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