Financial Times

Sri Lanka’s economy expanded by an impressive 8.1 per cent in real terms in the first quarter of 2006 over relatively low growth of 4.4 per cent in the corresponding quarter of 2005, reflecting the continuation of the growth momentum, in response to consumption and investment demand, the Central Bank said..

It said early indicators are that the overall growth during 2006 would be around 7 per cent.

However, the recent escalation of violence and resultant increased security measures would somewhat constrain economic activities, particularly agricultural production and tourism in vulnerable areas, while trading, transport, communication and distribution activities would be dampened. It is therefore necessary to make all efforts to maintain peace in the country, the Bank said in a statement.

It said the tsunami slowed down the economic growth in the 2005 quarter. Following post-tsunami recovery and reconstruction, the two sub-sectors that were most seriously affected (Fishing and Hotels and Restaurants) grew at a relatively much higher pace over that low base, and contributed 17 per cent to the overall growth in the first quarter of 2006. However, neither sector had recovered completely to pre-tsunami levels.

Sector-wise, the services sector recorded the highest growth rate of 9.5 per cent while the agriculture and industry sectors grew by 7.3 per cent and 5.9 per cent, respectively. The services sector continued to dominate, contributing 63 per cent to the growth, while the Industry and Agriculture sectors contributed 20 and 17 per cent, respectively. However, the shares of these sectors in GDP remained unchanged.

It said public administration, other government services and defence and other community, social and personal services sector grew by 1.8 per cent as against an increase of 5.5 per cent during the corresponding period of the previous year. Public administration, other government services and defence sector reported a marginal growth during this quarter as there were no major public sector recruitment programmes during the quarter. The other community, social and personal services sub sector recorded a growth of 4.5 per cent partly due to healthy growth in the private health care industry.