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Sri Lanka's growth slows to 7 pct in 2015 but outlook remains favorable: ADB

Xinhua, March 25, 2015 Adjust font size:

Postwar economic recovery in Sri Lanka is expected to moderate in 2015 to 7 percent from 7.4 percent the previous year as investors await economic policy directives from the new government, the Asian Development Bank ( ADB) said in its latest report released on Wednesday.

Sri Lanka's economy posted a growth rate exceeding 7.0 percent in every year since 2012 and continued to grow robustly in 2014, posting a rate of 7.4 percent, up from 7.2 percent in 2013. However, this year the growth rate is expected to ease to an estimated 7.0 percent.

The report says the election in January 2015 brought a new president into office on a mandate for political and economic change and with the parliamentary elections expected in June 2015, the year will be marked by political transition.

Risks to economic growth arise from uncertainties during the transition and a wait-and-see approach adopted by investors, it says.

Construction is expected to slow after leading growth in the recent years, driven by large government infrastructure projects. Political uncertainty would retard private investment. While investment is likely to lose momentum in 2015, consumption is expected to pick up.

Price reductions for food and fuel will encourage private consumption, and government consumption will rise with the shift in the budget toward recurrent expenditure.

However, the outlook is for a continued strong economic performance aided by generally favorable global conditions, the report added.

"Assuming that politics settle in the second half of 2015 and that investment rebounds, growth is projected to ease to 7.0 percent in 2015 and then strengthen to 7.3 percent in 2016," the ADB report says.

Exports will continue to improve in 2015 and 2016 as Sri Lanka' s partner economies pick up pace but imports are also expected to rise. Earnings from tourism and remittances are expected to continue current growth trends.

"Indications are that Sri Lanka is being viewed more favorably internationally with the change in government and its policies, which will attract higher foreign investment and cement trade ties, especially with Europe and the U.S. These factors will strengthen the balance of payments position in the medium term," the report said. Endi