Sri Lanka's first quarter growth is likely to be "more than 6.0 percent" allowing year-end growth to reach 7.0 percent, higher than originally forecast, Central Bank Governor Nivard Cabraal said. The Central Bank originally projected a growth of 6.5 percent for 2010. "Our estimates are the first quarter GDP will be over 6.0 percent," Cabraal said. "We can say that yearly growth will be 7.0 percent." He said all sectors have shown growth which is "substantial."
The Central Bank makes its own gross domestic product estimates and forecasts though the official government number is computed by the statistics office. First quarter numbers are due later this month. Sri Lanka's tourism sector has picked up sharply following the end of a 30-year war and economic activity is also picking up in the former war torn areas of the north and the east. External trade which plummeted in 2009, has also picked up. However exports especially in apparel have continued to shrink, raising fresh concerns about the industrial competitiveness of the island in the wake of high inflation and currency appreciation.
The central bank has largely kept inflation in check, though there was heavy debt monetization in the first quarter raising concerns among analysts. But 12-month inflation fell to 5.3 percent in May from 5.8 percent in April in line with Central Bank promises that price increases will moderate after April. Sri Lanka has a policy rate of 9.5 percent, far above that of the US dollar to which the currency is pegged, allowing the country to have low inflation and a solid peg if the monetary authority can avoid 'quantity easing' to fill government cashflow shortages.
@ LBO.lk
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