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Sequel to measures taken by Govt:

Lanka’s economy to grow around 5.5% in 2009

Sri Lanka’s economy is expected to grow around 5.5 percent in 2009 following the measures taken by the government to improve the liquidity of the financial sector, introduction of the stimulus package and further strengthen domestic demand, said Deputy Director, Institute of Policy Studies, Dr Dushni Weerakoon said.

She was speaking at the launch of the Economic and Social Survey of Asia and the Pacific 2009 at the Sri Lanka Foundation Institute in Colombo yesterday.

The Economic and Social Survey of Asia and the Pacific 2009 is the annual flagship publication of the United Nations Economic and Social Committee on Asia and the Pacific (ESCAP).

She said that the global slow down that has come in the aftermath of the financial crisis is having an adverse impact on the real economies of South Asia. However, the adverse impact is not as strong as in some other, more open economies of the Asia Pacific region.

Therefore, an estimated 2008 GDP growth of six percent in Sri Lanka is encouraging, given the global recession, high and volatile oil prices, sharp increases in food prices, and a tight anti-inflationary monetary policy. A significant improvement in the performance of the agriculture sector helped to check an even sharper deceleration in growth from 6.8 percent in 2007 .

According to the survey, inflation in Sri Lanka continued to rise. In 2007 it was 15.8 percent and estimated at 22.6 percent for 2008.

The surging global prices for fuel oil and staple food drove the high inflation. Inflation has been driven up in all countries of South Asia, partly by unrelenting pressures from higher international commodity prices.

The budget deficit remains high although the government took measures to enhance its revenue, manly by broadening the tax base, changing the tax rates to provide some exemptions to encourage development in specific sectors, and improving tax administration.

The surge in prices of fuel, oil, food and other commodities created severe problems for the external balances of most countries in South Asia.

However, Sri Lanka recorded a growth of 12.2 percent in exports and 10.2 percent in imports in 2007. Growth in exports decreased to 6.5 percent in 2008. Growth in exports of agricultural commodities remained strong and growth in exports of industrial products was slow according to the survey.

Poverty remains a major problem for most countries in South Asia and economic and social inequalities remain widespread.

The survey points out that the development of human resources is essential to benefit from employment, with social safety nets for the poor and vulnerable.

Lack of physical infrastructure is a major impediment to business growth in South Asia.

Speaking about the Global Economic Crisis and Sri Lanka, Senior Lecturer, Colombo University, Dr Sirimal Abeyrathna said lower import expenditure, downward trend on inflation and lower interest around the world and policy focus on domestic agriculture are the positive facts towards Sri Lanka.

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