Central bank confident growth will pick up in 2Q; more private investments after election

July 7, 2015 (LBO) – Sri Lanka’s Central Bank says that more private sector investments would flow in to the country after the general election helping the island achieve seven percent economic growth in 2015.

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The Island’s economic growth for the first quarter of 2015 slowed to 6.4 percent compared to 7.6 percent in the same period of last year due to a slow down witnessed in several infrastructure projects and pending investments. Investments slowed down for the past few months given the Island’s complex political situation. “Once the election is held I see a surge of private sector led investments coming through,” Arjuna Mahendran, Central Bank Governor said. “A lot of private sector investors whom I speak to are holding back on their investment outlays because of the uncertainties of the complexion of the new government and how the policies could change etc,” “Once that uncertainty is over on the 17th or 18th of August, then I think you will see a renewed serge of private sector investment activity across the board,” “I think that gives us a lot of confidence that the second half will be better than the first half from a growth prospective.” The island’s economic growth picked up to 7.4 percent last year from 7.2 percent in 2013. However, the government failed to achieve its forecast of 7.8 percent last year. In a recent report, the World Bank said that Sri Lanka's growth is expected to decline to 6.

9 percent this year due to slowing construction activity. International Monetary Fund or IMF forecasts a range of 6 percent to 7 percent economic growth for the same year. “Basically the first half of the year we have seen the growth been held back slightly by the new priorities of the new government which has held back in the outlay of the infrastructure because of concerns of borrowing and cost, particular from the pace that we saw last year,” Mahendran said. “Once the new government establishes the rates, then you will see a resumption of a lot of those projects that were held up as the consequence of the change of the government.” The new administration formed under President Maithripala Sirisena in January, halted many infrastructure projects started by Rajapaksa regime due to corruption allegations.
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