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.

Related Info :

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

• Standard Chartered Research Report Sees Slower Growth in 2012. "On the Ground: Sri Lanka – A Challenging Year Ahead"

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.

Related Info :

• Sri Lanka, Mongolia & Iraq to Lead Growth States of 2050, 3G Index of Global Growth Generators of Citibank Chief Economist

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 :

• Central Bank of Sri Lanka - Annual Report 2010

• Sri Lanka Budget Deficit Shrinks to 1.9pct of GDP for First TwoMonths of 2011 as Government Fscal Discipline Improves

• 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

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

Sri Lanka Records 43pct Growth in Tourism upto May 2011

29th May 2010, www.sundayobserver.lk, By Shirajiv Sirimane

Sri Lanka claimed the highest growth rate in tourism in the region recording 43% of growth when the Asian region as a whole recorded a tourism growth rate of 13% up to May 2011.

Deputy Minister of Tourism, Lakshman Yapa Abewardana speaking at the Sri Lanka Tourism Awards 2010 said that since the defeat of terrorism in 2009, the tourism industry in Sri Lanka has gathered momentum and grown steadily.

The industry has flourished, so has the enthusiasm of key stake holders to invest more and contribute more and to be a part of this drive forward.

"This year's awards will move beyond the traditional sectors to recognize specialized products and services valued by the visitors" said Hon. Lakshman Yapa Abewardana in his address to the gathering. "Sri Lanka Tourism Award is therefore is held to identify, recognize and reward excellence in the travel and tourism industry and promote the delivery of service standards and encourage true Sri Lankan travel trade" "We have established a regular dialogue with all stakeholders.

This will continue in the coming year. In that journey wish to recognize the performance of stakeholders every year"

Sri Lanka Tourism Awards - 2010 saw the enthusiastic participation of key stakeholders of tourism industry in Sri Lanka among whom, many were award nominees. This year's Tourism Awards saw an enhancement of the categories to make sure that as many contributors as possible would be recognized for their commitment.

Related Info :

• Sri Lanka Tourism Industry to Continue Its Growth Momentum. Impressive Performance in First Quarter 2011

• Sri Lanka Offers Land for Hotels at Government Estimated Price and Scraps Earlier Price of Rs 20mn an Acre. Attracts Projects worth $ 573mn

• Sri Lanka Tourism: Arrivals & Statistics

Sri Lanka Tourism Industry to Continue Its Growth Momentum. Impressive Performance in First Quarter 2011

3th May 2011, www.dailynews.lk, By Sanjeevi Jayasuriya

Sri Lanka’s tourist industry recorded an impressive performance in the first quarter of this year and is poised to continue its growth momentum in the coming months too.

“The first quarter industry performance is remarkable and we need to work hard in the next few months as May and June are the lowest yielding months. There could be an occupancy drop as it is summer for Western European countries,” Tourist Hotels Association Sri Lanka President Anura Lokuhetti told Daily News Business.

“The country needs to concentrate on the Middle East market where there is huge potential to attract tourists due to the prevailing hot weather conditions there. The focus should be to promote consumer marketing to generate interest regarding Sri Lanka,” he said.

An effective communication initiative coupled with consumer marketing would encourage tourists from the Middle East. There is a possibility of conducting food festivals through Sri Lankan chefs to create enthusiasm. These efforts would generate sufficient awareness and in return will boost tourist arrivals.

Having road shows in supermarkets will be an effective tool of promotion apart from the personal promotions. We could target not only Middle East, but also expatriates from various other countries. We need to focus more on consumer marketing in the Middle East,” he said.

Middle East tourists could be attracted with a combined effort by Sri Lankan Airlines staff and tourism industry stakeholders as an on going process.

Taking into account this sharp increase, steps have been taken to speed up the process to improve the tourism infrastructure facilities, especially in the hotel sector.

Several investment plans have been already launched in this regard, in association with the International and local tourist hotel companies.

These investments are estimated to be worth US$ 573 million.

There are 99 investment projects under evaluation for this year and so far 27 have been approved to be implemented in Sri Lanka, Sri Lanka Tourism Promotion Bureau(SLTPB) said.

Sri Lanka Tourism officials believe that the Sambuddhathva Jayanthi Celebrations and the International Buddhist Film Festival will attract many religious tourists to Sri Lanka from various Buddhist countries in the world like Japan, China, Korea, Tailand, India, Singapore, Burma and Nepal which are having a strong base of Buddhism.

Tourist arrivals comparison
% change
Month 2010 2011 2010/11
Jan 50,757 74,197 46.2
Feb 57,300 65,797 14.8
Mar 52,352 75,130 43.5
Apr 38,300 63,835 66.7

Related Info :

• Sri Lanka Tourism Statistics and Tourist Arrivals

40pct Growth in Earnings of Listed Companies in the Colombo Stock Exchange Forecast in 2010 Compared to 18 to 22pct in Regional Countries

28th April 2011, www.dailynews.lk, By Charumini De Silva

The CSE has been able to capture more attention and interest in foreign investments compared to the regional markets.

There will be a 40 percent growth in the earnings of listed companies in the Colombo Stock Exchange (CSE) whereas the listed companies in the regional countries will record a growth of around 18 to 22 percent for this year.

Speaking to the Daily News Business Richard Pieris Securities CEO Jayantha Perera said the country indicates a positive economic outlook with the low interest rate regime encouraging tax system. “The growth momentum will continue,” he said.

The listed companies and investors will benefit remarkably while contributing immensely to enhance the economy.

The expected earnings in the market are trading currently at a price earning multiply of around 14 times.

“Investors are coming back and little collections on certain counters such as banking, food and beverage and retail sectors are noticed. Since the commodity prices have increased these counters have attracted an impressive number of investors. The overall market will re-bound fully at the beginning of May. Currently, there are a flock of buyers, but not enough sellers. This generates a lower daily turnover in the market,” he said.

There will be a number of upcoming Initial Public Offerings (IPOs) in the next few months and those who will not enter the capital market within the next couple of months will definitely regret.

The existing companies and the investors are harnessing high returns on their investments. There will be around four IPOs lined up for the next three months and this indicates the confidence level of both foreign and local investors over the CSE.

Related Info :


• Sri Lanka IPOs To Triple after Colombo Stock Index Posted the Biggest Gain in Asia

• Colombo Stock Exchange Earnings Soared 126pct Year on Year to Rs121.1bn in 2010. This year to Mirror the Same

• Colombo Stock Exchange All Time High. All Share Price Index Closed at 7,193.10

• Colombo Stock Exchange to Double Market Cap to $20bn by 2012

• Colombo Stock Exchange Becomes Best Performing Capital Market in the World Recording 111.14pct Growth

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 Lankan Economy to Boom. Growth Shows Self-Sustainability, Non-Dependence on Policy

13th February 2010, www.island.lk, By Devan Daniel

With the war over and Asia leading the world out of the global recession, an economist says Sri Lanka is charged up and raring to go, showing signs of being self-sustainable with little dependence on policy initiatives but the fiscal situation remains under a dark cloud.

"Sri Lanka’s economy is expected to grow by 7 percent in 2010 and there are signs that this growth is self-sustaining and with little dependence on policy," HSBC Asia Pacific Senior Economist Robert Prior-Wandesforde said in a recent visit to the island nation.

However, ADB Sri Lanka Country Director Dr. Richard Vokes that stable macro and micro level policies are a prerequisite for sustainable economic growth.

Since the war ended there is an estimated 30 percent increase in arable land, access to new markets in the once war-torn region of the North and East with 2.8 million people, FDIs and remittances are expected to boom along with the agriculture and tourism industries. All these factors are expected to affect economic growth along with the reallocation of public resources previously tied up with the war effort.

Wandesforde said policy interest rates were the lowest in five years with the prime lending rates of commercial banks down 7 percent during 2009. Large scale infrastructure developments amounting to 12.5 of GDP and US$ 2.6 billion IMF standby facility are some of the policy measures contributing to economic growth.

Earlier this year, the Governor of the Central Bank too highlighted Sri Lanka’s solid economic performance in 2009, estimated to grow by 3.5 percent despite fighting the last stages of a 30-year-old war and the global economic crisis, which led to an environment of low inflation and low interest rates. But the governor warned all this could be risked if the government does not improve its fiscal discipline.

Wandesforde said the IMF target for Sri Lanka’s budget deficit as a percentage of GDP would be missed.

The target for 2009 is 7 percent but Wandesforde said estimates point to deficit of 7.5 percent.

However, the IMF has already said it would allow the target to be exceeded on account of development and emergency spending on account of the IDPs.