Sri Lanka’s GDP growth seen rising to 5% in 2017, WB says
View(s):Sri Lanka’s economic growth is projected to grow at 5 per cent in 2017, up from targeted 4.8 per cent in 2016 and driven by increased private consumption and postponed investment in 2015, a new World Bank report has said. ”It is imperative for Sri Lanka to expedite high priority structural reforms to increase competitiveness, improve governance and consolidate its fiscal balance in order to ensure sustained growth and development,” according to the twice-a-year, South Asia Economic Focus, released on Monday. It said South Asia has defied a sluggish world economy and solidified its lead as the fastest growing region in the world in 2016.
Led by solid performance in India, economic growth is expected to gradually accelerate from 7.1 per cent in 2016 to 7.3 per cent in 2017. The report said that the region remains a global growth hotspot and has proven resilient to external headwinds such as China’s slowdown, uncertainty around stimulus policy in advanced economies, and slowing remittances. The main challenges remain domestic, and include policy uncertainty as well as fiscal and financial vulnerabilities. “A reality check reveals that private investment – a key future growth driver across South Asia – is yet to be ignited to sustain and further increase economic growth,” said Annette Dixon, World Bank South Asia Region’s Vice President.
“Countries will need to activate the full potential of private investment and exports to accelerate economic activity further, reduce poverty and boost prosperity.” Given its weight in the region, India sets the pace for South Asia as a whole. Its economic activity is expected to accelerate to 7.7 per cent in 2017, after maintaining a solid 7.6 per cent in 2016. This performance is based on solid growth contributions from consumption – boosted by normal monsoon and civil service pay revisions. Over the medium term, accelerated infrastructure spending and a better investment climate may help increase private investment and exports.
“A reality check on the state of private investment in South Asia shows that the region has fallen short of expectations. Mobilising domestic savings remains key at the aggregate level. However, remittances and foreign direct investment prove very effective on a per-dollar basis, and the region should make the most of them. India can further rely on public infrastructure to crowd-in private investment, while finance may constrain investment in Pakistan. The business cycle matters all across the region, providing a potential accelerator from GDP growth to investment growth. Ultimately, the investment climate sets the broader stage. Alas, most South Asian economies suffer from a challenging business environment and some are subject to broader uncertainty and insecurity, which is detrimental to investor confidence,” it said.