First quarter 2011 growth of Sri Lanka’s GDP was largely within targets though there was a setback in the agriculture sector, the Central Bank said this week.
The growth was helped by the continuation of the momentum in the industry and services sectors led by trade-related activity and tourism, as well as the continuous improvements in productivity, the Bank said adding that in view of these positive developments it decided to maintain policy interest rates at current levels.
Domestic supply conditions recovered from the impact of floods in early 2011 while current weather conditions are favourable for agricultural activity and hydropower generation. The upward trends that were observed in international commodity prices have decelerated, although prices of many commodities still remain high. The geopolitical disturbances observed in many oil producing economies seem to have subsided, stabilising international crude oil prices, the Bank statement said.
Inflation increased to 9.8 % in April from 8.6 % in March, while annual average inflation also rose to 6.6 % in April from 6.2 % in the previous month.
“With the high anticipated international commodity prices, the trade deficit is likely to widen in 2011, while higher earnings from the tourism industry, workers’ remittances, and higher capital inflows are expected to have a positive impact on the overall balance of payments. So far, this year, in the domestic foreign exchange market, the rupee has appreciated by 1.08 % against the US dollar and by 1.22 % against the Indian rupee, while depreciating against the Euro (4.61 %), the pound sterling (3.51 %) and the Japanese yen (0.39 %).
Government revenue during the first three months of 2011 increased by 19.5 % compared to the same period in 2010. The recent revision in the Excise duty on the importation of motor vehicles effective from 24 April 2011 is likely to improve Government revenue, the Bank said. It is expected that fiscal consolidation measures would continue, and the fiscal deficit target announced by the Government would be within reach. |
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