Economy records eight percent growth
Highest annual rate of growth in three decades:
Trend suggests fast recovery from 2009 setback:
The Central Bank yesterday said that the country’s economy recorded
an impressive growth of eight percent, the highest annual rate of growth
reported in three decades. This remarkable achievement reflects a fast
recovery from the setback suffered in 2009 and a move to a high and
sustainable growth path. According to the 2010 Central Bank report which
was released yesterday all key sectors of the economy reflected a
commendable performance in 2010, underpinned by the peaceful domestic
environment, improved investor confidence, favourable macroeconomic
conditions and gradual recovery of the global economy from one of the
deepest recession in history.
Inflation continues to remain low at around mid-single digit levels
and the benign outlook for inflation enabled the Central Bank to ease
its monetary policy stance further in 2010.
While significant demand pressures were absent, improved domestic
supply conditions, downward adjustments of certain administered prices
and the reduction of import duties on several consumer items had a
favourable impact on prices.
An encouraging improvement in the overall fiscal situation was
witnessed in 2010 with the recovery in Government revenue supported by
the expansion of economic activity, the addressing of certain persistent
structural issues in the tax system, as well as the containment of
recurrent expenditure.
The overall deficit was reduced to 7.9 percent of GDP in 2010 from
9.9 percent in 2009. The external sector, which made a remarkable
turnaround since the second quarter of 2009, continues to improve in
2010. Both exports and imports recovered strongly, while increased
earnings from the tourism industry and higher inward remittances offset
the widening trade deficit to a great extent, reducing the external
current account deficit. Increased capital and financial flows resulted
in the balance of payments (BOP) recording a surplus in 2010, further
strengthening external reserves of the country.
With favourable macroeconomic conditions and the recovery in economic
activity and also with the supportive regulatory and supervisory
framework, the performance and stability of the financial sector
strengthened in 2010.
The improved performance in all key sectors of the economy
contributed towards the high economic growth in 2010. The agriculture
sector, which contributed around 11.9 percent of the GDP in 2010, grew
by 7.0 percent, compared to 3.2 percent in 2009, mainly driven by the
increased production of paddy, tea, rubber and minor export crops along
with significant improvements in the fisheries sector output.
The industry sector grew by 8.4 percent supported by increased
domestic and external demand with enhanced investor and consumer
confidence. Improved performance in industries, such as food and
beverages, rubber based products, textiles and garments coupled with
increased performance in the construction sector and increased
hydropower generation contributed to this growth.
The share of the Industry sector in total GDP increased marginally to
28.7 percent in 2010. Factory industry, which contributed approximately
54.6 percent to the total industry output, recorded a 7.5 percent growth
during 2010.
The services sector grew by 8.0 percent in 2010. The wholesale and
retail sub sector, which accounts for the largest share in the services
sector, grew by 7.5 percent with increased external trade with the
gradual recovery of the global economy and domestic trade with the
restoration of peace.
The hotels and restaurants sub sector grew sharply by about 39.8
percent underpinned by the strong performance in tourism. Other major
sub sectors such as transport and communications, and banking, insurance
and real estate also recorded significantly higher growth rates compared
to 2009.
Reflecting the recovery in economic activity, consumption expenditure
increased by 14.9 percent in 2010, while savings and investment of the
country also recovered. As a percentage of GDP, private consumption
increased from 64.4 percent in 2009 to 65.8 percent in 2010, while
government consumption declined from a high level of 17.6 percent to
15.6 percent.
Both domestic savings and national savings increased, from 17.9
percent of GDP and 23.7 percent of GDP, respectively, in 2009, to 18.7
percent and 24.7 percent, respectively.
Private investment recovered from 17.9 percent of GDP in 2009 to 21.6
percent in 2010, while public investment declined marginally from 6.6
percent of GDP in 2009 to 6.2 percent in 2010, and as a result, total
investment as a percentage of GDP in 2010 increased to 27.8 percent.
The recovery in total investment resulted in widening the national
savings and investment gap to 3.1 percent of GDP, which was reflected in
a higher deficit in the external current account. |