“This trend is partially set off by consumption growth thanks to increased public sector wages and higher disposable income,’ the report said.
Sri Lanka’s new regime is in the process of reassessing the previous government development projects and says most of them are unsolicited proposals which cost the government an unbearable amount. Some of the projects have already been halted by the new regime due to no agreements.
The newly released report also says Sri Lanka’s inflation is expected to remain around 3.0 per cent, as global commodity prices remain subdued and the taxes on key commodities are lowered.
However it says the fiscal deficit expected to narrow to 5.0 percent of GDP in 2015 thanks to proposed one-time revenue measures.
“Going forward, measures are needed to increase revenues to avoid widening of the deficit in the wake of some populist proposals increasing costs on a permanent basis for 2015 and beyond,”
“A slowdown in GDP growth might reverse the decline in the public debt-to-GDP ratio, which was largely dependent on fast GDP growth.”
Sri Lanka's gross domestic product (GDP) grew 7.4 percent in 2014 while the country’s economy slowed down in the fourth quarter of last year significantly from the growth in previous three months according to the latest data of the state statistics office.
Economic output as measured by GDP for the fourth quarter from October-December of 2014 slowed to 6.4 percent year-on-year, data released by the Census and Statistics Department showed.
GDP growth in Sri Lanka was healthy in the first half of 2014 with a growth of 7.6 percent in the first quarter and 7.8 percent in the second and 7.7 in the third recorded.
Sri Lanka’s annual economy grew 7.4 percent last year which was higher than 7.2 recorded in 2013.
The current account deficit is expected to narrow to 1.8 percent of GDP in 2015, reflecting savings on petroleum bill, the report says.
“Exchange rate that came under depreciation pressure due to forex outflows in the first quarter of 2015 would likely to be managed using reserves in the next few months,”
“A planned sovereign bond and other capital flows to the government would help mitigating pressures on the currency in the second half of the year,”
“Any upward pressure on oil prices could adversely affect the external balance.”