ADB’s projection of SL GDP at 6.8% in 2013, lower than CB target of 7.5 %
View(s):The Asian Development Bank (ADB) on Tuesday projected Sri Lanka’s economic growth this year at 6.8 per cent, much lower than the Central Bank (CB) of Sri Lanka’s target of 7.5 per cent.
The CB figure was released along with the presentation of the 2013 annual report to President Mahinda Rajapaksa on Tuesday, the same day the ADB figures were released.
In its Asian Development Outlook 2013 (ADO 2013), the bank said growth was expected to be 7.2 per cent in 2014.
It said Sri Lanka’s performance in 2012 reflected a strong showing in industry, which grew by 10.3 per cent driven by a doubling of growth in construction. Services sector growth, however, slowed down due to subdued international trade and the impact of tightened monetary policy measures. The agriculture sector suffered from drought and floods.
Earnings from garments fell due to slackened economic conditions in the US and European Union and the loss of the Generalized System of Preferences Plus facility, while tight monetary policy, Sri Lankan rupee depreciation, and high tariffs led to a decline in consumer and intermediate goods imports, the ADB report said.
Foreign direct investment inflows in 2012 are estimated to remain at $1billion level, unchanged from 2011.
Merchandise exports are projected to grow at a slow pace of 4 per cent in 2013 and 5 per cent in 2014, while imports are projected to grow by 6 per cent in 2013 and 10 per cent in 2014 without widening the current account share of GDP. “ADO 2013 notes that Sri Lanka’s policymakers will need to address the challenge of narrowing the budget deficit by improving tax efficiency and widening the tax base,” the ADB statement said.
The 2012 budget deficit estimated to meet the target, which was achieved by reducing current expenditure. Inflation is expected to improve marginally in 2013 to 7.5 per cent due to declines projected for global commodity and oil prices and exchange rate stabilization. As further energy price adjustments are expected to address the current operating losses of the Ceylon Electricity Board, the monetary policy stance will most likely remain as set in end 2012 to limit inflation expectations.
It said Sri Lanka achieved remarkable progress in the power sector by increasing the national electrification ratio from 29 per cent in 1990 to an estimated 94 per cent in 2012. However, high costs still plague the sector. Due to their intermittent nature and technical constraints, unconventional renewable energy sources cannot contribute significantly to the electricity supply. Therefore, ADO 2013 recommends that Sri Lanka strengthens its energy sector by diversifying its traditional energy mix and by improving cost reflective tariff mechanism.
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