SL among fastest economies despite rising inflation

By Sulochana Ramiah Mohan

Sri Lanka’s rate of inflation on a year- on-year basis, rose for the 4th consecutive month to 6.5 percent in January from 4.8 percent in December 2009 as consumer spending in the country increased.
Central Bank Governor Nivard Cabraal has held interest rates at a five-year low since November last year as an attempt to achieve 7 percent economic growth in year 2010.
Meanwhile the Central Bank announced that Sri Lanka has been ranked among the Top Ten Fastest Economies, being eighth in the world according to the Economist Intelligence Unit (EIU) of United States.
As the global economy would emerge in the recession, it is envisaged that Sri Lanka would record a 6.3 percent GDP growth rate that is second only to China, which will record 8.6 percent in the Asian region. The improvement in 2010 is that the world will emerge from recession and post crisis economic landscape will become clearer. This will pave the way to achieve a higher growth of about 7-9 percent in the medium term, said the Ministry of Finance and Planning, quoting the EIU.
“We can now expect Sri Lanka to become a competitive force in the region. If the government channels the funds spent on war for the development of infrastructure projects, the economy would grow much faster than what we have seen in the past. Furthermore, changing certain economic policies would be necessary in order to attract more foreign investments,” a leading economist said.
Commenting on last week’s Presidential election and its impact to the business community, economist Geeth Balasuriya said, “I think what the business community wanted was political stability and a conducive environment for investment. The election results indicate that political stability we witnessed over the past 2-3 years would continue and I’m sure the business community would welcome that. However, significant improvements are needed when it comes to areas such as taxation, public sector efficiency etc,” he added.
Our Stock Market correspondent while complimenting the development projects in the North and East, stressed the need to make financial assessments of suc h projects public.
UNP MP Ravi Karunanayake believes the rising inflation would exert pressure on the newly imposed interest rate slash on banks. “President Mahinda Rajapaksa, with his election victory must find a solid way to curb inflation.”
Karunanayake quoting Sarath Fonseka’s victory in the North and East electorates said, “The win points out that people in those areas were more engrossed over a political solution than development projects. The election results show a different picture about the North and East and not what the government says.”