Sunday, 1st June 2014
By Shirajiv Sirimane
The world has being talking about economic recession in several developed countries which had a negative impact on the world economy.
However, the global recession did not have any negative impact on the local economy mainly due to political stability and far thinking measures taken in Sri Lanka. The country continued to reap benefits from exports and foreign exchange remittances.
A new meaning to economic stability to Sri Lanka has been given by recording an average annual economic growth of 7.5 percent over the past four years.
Annual economic growth rate from 1951 to 1977 was at 3.7 percent while this increased to 4.8% from 1978 to 2005. This figure increased to 6.7% from 2006-2013.
The GDP which was at US$ 24 billion in 2005 increased to 67 billion in 2013. The Average Annual Increase in Per Capita GDP from 1978 to 2005 which was at 5.8% increased to 13.1% in the 2006-2013 period.
The unemployment rate, which is a key factor in determining economic stability, has moderated and stabilised below 5% over the past four years.
Openness
Lankan merchandise exports and imports over the past eight years too have increased reflecting the country's growing economic activity and increased openness. Exports last year stood at US$ 10,394 million while imports were at US$ 18,003 million. In 2005, exports were at US$ 6,347 million while imports stood at US$ 8,863 million.
The importance of services exports has also been rising while workers' remittances have increased significantly. In 2013 Service Exports stood at US$ 4,685 million while workers' remittances was at US$ 6,407 million.
The external current account has been improving while allowing greater trade openness. The current Account Deficit in 2013 was 3.9% of GDP. The Balance of Payments too is now in positive territory on a consistent basis with a BOP Surplus of US$ 985.4 million.
Gross Official Reserves (US$ 7.5 billion) have reached unprecedented levels and 'Months of Imports' have also recorded comfortable levels in recent times. The exchange rate has been relatively stable, thereby supporting economic and price stability.
A medium term macroeconomic framework is envisaged to take the economy beyond a per capita income of US$ 4,000. The projected GDP per capita in 2016 is US$ 4,825 million.
Economic outlook
The Sri Lankan economy envisages a growth of about 8% per annum on a sustainable basis and an investment level of about 33% of GDP is targeted.
Sri Lanka has already laid the platform to ensure a steady flow of investment and an 'Invest Sri Lanka - Investor Forum' was held on Friday at the Savoy Hotel, London.
The Colombo Stock Exchange (CSE) and the Securities and Exchange Commission of Sri Lanka (SEC) hosted this event which was organised
with the London Stock Exchange and Bloomberg.
The keynote presentation at this event on the subject Economic Outlook in Sri Lanka was made by Central Bank Governor Ajith Nivard Cabrral. The Chief Executive Officer, London Stock Exchange plc, Alexander Justham and Sri Lankan High Commissioner to the United Kingdom, Dr. Chris Nonis also spoke.
The forum saw an unprecedented response from institutional investors with over 100 participants.
Global Prosperity Index
A panel discussion was also conducted at the conclusion of the presentations. The panelists included Governor Cabraal, Sri Lankan High Commissioner Dr. Chris Nonis, SEC Chairman Dr. Nalaka Godahewa, CSE Chairman Krishan Balendra and CSE, CEO Rajeeva Bandaranaike.
Governor Cabraal said that prosperity, as measured by the Global Prosperity Index and the HDI has improved.
"Sri Lanka was ranked 60th in the world in the Global Prosperity Index and this was the highest ranked for South Asia. Sri Lanka was also ranked 92 in the world in the Human Development Index," he said.
Government continued with the mega-scale infrastructure development, which has improved the country's productive capacity significantly.
"The 5+1 hub strategy introduced under Mahinda Chintana has gathered momentum for inclusive and sustainable growth in Sri Lanka. "The activities relating to all these hubs will spearhead the transformation of the country into a commercial and business hub," Cabraal said.
"That will probably encourage the relocation of many regional operating headquarters and regional offices of international establishments," he said.
High mobile penetration
The declaration of Hambantota and Colombo South ports as free ports is also expected to attract significant private sector investments. Fast tracked expressway and road development projects have reduced transportation costs and enhanced access to markets through improvements in urban-rural links.
Healthy pace of growth in the telecommunications sector has resulted in high mobile penetration, rapidly growing internet penetration and increased potential in mobile related and e-commerce activities.
Public utilities are being developed to cater to the emerging world class city of Colombo.
Productive and skilled labour force with large pools of professionals as a result of government's commitment to free education and health will create a knowledge-driven economy.
The per capita income of Sri Lanka which is now at US $ 4,085 is expected to reach the US $ 4,000 mark soon. The governor predicted that by 2016, Sri Lanka will graduate to the 'Upper Middle Income' category as per international classification.
"The Central Bank will also ensure that its future macroeconomic policies will be fashioned so that the country will avoid the 'Middle Income Trap'," he said.
From : http://www.sundayobserver.lk/2014/06/01/fea10.asp
