Sri Lanka economy to grow 7.0-pct 2015 with recovery in second half: CB Governor
ECONOMYNEXT – Sri Lanka’s economy will grow around 7.0 percent in 2015 with despite a slowdown in the first quarter driven by a recovery in the second half especially after elections, Central Bank Governor Arjuna Mahendran said.
A slowdown in state construction spending after the new administration reviewed a number of project helped push down growth while exports were also a drag. Sri Lanka’s growth was estimated at 6.4 percent in the first quarter. The Central Bank projected 7.2 percent growth for 2015.
But more state projects are now expected to be given the go ahead and private residential and commercial construction would also pick up, he said.
Investors who were waiting until elections were over in September to start work.
"Once the elections are over, I see a surge in private sector led investments coming through," he told reporters in Colombo.
"A lot of private investors I speak to are holding back on their investment outlays because of uncertainties about the complexion of the new government and how the policies would change."
"I think that would give us a lot of confidence that the second half would be better than the first half."
Key challenges to the economy was high debt service costs compared to government revenues as well as a slow export demand.
Mahendran said he expected some turbulence in international markets when the Federal Reserve raised interest rates but did not expect it to last long.
Deputy Governor Nandalal Weerasinghe said markets have partly factored the hike, which is seen in rise in international interest rates.
Though investments fell, consumption has picked up the slack he said. Other analysts have warned that unsustainable consumption driven by low interest rates and state spending, would hurt the balance of payments requiring strong measures to correct.