Despite global recession:

Sri Lanka records positive growth rates

Gayan Kanchana

[The Economy]

*Per capita income to be US$ 3,000 by 2011

* Private consumption growth is forecast at 5.6 percent in 2010

* Inflation dropped steeply to a single digit

Sri Lanka is one of the few countries which has been able to record positive GDP growth rates in 2009 despite the global recession. The main reason for this was that President Mahinda Rajapaksa had a clear policy and a vision towards the country’s economy, Central Bank (CB) Governor Ajith Nivard Cabraal said.

He was speaking at an interactive session on “Economic Prospective of 2010 and Beyond” which was organized by the International Business Council last week in Colombo. A large number of businessmen participated for the event. The Governor said that the growth rate of the Sri Lankan economy revised upwards in 2009 after the dawn of the peace. In the past four years, the country’s economy growth rate was reported to be more than six percent.

The negative impact of the global recession obstructed the growth prospect in the first half of 2009. During second half of the year the situation changed and 2009 was the most difficult year. There was no text book theory to explain this situation.

The global economy Underwent serious stress and experienced its worst economic recession since the great depreciation but we were able to continue the capital expenditures to implement mega infrastructure development projects. Inflation dropped steeply to a single digit in contrast to its peak of 28 percent in June 2008.

The Governor said “Meanwhile, more strong inflows of foreign direct investment and sustained remittances are anticipated to support the projected growth in gross fixed capital formation, from 5.5 percent in 2010 to 5.9 percent in 2011. Beyond that the uptrend in private consumption is projected to continue in 2010 and 2011, backed by increasing foreign and domestic investor confidence as well as the accompanying rise in employment. Private consumption growth is forecast at 5.6 percent in 2010, progressing to 6.3 percent in 2011.

“The CB’s objective is to increase the per capita income to US$ 3,000 by 2011 and US$ 4,000 by 2014 and this will mean that total lending of the financial sector would have to be increased to almost Rs. 3.3 trillion. The CB is setting up an export-import bank to fast-track Sri Lanka’s international trade. The proposed ‘ex-im bank’ will provide financial assistance to exporters and importers, and promote the country’s international trade,” he said.