Despite many internal and external economic challenges Sri Lanka`s economy has recorded a growth of 3.5 percent last year. The outstanding performance was mainly due to the steady recovery in the economy and the restoration of peace. The Central Bank expected a Gross Domestic Production (GDP) growth of 2.5 percent in the beginning of 2009, but due to the remarkable progress in the final quarter of 6.2 percent the country could gain an average growth of 3.5 percent, Central Bank Director, K. D. Ranasinghe said.
The 60th annual report of the Monetary Board was submitted to President Mahinda Rajapaksa who is the Finance and Planning Minister at the Central Bank yesterday.
The sudden withdrawal of short-term capital by foreign investors resulting from adverse global conditions placed an enormous strain on the country`s foreign reserves and the management of liquidity, Ranasinghe said.
Targets for 2015
* Tea US$ 3 billion
* Rubber US$ 2 billion
* Apparel US$ 5 billion
* Tourism US$ 1.5 billion
* IT BPO US$ 1 billion
Higher Government expenditure on defence, interest payments, salaries and wages as well as the continued expenditure on urgent resettlement, rehabilitation and reconstruction (RRR) activities exerted a heavy burden on Government finances.
However, the country`s economy made an extraordinary recovery in the final quarter. Enhanced investor confidence in the economy saw a sharp reversal in foreign financial flows helping the country to record an unprecedented surplus in the Balance of Payments (BOP) of US$ 2.7 billion by end 2009.
Foreign exchange reserves have raised from a low level of US$ 1.1 billion in March 2009 to a historic high of US$ 5.1 billion by the end of the year. The three main sectors of the economy contributed immensely to achieve an economic growth of 3.5 percent.
The agricultural sector performed a growth rate of 12 percent industrial sector recorded 28.6 percent while the service sector dominated with 59.4 percent.
In 2009, total investments of the country declined while the savings and investment gap narrowed. Private investment declined significantly to 17.9 percent of GDP from 21.1 percent in 2008. The public investment increased marginally to 6.6 percent.
As a result, total investment declined to 24.5 percent in 2009, which was 27.6 percent in 2008.
The slowdown in domestic economic activity resulted in a marginal increase in the unemployment rate (excluding the Northern Province), to 5.8 percent in 2009 from 5.4 percent in 2008.
2009 economic growth
* First quarter 1.6 percent
* Second quarter 2.6 percent
* Third quarter 4.2 percent
* Fourth quarter 6.2 percent
He said the external sector recovered strongly during 2009 amidst the challenging global economic environment.
The trade deficit contracted by 47.8 percent to US$ 3,122 million in 2009 compared to the 63.6 percent growth in 2008 to US dollars 5,981 million, reflecting a significantly larger reduction in import expenditure in 2009 relative to the decline in export earnings.
The current account of the BOP improved remarkably due to the lower trade deficit and increase in migrant workers` remittances. Due to slow growth in the first quarter of the year, foreign remittances grew by 14.1 percent to US$ 3,330 million in 2009. Central Bank Governor Ajith Nivard Cabraal said Sri Lanka has immense potential to grow with the current macro - economic establishment in an excellent manner.
`We still have only two industries that have achieved billion dollars, which is tea and rubber. But there are many key areas that the country could explore now,` he said.
Agricultural products, food processing, fisheries, gem and jewellery, apparel, tourism, higher education, IT/BPO and boat building have many possibilities to grow as billion dollar industries,` Cabraal said.
Central Bank targets an average GDP growth of foreign remittances of 15 percent by the end of this year. Foreign remittances will be one of the facets to the economy, he said.
`We should set targets to achieve certain objective. The Governor requested the President to appoint new Ministers with goals to assist the Central Bank to gain a sustainable economic growth.