Sri Lanka economy now stable, reform momentum has to be kept up: economist

ECONOMYNEXT – Sri Lanka’s economy is now stable with better policy direction improving investor confidence and the economy is expected to grow with a lower budget deficit and stronger exports, but outlined reforms should be implemented, an economist said.

Shiran Fernando, Chief Economist at Ceylon Chamber of Commerce, Sri Lanka’s largest business association said the economy could grow 4.5 percent in 2018 with agricultural output recovering and exports set to grow with duty free access to the EU.

The Chamber’s economic research unit is projecting the budget deficit would be around 4.5 to 4.8 percent but inflation could be as high as 5-7 percent, indicating continued pessimism on the competence of the central bank to generate low inflation.

Fernando said the balance of payments was positive by 1.9 billion US dollars up to October, 2017 and limited depreciation was expected in 2018. Foreign direct investment as well as portfolio investments, were also improving he said.

Sri Lanka was already seeing a bottoming out in consumer spending.

But building on the budget 2018, and implementing reforms would be key to the keeping up the momentum, he said.

Sri Lanka 2018 budget, a Prime Minister’s economic statement made earlier and a policy framework outlined in a vision 2025 document was in line.

Sri Lanka also had to manage external risk, in 2018 and later Fernando said. Global oil prices were also trending up, he said.

Sri Lanka is planning to market price oil in March and electricity in September.

Sri Lanka’s headed into a balance of payments crisis in 2015 and 2016 after the central bank printed money to accommodate a runway budget, retrospective taxes undermined business confidence and the budget and the administrations’ state policy went it different directions. (Colombo/Jan23/2018)





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