Financial Times

Sri Lankan economy grew by 5.9 % in 2005 – Central Bank
Sri Lanka’s economy grew by 5.9 percent – on an annual basis – last year, up from 5.4 percent in 2004, the Central Bank said on Friday. It said the economy is estimated to have grown by 6.3 per cent in real terms in the fourth quarter of 2005 compared with 4.4 per cent growth in the corresponding period of the previous year. This growth was achieved in an environment of high international oil prices and rising global competition for exports, particularly garments.

All three sectors performed well with the recovery in agriculture, but growth in the quarter continued to be affected by the tsunami, particularly in the fishing and hotel and restaurant services sub sectors.

On the basis of the most recent data, during the first three quarters of the year, the economy is estimated to have grown by 4.4 per cent, 6.0 per cent and 6.7 per cent, respectively.

Sector-wise, the industry sector recorded the highest growth of 8.6 per cent, while its contribution to growth remain unchanged. The growth in the services sector moderated to 5.9 per cent and contributed just over a half of the growth, when compared with a contribution of 77 per cent in the corresponding quarter of the previous year. This was basically due to the re-bounding of the agriculture sector as a positive contributor to economic growth during the quarter under reference.

The agriculture sector grew by 4.2 per cent and thus contributed positively to growth, in contrast to the corresponding quarter of 2004, despite the poor post-tsunami performance of the fishing sub sector.

The agriculture, fishing and forestry sector grew by 4.2 per cent in the fourth quarter of 2005 compared to a contraction of 2.8 per cent during the corresponding quarter of 2004, while contributing 12 per cent to overall growth. Most agricultural crops, except tea, performed well and contributed to an 8.0 per cent growth in the agriculture sub sector.

The recovery of the fishing sub sector continued in the fourth quarter, but over a relatively low base during the corresponding quarter of 2004.
Paddy production recorded a bumper harvest with a growth of 28.7 per cent during the Yala season, while paddy producer prices declined by 22.2 per cent during the quarter. The ‘other’ agriculture sub sector, which covers all other crops in domestic agriculture and animal husbandry, recorded a growth of 3.3 per cent. During the quarter, vegetables and subsidiary food crops performed satisfactorily under favourable weather conditions.

Industry
The industry sector grew at 8.6 per cent during the fourth quarter of 2005 while contributing 35 per cent to the overall growth in GDP. The mining and quarrying sector grew by 21.6 per cent compared to a contraction of 1.0 per cent during the corresponding quarter of the previous year. In the mining sub sector, gem exports expanded by 110 per cent during the fourth quarter along with expansion in mineral sand production.

The quarrying sub sector grew by 9.5 per cent due to the higher activity levels in the construction sector during the quarter. The electricity and water sector recorded a growth of 23.4 per cent primarily due to the electricity sub sector performance. Electricity generation increased by 10.4 per cent due to the growth in hydropower generation by 26.2 per cent, while thermal power generation declined marginally by 0.8 per cent compared to the fourth quarter of 2004. With the increased generation of low cost hydropower, the electricity sub sector grew by 26.1 per cent in value added terms.

Hydropower generation accounted for 47.6 per cent of the total power generation compared to a contribution of 41.6 per cent during the same period in 2004. Water distribution grew by 2.8 per cent compared to a growth of 5.6 per cent during the fourth quarter of 2004.

In the manufacturing sector, export oriented industries such as rubber based products grew by 35.1 per cent with increased demand in international markets, while apparel exports grew by a moderate 2.3 per cent under increased competition. Domestic market oriented industries such as building materials, chemicals, fertiliser and cement grew in a range of 8 to 14 per cent due to higher domestic demand from other sectors.

Services
The services sector maintained its importance in the economy, recorded a 5.9 per cent growth and contributed 53 per cent to overall economic growth in the fourth quarter of 2005. This growth was largely driven by the performance in the post and telecommuications, domestic trade and financial services sub sectors. The post and telecommunications sector which has continued to grow at a high pace, expanded further by 24.9 per cent in this quarter. With the latest CDMA technology, subscriber levels of Fixed Access – Wireless Local Loop phones increased by 159,162 new connections, a notable expansion for this category.

The subscriber level of cellular phones expanded by 52 per cent and the mobile penetration ratio (Mobile connections per 100 people) was around 17. The Fixed Access-Wire Line Local Loop category grew by 11 per cent. Meanwhile, the Internet and e-mail subscriber level grew by 23 per cent in 2005 as against 9 per cent during the corresponding period in 2004.

Back to Business