Sri Lanka’s exports to see moderate growth in 2012/13 - RAM

“Despite Sri Lanka’s stellar growth in recent years, global headwinds and policy measures taken to curb demand, remain key considerations through the rest of 2012 and next year” says, RAM Ratings in its Economic Outlook report for 2013. Taking into consideration the above two factors, RAM Ratings have revised its Sri Lanka GDP growth forecast to 6.5% for this year, followed by 7 % in 2013.

The agency says, Sri Lanka’s export performance is not envisaged to improve anytime soon with no end in sight to the troubles plaguing its key trading partners, USA and EU. “Export-oriented manufacturing shows a downtrend due to persistently weak demand from traditional export markets,” adds the report issued by the agency.The report points out that, agriculture may decline further due to the extreme drought, which has also hit hydro-powered electricity generation. However the agency says, import growth will likely be sustained by robust domestic consumption and construction.

“On the flip side, a pick-up in investment will boost construction, especially for civil infrastructure projects. The active financial and retail sectors should also lift the services sub-sector,” adds RAM Ratings. It says, investment from Chinese government is expected to increase. According to RAM, domestic private consumption is anticipated to chart healthy growth due to the expansion of the general economy.

“Nonetheless, the Central Bank’s tightening of policies may trickle down to the real economy in 2013.” The report cautions, that public expenditure, should be reined in on account of fiscal consolidation, but a larger proposed defense and urban development budget may be of some concern. RAM forecasts, the inflation rate to ease as growth momentum slows and macro-prudential controls cool domestic credit growth, albeit still subject to global commodity prices.

“The Central Bank is likely to maintain its key policy rate in the near term due to heightened risks for growth. Short-term stabilization of the rupee is expected on the back of enhanced global liquidity,” added the Sri Lanka Economic Outlook released by RAM. news360.lk

source : Daily news