Sri Lanka’s lower inflation, narrowing budget deficit to boost growth: ADB

Apr 01, 2014 (LBO) – Sri Lanka’s current relatively low inflation and a narrowing budget deficit will boost investment and growth helped by recovering exports and domestic demand, the Asian Development Bank said. Last year Sri Lanka gross domestic product was estimated to have grown by 7.3 percent in the middle of recovering from a balance of payments crisis triggered by a credit bubble.

Positive Cycle

ADB’s senior country economist Tadateru Hayashi said the economy was expected to grow 7.5 percent in 2014 and 2015.

Investment and domestic demand would be boosted by lower inflation and falling interest rates, he said.

Exports which started to grow from the second half of 2013 amidst a recovery in developed markets would give a boost throughout 2014. Tourism was also doing well after the end of a 30-year war.

The central bank has also kept inflation low in 2013, after raising interest rates sharply in 2012 to curb bank credit and floating the rupee to arrest a balance of payments crisis which initially pushed inflation to almost 10 percent.

ADB’s Asian Development Outlook (ADO 2014) report released Tuesday also advocated greater state intervention and spending of people’s mo