Sri Lanka's growth to slow to 6.9 percent in 2015

Sri Lanka's economic growth is expected to decline to 6.9 percent in 2015 due to slowing construction activity, while South Asia is the fastest growing region in the world, said the World Bank in it's latest report on Friday.

According to the twice-a-year South Asia Economic Focus report, Sri Lanka's growth is expected to decline due to deceleration of construction activities with the new government reassessing the investment-led growth model, partially set off by increased consumption thanks to increased public sector wages.

Last year Sri Lanka grew by 7.4 percent.

Inflation is expected to remain around 3.0 percent as global commodity prices remain subdued and the taxes on key commodities are lowered.

The fiscal deficit expected to narrow to 5.0 percent of GDP in 2015 thanks to one-off tax measures imposed by the new government elected in January.

Recent growth has been driven mainly by non-tradable sectors. Going forward, it will be difficult to sustain its high growth path without increasing growth in manufacturing and export sectors, the report warns.

"With limited public and private national savings compared to national investment, Sri Lanka needs to attract Foreign Direct Investments (FDI) in order to maintain its high growth rate," the World Bank points out.

Despite its geographic, education and infrastructure advantages, Sri Lanka attracts less FDI than expected compared to other countries in the region.

This week the Central Bank reduced rates by 0.5 percent in an effort to encourage investment.

The private sector is waiting on the new government to push through reforms that include anti-corruption measures to spur growth, analysts say. Endi