Economy on a spurt

Significant tourist arrival

Dr Mathu H Liyanage

The year 2010 has ended with a bang showing that it was a year of economic growth and development.

Good times ahead

* Eradication of terrorism paved way for regeneration and resurgence

* Export earnings during 2010 increased by 13.2 percent to US $ 6.505 billion

* Textile and garment export earnings to EU and US increased to 27.4 percent and 33.1 percent in October 2010

*Estimated to earn about US $ 600 million from tourist arrival

* Semi-skilled workers secured highest place in foreign exchange earnings

* Estimated tourist arrival about 750,000 by end of 2011

The eradication of terrorism and the end of the civil disturbances during the last three decades which not only crippled the economic growth and development but also acted as an impediment to investment and production at optimum levels paved the way for regeneration and resurgence.

The unfavourable economic conditions of Western countries affected by the recession and high unemployment prevailing in those countries brought more pressure on the country’s foreign exchange earnings as a result of the dwindling numbers of tourist arrivals, diminishing of foreign investment and aid for resettlement of the displaced persons in the Northern and Eastern provinces.

Industrial unrest

Economic growth particularly in China and India and other Asian and Middle East countries acted as a cushion to absorb a major proportion of the pressure.

The need still exists for the government to move on more cautiously in view of its external indebtedness, trade deficits, industrial unrest punctuated by sudden strikes and extensive damages caused by recurrent floods.

The external debt now stands at US $ 17.44 billion, according to the latest estimates of the Central Bank.

The cumulative trade deficit during the first 10 months of 2010 was US $ 4.357 billion though earnings from exports during this period increased by 13.2 percent to US $ 6.505 billion while the cumulative expenditure on imports, mainly of non-food consumer goods like cars, increased by 32.8 percent to US $ 10.863 billion.

Despite the loss of GSP+ tariff concession in August 2010, the earnings from textile and garment exports to the EU and USA in October 2010 increased to the tune of 27.4 percent and 33.1 percent respectively. Besides, earnings from textile and garments, rubber products, machinery and equipment, tea and rubber contributed mostly to the growth in exports in October 2010.

Foreign remittances from those working in overseas countries especially in the Middle East as skilled and semi-skilled workers secured the highest place in foreign exchange earnings. During the first 10 months of 2010, the workers had remitted US$ 3.38 billion registering a record increase of 21.9 percent over the corresponding period of 2009.

The tourism industry is almost competing with foreign remittances and according to the Sri Lanka Tourism Development Authority, it is estimated to earn about US $ 600 million with 600,000 tourists expected to arrive in the country. This number is estimated to go up to about 750,000 by the end of 2011.

Tourist industry

During January to November 2010, the number of tourists who visited the country rose by 45.7 percent to 569,849 surpassing the previous annual record of 566,202 in 2004. Revenue from tourism jumped 61.8 percent in the first 10 months of 2010 to a record $437 million, breaking the previous record of $416.8 million set in 2004, according to the Central Bank.

The gross official reserves remained above the targeted level and stood at US $ 6.6 billion mainly due to the remittances from those employed overseas and the revenue added by the tourist industry.

The contributions of the Fisheries sector to GDP, which is the third most significant contributor to economic growth and second only to agriculture and tourism, reached 18 percent in 2010 as a result of renewed focus on the fishing industry.

Sri Lanka is one of the leading nations in yellow fin tuna market and exports this species mainly to 27 European countries.

Census and Statistics Department

According to the Census and Statistics Department the overall economic output is estimated at Rs 690.7 billion as against Rs 639.3 billion in the third quarter of 2009, registering an eight percent growth rate which is the second highest ever recorded quarterly GDP growth since 2002.

The International Monetary Fund (IMF) was confident that economic conditions would remain strong and that the suggested 2010 deficit target of eight percent of GDP would be achieved.

The other notable and significant feature was the recorded increase in cultivated land in the Northern Province by 130,422 acres in 2010 bringing the total cultivated land to 221, 818 acres against 91, 396 acres in 2009.

With more extensive development programs in infrastructure, agriculture, education and housing in the Northern Province and the resettlement of remaining displaced persons in a couple of months, there is no doubt that 2011 would really be a year of development that would touch and benefit the entire nation.