Capital Market to Contribute 50pct of Sri Lanka's GDP by 2016. Present Contribution is 30pct of GDP of $ 60bn

04th April 2013, www.dailynews.lk, By H DH Senewiratne

The capital market is expected to contribute US $ 50 billion for the country’s GDP by year 2016, therefore the Stock Brokers should be geared to handle the highest number of deposits in the future, Director General Security and Exchange Commission (SEC) Dr Nalaka Godahewa said.

“Sri Lanka’s GDP would be US $ 100 billion by 2016, out of which 50 percent should contribute from the capital market. Therefore, each stock broker should be geared to manage many retail accounts, “Dr Godahewa said at the launch of the Colombo Stock Brokers Association website and also introduced code of principles of best practices at the event.

He said that right now the country’s total GDP was US $ 60 billion and the capital market’s contribution to the GDP was only 30 percent.

There are more than 220,000, accounts in the Capital Depository System, he said.

“At present the country has 29 stock brokering companies, each company should be geared to manage at least 20,000 retail deposits. Therefore all stakeholders should work together to make a vibrant stock market to achieve that target.

To popularize the capital market education aspect plays a pivotal role because our present market is a speculative market than the research base market,” he said.

” When the foreign investors are investing in Sri Lanka they have little knowledge on few companies.

Therefore, research on companies would help to create a vibrant and strong market in the country.

“With the stability in the market, the debt market has performed well, better than we expected. Therefore, we have to find ways and means to face future challenges to make a vibrant market,” he said

The President of the Colombo Stock Brokers Association (CSBA) Dimuthu Abeysekera said that in developing a vibrant equity market, the role of stockbrokers is crucial and into this equation comes the tenets of transparency and enhancing effectiveness across the market.

He said that facilitating a customer centric solution in securities trading in Sri Lanka would be a primary objective for the stock broking community, while maximizing financial returns for the broader investor community by proving prudent timely information,” he said.

“Colombo Stock Exchange is showing stability at present and the development of the overall capital market by introducing Principles of Best Practice that would help to promote the professionalism to the market,” he said.

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Sri Lanka's Central Bank Lowers 2012 Growth Forecast to No Lower than 7pct

10th March 2012, www.ft.lk

The Central Bank will soon lower its 2012 growth forecast of eight per cent to a figure no lower than seven per cent, owing to tighter monetary policy measures and the depreciation of the rupee, the Bank’s overnor told Reuters on Friday.

The bank had originally forecast this year’s growth at eight per cent, slowing from an estimated 8.3 per cent expansion in 2011.

The International Monetary Fund (IMF), which has given a $ 2.6 billion loan program to Sri Lanka, on Monday said the economic growth would be less than 7.5 per cent.

“We are getting ready to lower our growth forecast, around next week’s monetary policy announcement.It won’t be below seven per cent,” Central Bank Governor Ajith Nivard Cabraal told Reuters.

The bank meets on interest rates next Wednesday, when it should announce the changed forecast formally. Two other Central Bank officials confirmed the revision is under way.

“We will be looking at all the conditions. There are some areas going to be better and some areas not so good. So we are taking a calculated call,” Cabraal said. A record trade gap and a growing current account deficit forced the Central Bank to raise its policy rates for the first time since 2007.

The Central Bank last month halted its defence of the rupee at a specific price against the dollar, having spent more than $ 2.7 billion of its foreign exchange reserves last year to stave off depreciation.That removed a point of friction with the IMF and relieved pressure on its fast-dwindling reserves. Market interest rates have risen by 115-143 basis points since the bank raised its main policy rates by 50 basis points to 7.5 and 9.0 per cent respectively on 3 February. The rupee has also depreciated more than 5.7 per cent since the Central Bank stopped defending it on 9 February. The country is expected to have recorded a balance-of-payments deficit in 2011, although the official figures have not been released yet.

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Global Slowdown Could Affect Sri Lanka - World Bank

19th January 2012, www.lankabusinessonline.com

Sri Lanka's post-war economic rebound is slowing and financial problems in key Western markets could reduce demand for the island's exports and hit earnings from worker remittances and tourism, the World Bank said.

It has also lowered its forecast for economic growth in the island, saying Sri Lanka is now expected to grow at 6.8 percent in 2012 and 7.7 percent in 2013.

Earlier this month, Sri Lanka's Central Bank said Sri Lanka's economy is projected to grow at 8.0 percent in 2012 after having grown at about 8.3 percent in 2011. The forecast was lowered from the earlier forecast of nine percent in 2012.

The World Bank said in a new report on global economic prospects that the global slowdown has been taking its toll on South Asia, with merchandise export volumes which had been growing very strongly in the first part of 2011, declining almost as quickly in the second half.

" . . . year-over-year exports in October are broadly unchanged from a year ago," it said.

"A deepening of the Euro Area crisis would lead to weaker exports, worker remittances and capital inflows to South Asia," the World Bank said.

"The EU-27 countries account for a significant share of South Asia merchandise export markets, although not as much as for some developing regions."

Moreover, the bank said, export financing from Europe, an important component of the region‟s trade credit, is particularly vulnerable to drying up, as was the experience during the 2008 financial crisis.

"At the country level, Bangladesh, the Maldives and Sri Lanka are particularly exposed to a downturn in European demand for merchandise," the World Bank said.

"With respect to services, tourism sectors could be especially hard hit in Sri Lanka and the Maldives, although greater diversification (with booming arrivals from Asia) should provide a buffer.

However, the World Bank noted that there could be some "countercyclical benefits" for goods exporters - the so-called 'Walmart effect' - for some sectors such as for Bangladesh's garment industry.

The bank also said that a slowdown in global activity would likely translate into lower oil prices that would ease pressures on current account and fiscal balances for the oil import-dependent nations like Sri Lanka.

"Worker remittances inflows could slow markedly through second round effects of weakened domestic demand in migrant host-countries, largely located in the Arabian Gulf," the report warned.

Worker remittances inflows were the equivalent to 7 percent of GDP in 2010.

"Despite a waning of the post-conflict rebound effects, GDP in Sri Lanka is estimated to have grown 7.7 percent in the 2011 calendar year, slightly below the 2010 pace of 8 percent," the report said.

"While growth was strong at the start of 2011, a deceleration became apparent in the second half of the year, on heightened uncertainty and weakening external demand, as reflected in a modest slowdown in industrial production growth."

Given the possibility of further weakening in the global economy, efforts at greater revenue mobilization particularly in countries like Sri Lanka could pay dividends by allowing governments to maintain critical social and infrastructure programs, the World Bank said.

Governments should also look at further improving the targeting of its safety nets and capacity to respond to a crisis to improve efficiency of social safety net programs, it said.

"With markets in the United States and Europe expected to experience prolonged weakness, South Asian countries have the opportunity to re-think and pursue new sources of growth for their countries," the World Bank said.

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Sri Lanka's Economy to Grow at 8pct in 2012 with a New Deal with IMF

03rd January 2012, www.lankabusinessonline.com

Sri Lanka's economy is projected to grow at 8.0 percent in 2012 with a new deal in the offing with the International Monetary Fund, Central Bank governor Nivard Cabraal said.

The island economy had grown at about 8.3 percent in 2011, he said.

In 2012 Sri Lanka is targeting an inflation rate of between 5-6 percent, Cabraal said.

Annual average inflation for 2011 was 6.7 percent compared with 6.2 percent the year before, according to a 12-month moving average.

Cabraal said the economy had earlier been forecast to grow at nine percent in 2012.

But the forecast was lowered as the global economic situation had changed with the debt crisis in Europe and recession or low growth looming in key Western markets.

Sri Lanka will also negotiate a follow up or surveillance programme with IMF for 2012, Cabraal said at the launch of the central bank's monetary policy road map for 2012.

The International Monetary Fund has so far given Sri Lanka 1.7 billion US dollars under its stand-by arrangement programme, Cabraal said.

The IMF came in with a 2.5 billion US dollar bailout after Sri Lanka ran down its foreign reserves in a period of peg defence from around September 2008 to April 2009 triggering currency and banking crisis after a period of earlier loose monetary policy.

Two tranches of about 400 million dollars remain to be given under a review in September 2011 that was put off and another in March 2012, and the program will formally end in May.

In 2011 Sri Lanka's gross domestic product was estimated at 59 billion US dollars and per capita income at 2,830 US dollars, Cabraal said.

Unemployment fell 4.3 percent in the first quarter of 2011 and labour productivity had improved, Cabraal said.

Poverty is estimated to have fallen below the level of 8.9 percent in 2009.

In 2011, the industry sector had grown the fastest, expanding by an estimated 10.1 percent and contributing 18 billion dollars or 30 percent of GDP.

The services sector followed with 8.6 percent growth and contributing 34 billion dollars or a 58 percent share of GDP while agriculture grew two percent in 2011 and contributing seven billion dollars or 12 percent of GDP.

The island's external sector was strong with imports at 51.6 percent of GDP in 2011, up from 44.4 percent in 2010.

The share of exports in GDP was 17.7 percent in 2011 while the contribution of remittances to GDP rose to 8.8 percent from 8.3 percent the previous year.

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Sri Lanka Debt to GDP Ratio Falls to 78pct from 82pct in 2010

03rd January 2012, www.lankabusinessonline.com

Sri Lanka's debt to GDP ratio had fallen to 78 percent by end-2011 from 82 percent in 2010, Central Bank governor Nivard Cabraal said.

The island's foreign exchange reserves had fallen to 6.0 billion US dollars by the end of 2011 enough to cover 4.0 months of imports and higher than the 3.5 months targeted in IMF programme, he said.

The International Monetary Fund has so far given Sri Lanka 1.7 billion US dollars under its programme, Cabraal said at the launch of the central bank's monetary policy road map for 2012.

Cabraal said foreign exchange reserves are built up by central banks to be used when needed.

The central bank in recent months has been selling dollars to maintain the rupee's peg with the US dollar.

However, the exchange rate remains under pressure despite a three percent devaluation of the rupee against the dollar in November 2011.

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Sri Lanka's North Shows Highest Growth in 2010 while All Provinces Report Double Digit Growth

13th July 2011, www.dailynews.lk

The Western Province, made the highest contribution to GDP in 2010. However its share in GDP reduced to 45.1 per cent from 45.8 per cent in 2009.

As in 2009, Southern province provided the second highest contribution which was 10.7 per cent, an increase compared to 10.5 per cent in 2009, the Central Bank said yesterday.

In 2010, the GDP at current prices grew by 15.9 per cent, and reached Rs 5,602 billion with a per capita income of Rs 271,259 equivalent to US$ 2,399.

The Central Province provided the third highest contribution maintaining its relative position compared to 2009 and managing to increase its GDP contribution to 10.0 per cent in 2010.

However, the contribution of the North Western province declined to 9.4 per cent in 2010 from 9.6 per cent in 2009.

The contributions to GDP from Northern, Eastern, North Central and Sabaragamuwa provinces increased in 2010 while that of the Uva province was unchanged.

In line with improvements in country's economic environment, all the provinces have reported a double digit growth rate in 2010. Reflecting the rapid expansion in income generating activities in the Northern province, GDP growth rate was highest in the province at 22.9 per cent.

It's contribution to GDP also increased from 3.2 per cent in 2009 to 3.4 per cent in 2010. The North Central province has reported a 20.3 per cent GDP growth rate which is the second highest among all the provinces. Sabaragamuwa and Eastern provinces also reported high GDP growth rates of 19.1 and 18.7 respectively.

As in the past, the Western province contributed significantly to GDP in the country, as most of the economic activities that relate to sea port, air ports, banking and financial institutions and business centers are still centralized in the province.

The per capita income in the Western province which stood at US$ 3,808 (Rs 430,488) was 1.6 times the national per capita income in 2010. Per capita income in all other provinces continued to fall below the national per capita income.

Also in all provinces, this ratio was unchanged except in the Sabaragamuwa province where the relevant ratio increased. There are considerable variations in the structure of GDP across the provinces.

Agriculture accounted for just three per cent of GDP in Western province in 2010, whereas it accounted for over 16 per cent of GDP in the other provinces.

In the Uva Province agriculture accounted for more than 30 per cent of GDP.

In all provinces industry accounted for between 14.2 per cent and 34.8 per cent of GDP in 2010. Services sector was the most dominant single-sector accounting for between 48.3 per cent and 69.8 per cent of the GDP in the different provinces.

The contribution from the industry sector declined in the Western, Eastern, Uva and Sabragamuwa provinces in 2010 but expanded in the other provinces.

The greatest contribution to GDP from this sector was observed in the Southern province. Despite the contribution from the industry sector to GDP being lowest in Northern province, the province experienced the greatest expansion in its contribution during the period 2009 and 2010.

Meanwhile the contribution from the service sector increased in the Western, Eastern and North Central provinces but declined in all other provinces during 2010.

Related Info :

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• Sri Lanka's Public Debt Reduces to 81.9pct of GDP in 2010

Sri Lanka's Public Debt Reduces to 81.9pct of GDP in 2010

27th April 2011, www.dailynews.lk, By Ravi Ladduwahetty

The Government debt as a percentage of GDP has declined to 81.9 percent in 2010 from 86.2 percent in the previous year due to improvements in fiscal operations, says the Central Bank of Sri Lanka.

Central Bank Deputy Governor Dharma Dheerasinghe told Daily News Business yesterday that higher revenue collection which reduced the borrowing requirement, the reduction in the discount factor (which is the net difference in the book value and the face value of issues and maturities of Treasury bills and Treasury bonds) as a result of declining yield rates in government securities and the appreciation of the rupee vis-a-vis major foreign currencies, as well as higher economic growth contributed to the reduction in the debt to GDP ratio.

In nominal terms, the total outstanding government debt increased by 10.3 percent to Rs. 4,590 billion as at end 2010. As a percentage of GDP domestic debt declined significantly to 45.8 percent of GDP in 2010 from 49.8 percent of GDP in 2009, while foreign debt declined to 36.1 percent of GDP in 2010 from 36.5 percent of GDP in the previous year, he said.

The share of domestic debt in total government debt declined further in 2010 to 56 percent from 58 percent in 2009. Repayment of high cost domestic borrowings with the proceeds of the international sovereign bond and the increase in availability of foreign funds reduced the share of domestic debt in the total debt stock.

The share of medium to long term debt to total domestic debt stock declined marginally to 76 percent in 2010 from 77 percent in the previous year, while 84 percent of medium to long term domestic debt comprised Treasury bonds.

The share of Treasury bills in short term debt increased to 83 percent in 2010 from 79 percent in the previous year.

The outstanding stock of Rupee loans continued to decline to Rs. 88 billion in 2010 from Rs. 112 billion in 2009 due to the repayment and non issuance of Rupee loans during the year, as the debt management strategy has been to move towards more market oriented debt instruments.

Reflecting the increasing reliance on non bank borrowings, the outstanding debt held by the non bank sector increased by 10.5 percent to Rs 1,873.8 billion in 2010.

Accordingly, the outstanding stock of Treasury bills and Treasury bonds held by the non bank sector increased by 19.5 percent and 12 percent, respectively, in 2010.

The EPF and NSB continued to be the major investors in government securities, accounting for 46 percent and 15 percent, respectively of the outstanding debt stock held by the non bank sector, the Deputy Governor said.

The outstanding debt obligations of the government to the domestic banking system declined by 2 percent to Rs 691.7 billion in 2010. The outstanding debt held by the Central Bank declined by Rs. 31.2 billion to Rs. 78.4 billion, while outstanding government debt held by commercial banks increased by Rs. 17.2 billion to Rs. 613.3 billion in 2010. Consequently, the share of banking sector debt in the total domestic debt stock declined to 27 percent in 2010 from 29 percent in 2009.

Retirement of the Central Bank’s holdings of Treasury bills reduced the government debt outstanding to the Central Bank. While, Treasury bill holdings of commercial banks increased by Rs 60 billion to Rs 220 billion, Treasury bond holdings of commercial banks declined by Rs 26 billion to Rs 162 billion, reflecting the appetite of investors for short term instruments.

Further, other outstanding government debt held by commercial banks declined to Rs 230.8 billion in 2010 from Rs 247.5 billion in 2009.

Sri Lanka's First Post War Year Achieves GDP Growth Rate of 8pct. 2009 only 3.5pct. Highest Ever Achieved Since Independence was 8.2pct in 1968 & 1978

30th March 2011, www.ft.lk

Sri Lanka in its first post-war year achieves 8% growth, second best ever in history behind 8.2% posted in 1968 and 1978; Industry and Services sectors grew unprecedentedly by over 8%, marking highest-ever growth since 2002.

The value of country’s Gross Domestic Product (GDP) crossed the Rs. 2.6 trillion mark in 2010 registering a second highest ever annual growth of 8%.

The Department of Census and Statistics revealed yesterday that the economic output of Sri Lanka as measured by GDP for the year 2010 at constant (2002) prices is estimated at Rs. 2,645.4 billion as against Rs. 2,449.2 billion in the previous year, registering an 8.0% growth rate as against 3.5% growth in the previous year.

“This impressive high growth is more important for the country’s economic progress and it is the second best GDP growth ever achieved since independence,” the Department of Census and Statistics said. “The highest-ever achieved GDP growth in the history of the country was 8.2%, and it was recorded in the years 1968 and 1978,” it added.

The three major sectors of the economy – Agriculture, Industry and Services – registered significant growth as 7.0%, 8.4% and 8.0% respectively, in 2010 over the previous year. Of these, Industry and Services sectors grew unprecedentedly, marking the highest-ever growth since 2002.

The sub sectors which registered relative significant growth among the major sectors in the reference year are Tea 13.1%, Rubber 12.7%, Minor Export Crops 37.6%, Paddy 17.5%, Fishing 12.2%, Mining and Quarrying 15.5%, Construction 9.3% , Electricity Gas & Water 7.8%, Wholesale & Retail Trade 7.5%, Hotels & Restaurant 39.8%, Transport & Communication 11.9%, and Banking, Insurance & Real Estate 7.5%.

However, the growth of the Coconut sub sector dropped by (-) 14.3% in 2010 as against previous year. The Livestock Production, Other Food Crops (Highland Crops, Vegetables, and Fruits) , Firewood & Forestry and Gas in 2010 have recorded relatively slow growth constituting 2.9%,4.4%, 3.1%, and 4.6%, as against the previous year.

The percentage share of the three major sectors, namely the Agriculture, Industry and Services, to the total GDP constituted 11.9%, 28.8% and 59.3% respectively. The year-on-year inflation as measured by Colombo Consumers’ Price Index is recorded as 5.9% in 2010, whereas it was 3.4% in 2009. The index number of GDP implicit price deflator rose to 211.8 in 2010, from 197.4 in 2009, registering inflation rate as 7.3% for the year 2010.

The GDP per-capita at market prices is estimated at Rs. 271,259 (US$ 2,399) in 2010 as against Rs. 236,445 (US$ 2,057) for the previous year depicting a growth of 14.7% for the rupee value and 16.6% for the US$ value.

Private Final Consumption Expenditure (PFCE) at current prices is estimated at Rs. billion 3,684.7 in 2010 as against Rs. billion 3,116.2 in 2009. Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs. billion 1,452.0 in 2010 as against Rs .billion 1, 147.4 in 2009. The corresponding share of GFCF to the GDP is 25.9% in 2010 and 23.7% in 2009.
Gross Savings at current prices in 2010 is estimated at Rs. 1,360.1 billion as against Rs. 1,141.5 billion in 2009 constituting 24.3% of GDP as against 23.6% in the previous year.

Agriculture sector

The Agriculture, Forestry and Fishing sector showed a 7.0% growth in 2010 as against the growth of 3.2% the year before. The growth rate of Tea is registered as 13.1% for the year 2010 as against (-) 8.4% for the year 2009, attributed to the recovery in tea production which had been dropped in 2009. The favourable weather conditions during the period of January to September in 2010 also supported this growth. However, tea production decreased by 1.0% in Q4 2010 owing to unfavourable weather conditions.

The value added of rubber production grew by 12.7% in 2010 as against the 7.9% for the last year. The major reasons for this growth was due to the increase in average price of rubber (at the Colombo auction) which rose to Rs. 397.70 per kg in 2010 from 201.66 per kg in 2009 indicating 97.2% price increase.

This price increase enthused over the maintenance of rubber estates and tapping activities which eventually propped up the growth. The value addition of coconut production showed a 14.3% decrease in 2010 although it grew by 5.3% in the previous year. Low rainfall in 2009, onset of pest and outbreak of diseases and low humidity in major coconut cultivating areas were identified as root causes to such a decline.

The growth rate of Minor Export Crops (MEC) was recorded as 37.6% in 2010 whereas it was 5.2% for the previous year. The export quantities of cloves, sesame seeds and cashew nuts have increased by 206.6%, 438.8%, and 94.7% respectively in the reference year.
Paddy grew by 17.5% in 2010 as against the negative growth of 5.1% in 2009. The gross extent sown and gross extent harvested increased by 9.0%, and 12.5% respectively in 2010 over the previous year. The higher paddy prices, adequate water supply, resumption of cultivation in paddy fields – especially in Northern and Eastern Provinces, which had been forbidden cultivation for years by the war, and pro-agricultural policies such as fertiliser subsidy, guaranteed paddy prices, etc., were the major driving forces for the growth of paddy production.

The sub sector of Livestock Production grew by 2.9% in 2010. The restored peace across the country supported the growth of livestock farming, especially in the east. The North Central Province was able to increase livestock production.

The overall fishing industry grew by 12.2% in 2010. Of these Inland Fishing grew by 10.1% and Marine Fishing grew by 12.5%. The expansion of breeding fish distribution to tanks, the development programmes currently being operated for inland fishing in the north, better management practices in the inland fishing industry and resumption of inland fishing in Mannar and Vavuniya Districts supported the outstanding growth of inland fish production.
The satisfactory growth of the marine fishing industry has been supported by the relaxation of restricted fishing time and fishing areas in the north, higher fish production in Northern and Eastern Provinces and the progress made in fishing industry related infrastructure facilities.

Industry sector

In real terms, Value Added of the industry sector grew by 8.4% in 2010 as against 4.2% growth in 2009. Manufacturing, which is the largest sub sector of the industry sector, grew by 7.3% in 2010. The growth rate of gem mining recorded 7.9% in 2010. Export quantities of both the precious stones and semi-precious stones increased by 4.7% in the reference period.
The Factory industry grew by 7.5%. The higher growth of factory industry has been supported by Chemicals, Petroleum, Rubber and Plastic Products by 12.2%, Non-Metallic Mineral Products by 10.4%, Fabricated Metal Machinery & Equipment by 8.2% and Textile, Wearing Apparel & Leather Products by 5.2%.

The growth rate for the sub sector of Electricity, Gas and Water is 7.8% for the reference year as against 3.7% growth in 2009. The overall electricity generation grew by 8.4% during the reference year, while hydro power generation recorded a 46.4% growth and thermal power generation recorded a (-) 16.4% growth.

In real terms, the Construction sub sector indicated a 9.3% growth for the year 2010 and it was 5.6% for the previous year. This growth was supported by the introduction of new development projects, the large scale projects already in operation and the operated rehabilitation and resettlement programmes, especially in Northern and Eastern Provinces.
Total cement production has increased to 3,749,005 MT in 2010 from 3,212,865 MT in 2009 indicating a 16.7% increase; the disbursement of loan for constructions of houses, business premises, other buildings and property developments increased by 39.6% during the reference year.

Service sector

The overall Service sector marked 8% growth in 2010 as against 3.3% growth in the year 2009 making the highest-ever growth in the annual series, since 2002.

The recorded high growth in the reference year has been boosted by the promising higher growth of its major sub sectors such as, Hotels and Restaurants by 39.8%, Transport and Communication by 11.9%, Banking, Insurance and Real Estate by 7.5% and Wholesale and Retail Trade by 7.5%.

The Export Trade sector grew by 3.4% at constant prices for the year 2010. According to the Balance of Payment (BOP) Statistics of Central Bank of Sri Lanka (CBSL), exports earnings increased to Rs. 937,737 million in 2010 from Rs. 813,911 million in the year 2009, indicating a 15.2% increase. According to trade indices of CBSL, export volume and export price level increased by 3.7% and by 11.1% respectively during the reference period.

The Import Trade sector grew by 9.5% in the reference period as against 8.2% drop in the previous year. Total expenditure for imports increased to Rs. 1,528,171 million in 2010 from Rs. 1,172,618 million in the year 2009 recording a 30.3 increase. According to the trade indices of CBSL, the import volume and import prices increased by 11.6% and by 16.7% respectively in 2010 over the previous year.

Domestic Trade sub sector grew by 7.6% in the year 2010. This was mainly due to the higher agricultural and industrial productions which mostly consume the domestic market. Higher production of paddy and fish, which are mostly consumed locally, are the major driving forces to higher growth of domestic trade.

The Hotels and Restaurants sector recorded 39.8% higher growth in 2010 as against the growth rate of 13.3% for the last year. Tourist arrivals increased to 654,476 in 2010 from 447,890 in 2009, contributing a growth of 46.1% for the reference year. It is the highest-ever recorded number since 1969. The major reason for these increments is the prevailing peace across the country. Tourist earnings increased by 62.0% and room occupancy rate increased to 70.1 in 2010 from 48.4 in 2009.

Transport & Communication sector indicated 11.9% growth as against that of 6.3% growth in the previous year. The Passenger and Goods Transportation, Cargo Handling and Posts and Telecommunication sub sectors grew by 11.4%, 16.8% and 13.2% respectively.

The total number of new registrations of vehicles increased by 76.0% in the reference year, as against a 23% decline in the previous year. Registration of buses, three-wheelers and goods transport vehicles increased by 237.1% 129.2% and 40.1% respectively in 2010. The boom of new registration of vehicles has been chiefly fuelled by the reduction of import duty with effect from June 2010.

Both passenger income and passenger kilometres flown by SriLankan Airlines increased by 25.3% and 19.7% respectively in 2010. Total telephone connections increased by 17.6% in this year due to expansion of telecommunication services, especially in the newly-liberated areas of the Northern Province and the introduction of new connections with advanced technology which attracted customers.

The Banking, Insurance & Real Estate sector grew by 7.5% in 2010, as against the growth of 5.7% in the year 2009. Loans and advances increased rapidly in the year 2010, compared with previous year.

Related Info:

• The estimated Gross Domestic Product (GDP) of Sri Lanka for the year 2010 at current and constant (2002) prices and its related economic indicators is hereby released by the
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Sri Lanka Records 8pct Q3 GDP Growth. Second Highest Ever Quarterly Record

16th December 2010, www.dailynews.lk

The economic output of Sri Lanka as measured by Gross Domestic Product (GDP) for the Q3 (July-September), of 2010 at constant (2002) prices is estimated at Rs 690.7 billion as against Rs 639.3 billion in the Q3 of 2009, registering an eight percent growth rate the Census and Statistics Department said yesterday.

This growth rate is noteworthy as it is the second highest ever recorded quarterly GDP growth since 2002. The three major sectors of the economy namely, Agriculture, Industry, and Services registered significant growth rates as 6.2 percent, 8.8 percent and eight percent respectively, in the Q3 of 2010 over the same quarter of previous year. The percentage share of the three major sectors, the Agriculture, Industry, and Services to the total GDP reported as 12.0 percent, 28.5 percent and 59.5 percent respectively.

The “Agriculture, forestry, and fishing” sector showed a 6.2 percent growth during the Q3 of 2010 as against the growth of (-) 0.5 percent during the same quarter previous year. The growth rate of tea production is registered as two percent for the Q3 2010 as against (-) 2.1 percent for the Q3 2009. The value added of rubber production grew by 15.9 percent for this quarter as against the (-) 3.4 percent the same quarter of the last year.

The real terms value added of the industry sector grew by 8.8 percent in the Q3 2010 against 4.4 percent growth in Q3 of 2009. The manufacturing sector which is the largest portion of industry sector grew by 6.5 percent in the Q3 of 2010.

The higher growth of factory industry was supported by the higher growth of Chemicals, Petroleum, rubber and plastic products by 9.8 percent, Non-metallic mineral products by 11.3 percent and Fabricated metal machinery and equipment by 9.7 percent and Textile, wearing apparel and leather products by 3.2 percent.

Construction sub sector grew by 11.3 percent in the Q3 of 2010 as against 6.4 percent growth in the same quarter previous year. This Q3 growth is the highest ever recorded quarterly growth achieved since 2002.

The overall service sector marked eight percent growth in the Q3 2010 against 5.1 percent growth in the same quarter of 2009 marking the ever highest growth in a third quarter since 2002. This recorded 8 percent high growth in Q3 2010 has been boosted by the promising higher growth of its major sub sectors such as Hotels and restaurants by 32.2 percent, Transport and communication by 12.4 percent, Banking, insurance and real estate by 8.5 percent, and Wholesale and retail trade by 7.7 percent.

The export trade sector grew by 1.2 percent at constant prices for the Q3 2010. According to trade indices of CBSL, export volume and export price level increased by 0.9 percent and by 4.7 percent respectively during the reference quarter.

The import trade sector grew by 11.8 percent in the reference period as against a 1.5 percent drop in the same quarter of the previous year. Domestic trade sector grew by 7.7 percent in the Q3 2010.

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Sri Lanka GDP Growth 7.2pct in 2010 - Fitch Forecast

08th October 2010, www.dailynews.lk

Fitch Ratings forecasts Sri Lanka's GDP growth to average 7.2 percent during the 2010 - 2012 period compared to an average of 5.1 percent recorded during the last 20 years.

The rating agency recently uplifted the country's creditworthiness which reflect the economic benefits of post war transformation and IMF support, news360.lk reported. Fitch says the IMF program in the country has lifted investor's confidence on Sri Lanka thus helping to pick up private capital inflows to the country and in turn a rise in foreign exchange reserves.

Fitch in its rating report adds that Sri Lanka has made headway in integrating the war torn Northern and Eastern provinces into the rest of the economy which it notes will help boost the nations productive capacity.

The Agency also predicts that the end of the war will help Sri Lanka cut defence spending which accounted for over 15 percent of the Government spending.

It says the Island's authorities' ability to boost tax revenues while consolidating the budget deficit and significantly lowering the level of overall Public debt would be a positive development for the country's credit ratings.

Further adding, Fitch notes that the ability to attract foreign direct investment will help Sri Lanka to offset its loss of EU GSP plus status. www.priu.gov.lk

Sri Lanka Records Highest GDP Growth of 8.5pct since 2002. All Three Major Sectors Register Significant Growth

17th September 2010, www.news.lk

Sri Lanka recorded an economic growth rate of 8.5 percent in the second quarter of 2010, the highest ever recorded quarterly GDP growth since 2002.

According to the figures released by the Department of Census and Statistics, the economic output of Sri Lanka as measured by Gross Domestic Product (GDP) for the second quarter(April-June), of 2010 at constant (2002) prices is estimated at Rs. 635.0 Billion as against Rs. 585.5 Billion in the corresponding period of yester year, registering an 8.5 percent growth rate.

The report says that all three major sectors of the economy Agriculture, Industry, and Services registered significant growth rates of 5.1 percent, 9.2 percent and 8.8 percent respectively, in the same period.

The Agriculture sector contributed 11.9 percent to the total GDP while Industry was responsible for 28.1 percent and Services accounted for 60.0 percent of the total. Within the Agriculture Sector Minor Export Crops grew by 20.7 percent, Paddy by 10.3 percent and Fishery by 18.3 percent as the agricultural activities in the war-ravaged Northern and Eastern provinces picked up and fishing restrictions eased.

The report noted that the marine fish production increased by 134.1 percent in the Northern Province and by 45.8 percent in the Eastern Province while overall fish production in other regions except the North and the East decreased by 2.1 percent in the second quarter as more fishermen from the South migrated to North. The Services sector posted a substantially higher growth rate of 8.8 percent higher over the 1.2 percent recorded a year earlier.The Census and Statistics Department attributes the growth in the Q2 2010 due to the recovery of its major sub sectors such as Wholesale & retail trade, Hotels & restaurants and Transport & communication. Hotels and restaurant sector has experienced significant growth of 25.2 percent in Q2 as opposed to a negative 0.4 percent for the same period last year. Tourists arrivals have jumped from 81,027 in the Q2 2009 to 118,243 in the Q2 2010 indicating a 45.9 percent increase.

Reduction of import duty on vehicles in the latter part of the quarter contributed to an increase of 78.6 percent in the total number of new vehicles registered in Q2 as opposed to a 36.2 percent decline in the same quarter of previous year.

Sri Lankan Economy Grows Fastest in last Five Quarters. 6.2pct in Last Quarter

30th March 2010, www.bloomberg.com, By Anusha Ondaatjie

Sri Lanka’s economy expanded at the fastest pace in five quarters as the government stepped up spending on new roads and ports after the end of a quarter- century of civil war in the country.

Gross domestic product rose 6.2 percent in the three months ended Dec. 31 from a year earlier after gaining 4.2 percent in the previous quarter, the statistics department said in a statement in Colombo today.

President Mahinda Rajapaksa, who was reelected for a six- year term in January after defeating the Tamil Tiger rebels in May, has pledged to spend $1 billion on ports, roads and power plants in 2010. Reconstruction in the $41 billion South Asian economy is boosting profit in companies including Tokyo Cement Co. Lanka Plc and Central Industries Plc.

“The infrastructure investments will have a spillover effect in the economy,” Saminda Weerasinghe, research manager at Acuity Stockbrokers Pvt. in Colombo, said before the report. “It will help even faster growth in the second half of 2010.”

Central Bank of Sri Lanka Governor Nivard Cabraal on March 18 maintained benchmark interest rates at a five-year low to boost consumer demand and drive growth to as much as 7 percent in 2010. Sri Lanka’s reverse repurchase rate is 9.75 percent and the repurchase rate is 7.5 percent.

Low Inflation

Cabraal can afford to keep borrowing costs low because of tame inflation in the country. Consumer prices in the capital, Colombo, rose 6.9 percent in February from a year earlier, almost half the average inflation rate between 2004 and 2009.

Commercial bank loans rose to 1.196 trillion rupees ($10.5 billion) in January from 1.195 trillion in December, the fourth gain in five months, according to the central bank, an indicator of growing consumer spending.

Low interest rates are also critical to support domestic demand as Sri Lanka’s exports may slow in the coming months after the European Union on Feb. 15 said it will suspend preferential trade benefits to the island nation because of human rights “shortcomings” during the war.

Sri Lankan exports rose 6.4 percent in December to $723.4 million after a yearlong decline.

Peace has prompted foreign companies, including HSBC Holdings Plc and Emirates Telecommunications Corp., to start operations in the island’s northern and eastern areas that were earlier under the control of the separatist Liberation Tigers of Tamil Eelam.

HSBC Holdings, Europe’s biggest bank, in February opened the first branch by any foreign bank in Sri Lanka’s northern Jaffna peninsula.

Start Operations

Etisalat, the United Arab Emirates’ biggest phone company, started services in Jaffna on Feb. 26 after acquiring Tigo Pvt., the Sri Lankan unit of Millicom International Cellular SA, for $155 million in October.

Demand for building roads and ports after the end of the war helped lift sales at Tokyo Cement by 79 percent in the three months ended Dec. 31.

Sri Lanka plans to invite overseas and local companies this month to set up business in a new $550 million tax-free port zone in the island’s south. The country is also seeking foreign investments to help build a new terminal in Colombo port, Sri Lanka Ports Authority Chairman Priyath Wickrarma said March 5.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

Sri Lanka Economy 2009. Growth 3.5pct. Hotels and Restaurants Expanded by 13.3pct

27th March 2010, www.lankabusinessonline.com

Sri Lanka's economy grew 3.5 percent in 2009 pushed by growth in all three major sectors of economic activity, agriculture, industry and services, the Department of Census & Statistics (DCS) said in a statement.

The Gross Domestic Product (GDP) growth was much slower than the six percent achieved in 2008, largely owing to the global slowdown, although the economy has been recovering in recent quarters with revenue and exports picking up.

The Central Bank has forecast economic growth of five percent this year.

The statistics office said key contributors to growth of in 2009 came from rubber, which grew 7.9 percent, vegetables which grew at 7.3 percent, fishing which expanded by 6.9 percent, mining for construction which grew 18.1 percent, hotels and restaurants which expanded 13.3 percent, and post and telecommunications at 11.7 percent.

The services sector, which accounts for almost 60 percent share of economic activity, grew 3.3 percent, industry which accounts for just over a quarter of economic activity grew 4.2 percent and agriculture, which has a 12 percent share, expanded by 3.2 percent.

The statistics office said estimated per-capita GDP at market prices (per capita income) for 2009 was 235,945 (2,053 US dollars).

The total investment rate for the year 2009 was 24.5 percent with the government investment ratio up 6.6 percent in 2009 from 6.5 percent the year before.

"The gross saving was up 23.7 percent in 2009 compared with the relatively low rate of 17.3 percent in 2008."

Gross Fixed Capital formation at current prices was estimated at 1,147,440 million rupees in 2009, as against 1,115,310 million rupees the year before.

Overall agriculture sector growth was achieved despite a decrease of earnings from agricultural exports and drought.

Tea exports growth, which decelerated for the first three quarters of 2009, picked up by 18.3 percent at the end of the year.

The value added for the rubber production increased of 7.9 percent in 2009.

"Although the growth of first, second and the third quarters registered a slight decline, the fourth quarter shows a significant growth of 22.3 percent," the statistics office said.

Paddy production last year was lower than in 2008 but was the second best harvest ever produced after 1952 and also the second best harvested land extent area for paddy cultivation.

This was because more land was cultivated especially in the east with the end of the 30-year ethnic war in May 2009.

The end of the war also gave a fillip to the fishing industry which grew by 6.9 percent in 2009.

"The fishing industry flourished due to lifting of security measures specially in the Eastern and the Northern coasts and the deep sea."

Sri Lanka Stocks Hit All Time High. Up 112-pct as Economy Expanded 4.2% in Third Quarter

18th December 2009, www.lankabusinessonline.com

Sri Lanka stocks hit an all time high with the benchmark Colombo All Share index closing at 3,188.8 points, topping a previous peak of 3,139.7 points reached on October 13, the Colombo Stock Exchange said.

So far this year stocks are up 112 percent. The Milanka index of liquid stocks, which closed at 3,630.5 points, is up 122 percent.

The latest high came as the government's statistics office said Sri Lanka's economy expanded 4.2 percent in the.' third quarter, boosted by peace, tourism and domestic retail trade growth.

Sri Lanka defeated Tamil Tiger separatists in May ending a 30-year conflict. Sri Lanka's Central Bank has also kept inflation low this year, but fiscal policy has deteriorated further in recent weeks ahead of elections in January.

Part of the economic growth came from new recruitments to the state. Under international national income accounting methods the state salary bill is considered 'gross domestic product.'

The opposition candidate for the presidency, Sarath Fonseka, a general who led the military campaign against the Tigers has promised a 10,000 rupee salary hike for state workers.
Sri Lanka has 1.3 million state workers and already more than half the taxes collected from the people are given to them as salaries and pensions.