough economic decisions on passing the global price shocks of fuel and food on to Sri Lankan consumers have been the main reasons for record high inflation, Cabraal said.

“We are strengthening the economy for the future, but initially it sends some shocks. So we are going through that situation, with high inflation, high interest rates.”

Annual consumer price inflation rose to 28.2 per cent in June.

Cabraal said the 2008 economic growth target could still be achieved.

“We still see no reason to change the growth estimate, because upturns and downturns even each other out. We probably see growth close to 7 (per cent),” Cabraal said.