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Sri Lanka growth expected to recover to 7.5-pct in 2013: Central Bank
08 Nov, 2012 11:26:02
Nov 08, 2012 (LBO) - Sri Lanka's economy will expand 7.5 percent in 2013 after slowing to 6.8 percent in 2012 helped by a global recovery, monetary easing and better weather for agriculture, the Central Bank said.
"Growth is expected to be broad based in 2013 with the performance in all sectors of the economy expected to improve," the Central Bank said in a report released ahead of an annual budget to be presented later on Thursday.

"Global economic recovery and less uncertainty over policy responses, especially in the Euro area, coupled with an easing of both fiscal and monetary policy measures adopted domestically to address issues in certain sectors, are expected in 2013."

The central bank in its Recent Economic Development Report said factory industry and services will expand with a recovering global demand.

Fiscal consolidation and post war growth momentum will also help, the report said.

For the rest of 2012, growth will slow to 6.8 percent from 8.2 percent last year. During the first half the economy has grown 7.2 percent with monetary policy tightened to address a balance of payments crisis.

Inflation which peaked to above 9.0 percent may remain in higher single digits for the rest of the year but will reduce after March 2013.

"Cautious monetary and fiscal policy measures together with envisaged improvements in domestic supply conditions are expected to help maintain inflation at mid-single digit levels in 2013," the Central Bank said.

"The one-off increase in consumer prices as a result of the adjustment of several administratively determined prices in March 2012 is likely to keep year-on-year inflation levels at upper single digit levels until March 2013.

"However, inflation is projected to decline to mid-single digit levels by end 2013."

During the rest of 2012 tigher monetary policy measures and the stabilisation of the exchange rate will help inflation.

The budget deficit which was targeted at 6.2 percent of gross domestic product for 2012 had hit 5.6 percent by July. The gap in the current account (government dis-saving) was up to 1.9 percent of GDP from 1.4 percent last year.

"Fiscal management during the remaining months of 2012 will be challenging," the Central Bank said.

"To address the shortfall in revenue, the government has introduced several revenue measures to enhance revenue mobilisation during the remaining months of the year.

"In addition, strict measures to restrict expenditure within the budgetary estimates are being taken by the government."

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