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Sri Lanka expects 7.0-pct growth in 2015, inflation 3.0-pct

COLOMBO (EconomyNext) – Sri Lanka is expected to grow 7.0 percent in 2014 and annual average inflation would be 3.0 percent, the Central Bank said with optimistic forecasts for the external front.

The Central Bank is expecting exports to grow to 11.1 billion US dollars in 2015 from 10.3 billion US dollars in 2014, and imports to fall to 18.7 billion rupees from 19.4 billion rupees, due to lower oil prices.

The Central Bank is expecting the deficit in the external current account to contract to 1.0 percent of GDP from the 2.7 percent this year and foreign reserves to grow to 6.2 months of imports, (about 9.7 billion US dollars).

The optimistic forecasts come amidst deterioration in the budget deficit and a dramatic rise in state consumption and borrowing amid a pick-up in private credit and consumption.

The combination of loose fiscal policy and loose monetary policy is already putting pressure on the balance of payments. Sri Lnaka is now relying on central bank swaps to boost reserves, which are under pressure from the credit system.

The Central Bank is expecting annual average inflation, which is a number that is averaged across two years to be 3.0 percent.


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