Debt, politics, fiscal uncertainty could dampen Sri Lanka growth: World Bank

ECONOMYNEXT – Sri Lanka’s economic growth rate will improve this year and the next but rising debt, political tensions and uncertainty about fiscal consolidation could weaken its prospects, according to a new World Bank report.

“Growth in Sri Lanka is forecast to climb to 5 percent in 2017, supported by increased private consumption and a rise in foreign direct investment,” the World Bank’s January 2017 Global Economic Prospects report said.

It forecast the island’s growth momentum would continue with 5.1 percent growth in 2018 and 5.1 percent growth 2019.

A boost by the construction and services sectors and resumption of the Colombo Port City real estate project helped Sri Lanka’s growth to hold steady at 4.8 percent in 2016, the report said.

But weak exports, flooding, and a deceleration in private investment weighed on activity, while a slowdown in remittances dampened private consumption and investment, it added.

The World Bank noted that there were several risks, mostly domestic, to its outlook for the Sri Lankan and south Asian regional economy that on balance are tilted to the downside.

“Rising debt levels could weaken prospects in India, Pakistan and Sri Lanka,” it said.

“Security challenges and political tensions could pull back growth in Afghanistan, Pakistan and Sri Lanka. Uncertainty about fiscal consolidation could weigh on confidence in the near-term in Bangladesh, India, and Sri Lanka.”

The World bank noted that although the region’s global integration is relatively limited, heightened policy uncertainty in the United States and Euro area, unexpected tightening of financial conditions, a jump in energy prices, and prolonged sluggish growth in key export markets could slow growth.
(COLOMBO, Jan 13, 2016)
 

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