Tourism earnings and workers’ remittances cushion Lanka’s adverse trade balance
View(s):“Earnings from tourism were estimated to have increased by 14 per cent to around US$3.4 billion during 2016, while workers’ remittances increased by 3.7 per cent to $7.2 billion during the year,” the report said, adding that foreign direct investment (FDI) inflows was below expectations in the first nine months of last year.
Board of Investment Chairman Upul Jayasuriya told the Business Times in a recent interview that FDI has recorded a low level of $600 (2015) and $300 million (2016) in the past two years but will regain the momentum this year.
The CB said headline inflation, measured by the year-on-year change in the Colombo Consumers’ Price Index (CCPI, 2013=100), rose to 5.5 per cent in January 2017 from 4.5 per cent in December 2016.
Core inflation, based on CCPI, also accelerated to 7 per cent in January 2017 from 5.8 per cent in December 2016.
“In spite of the increase in inflation in recent times, which is mainly attributed to the impact of tax adjustments and the adverse weather conditions, inflation is projected to remain in mid-single digit levels, on average during the year supported by appropriate supply side and demand management policies,” the report noted.
Year-on-year growth of credit extended to the private sector by commercial banks remained high at 21.9 per cent by end 2016. Although the growth of credit has somewhat eased from the peak of 28.5 per cent observed in July 2016, credit disbursements in absolute terms remain high in spite of the substantial upward adjustments in nominal and real interest rates.
“It is anticipated that the growth of monetary and credit aggregates would gradually moderate during 2017, towards a level consistent with the anticipated real economic growth and mid-single digit inflation,” the CB added.
Gross official reserves were estimated at $5.5 billion by end January 2017 compared to $6 billion by end 2016. Reflecting the developments in the external sector, the Sri Lankan rupee, which depreciated by 3.8 per cent against the US dollar in 2016, has depreciated further by 0.5 per cent so far during 2017.