Date: 10 May 2012
The event will be held in Colombo , Sri Lanka , with the participation of distinguished participants from academia, government, civil society, international organizations, and the press. The list of well known participants making opening remarks, presentations and commenting on the publication includes:
Hon. Mr. Sarath Amunugama
Senior Minister of International Monetary Cooperation
Government of Sri Lanka
Institute of Policy Studies of Sri Lanka (IPS)
Economic Affairs Officer
Macroeconomic Policy and Development Division
United Nations Economic and Social Commission for Asia and the Pacific
Country briefing note <download pdf file>
Strong growth momentum maintained
The economy of Sri Lanka continued to grow at a high rate. It expanded 8.3% in 2011 as compared to 8% in 2010. High growth momentum was supported by an improved macroeconomic environment, increased capacity utilization, expansion of economic activity in the northern and eastern provinces and enhanced external demand.
Growth in 2011 was broad-based with positive contributions provided from all the major sectors of the economy. On the demand side, private consumption growth, fuelled by rising incomes and overseas workers' remittances, contributed to the economic expansion. At the same time, gross investment increased from 27.6% of GDP in 2010 to 29.9% of GDP in 2011.
The economy of Sri Lanka is projected to grow strongly, at 7.2% in 2012, as it continues to recover from the end of the civil war, which has boosted tourism, construction and increased investor confidence in the country.
Inflation rose in 2011 but was lower than other countries in South Asia
Inflation in Sri Lanka picked up in the early part of 2011, partly due to severe flooding in the country, and then moderated in the second half of the year. For the year as a whole, inflation rose to 6.7% as compared to 5.9% in 2010. Moderation in inflation in the second half of the year was helped by an increase in food supply due to favourable weather conditions.
Budget deficit falls but still remain high
Budget deficits are generally high in most countries in South Asia . The budget deficit in Sri Lanka narrowed to 6.9% of GDP in 2011 from 8.0% of GDP in the previous year, on the back of higher government revenues as a result of rapid economic growth and tax reforms.
The budget for 2011 included major reforms to simplify the tax structure while broadening the tax base to improve revenue mobilization. Besides increased government revenue, containment of recurrent expenditure helped improve the fiscal situation. Capital expenditure is being protected to avoid adverse implications for long-term growth of the country.
Current account deficit widened due to stronger growth in imports than exports
In Sri Lanka , external sector growth momentum continued during 2011. Exports grew by 22.4% and imports increased by 50.4% in 2011. The country's trade deficit widened but sharp gains in tourism and overseas workers' remittances helped containing the current account deficit.
Nevertheless, the current account deficit stood at 7.8% of GDP in 2011 as compared to 2.2% of GDP in 2010. The exchange rate remained relatively stable, with the Sri Lankan rupee depreciating only 2.6% against the dollar in 2011. Also of note, FDI exceeded $1 billion in 2011 for the first time.
Workers' remittances play a major and positive role in the economy
Remittances from overseas workers are quite substantial and play a major role in the South Asian economies. Governments should consider some special and innovative institutional arrangements to protect migrants and provide social protection coverage. In this regard, a commission should be created to put forward a uniform stance of countries in South Asia to oversee migration and enhance its positive aspects.
Once established, the South Asian Migration Commission could formulate the framework for a coherent and comprehensive response to the issues surrounding migration generally applicable to all the countries in South Asia . By looking into best practices regionally and internationally, the Commission could help in designing policies that harness the benefits of migration in the best possible way for all stakeholders and minimize their negative effects.
Widespread poverty continues to remain a major long-term development challenge
Widespread poverty continues to be a major challenge in South Asia despite some notable success in reducing it over time. Even today, at least one in every three persons in South Asia is classified as poor.
To fight against poverty, countries need to continue to implement economic reforms to improve productivity, strengthen public institutions, improve economic governance and build social safety nets to protect the more vulnerable segments of the population.
To promote more inclusive growth, the provision of basic services, such as health care and education, should remain the principal priority in the policy agendas of all governments. Generating ample employment opportunities are crucial for the poor to earn a livelihood.