Sri Lanka economy to grow 7.0-pct in 2013 but risks emerge: RAM Ratings

Oct 31, 2012 (LBO) – Sri Lanka’s economic growth is likely to recover to 7.0 percent in 2013 after slowing to 6.5 percent in 2012, helped by Chinese loans and domestic consumption, while new risks are emerging, RAM Ratings, a rating agency has said. A key regressive policy is the expropriation of citizens and non citizens which resumed in 2011 through a controversial law.

The expropriations may undermine other reformist measures, the report said.

US-based Overseas Private Investment Corporation has reported that it had added a 2-5 percent premium on political risk insurance premiums for loans to the country, the report noted.

Further expropriations of land in privatized plantations firms were announced in a budget for 2012.

A slowing economy may hurt state revenues while rising interest rates may also expand the budget deficit, RAM said, though there were efforts to reduce the budget deficit.

There was also a large defence and urban development ministry outlay for 2013, despite the end of a war, with the breakdown for the two activities not clear. But the report said at least a part of the expenses may be due to paying off old defence loans.

“Export-oriented manufacturing shows a downtrend due to persistently weak de