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Sri Lanka expects higher growth in 2017, but drought a risk

Jan 03, 2017 17:31 PM GMT+0530 | 0 Comment(s)

ECONOMYNEXT – Sri Lanka’s economy is expected to expand 5.5-6.0% in 2017, up from an estimated 4.5-5.0% last year, as growth momentum picks up but downside risks remain, particularly from the drought, Central Bank Governor Indrajit Coomaraswamy said.

Inflation will remain in the mid-single digits, around 4-6%, he said in a speech on the Central Bank’s monetary and financial sector policies for 2017.

“In particular, if current drought conditions prevail, there could be adverse implications on price levels, while impacting economic activities, notably agriculture and power generation,” Coomaraswamy said.
“As in the past, it is expected that the government would take timely measures to counter the adverse supply side effects on prices, thus mitigating adverse inflation expectations of the general public.”

Coomaraswamy said economic growth picked up towards the latter part of 2016, with the third quarter expected to do better than previous quarters.

Sri Lanka's economy had picked up in the latter stages of 2016 with construction, finance and wholesale and retail trade sectors showing activity. The momentum is expected to remain in 2017.

Sri Lanka's economy was now stable with inflation under control and it was time for the domestic private sector to step forward, he said.

Some impact will also come from Chinese-funded projects like Colombo Port City and other planned projects involving Hambantota, but their effects will mostly be felt in the years after, Coomaraswamy said.

Sri Lanka also faced challenges from international risks such as Brexit, the recent United States presidential election and interest rate hikes by the US Federal Reserve, and the forthcoming elections in France and Germany, he said.

The projected slowdown in the Chinese economy, as well as economic conditions in Sri Lanka’s major trading partners, including India, Japan, Russia and the Middle East, will also have a significant influence on the domestic economy, he added.

Coomaraswamy said he expects more domestic and foreign investment this year, including some Chinese investment in the Port City reclamation project.
(COLOMBO, Jan 03, 2016)


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