Sri Lanka Central Bank suggests reducing impact of oil prices to sustain economic growth

Despite the global economic uncertainties Sri Lanka's economy delivered the expected results last year with a low inflation and high growth rate but Sri Lanka needs to tackle challenges of high fuel prices and weak global economic recovery that can affect the country's growth this year as well, the Central Bank said today.
The Central Bank Governor Ajith Nivard Cabraal presented the Annual Report of the Central Bank 2011 which details the state of the country's economy to President Mahinda Rajapaksa today at the Temple Trees. Cabraal in his speech said that the oil price uncertainties, Iranian sanctions, Euro Zone crisis, the political uncertainties in the West and many other countries, the possible outbreak of global hostilities, will be major risks for Sri Lanka's economy. He said the government and the Central bank have substantially delivered the economic development goals projected over the past two years. Sri Lanka's economy grew at 8.3% in 2011 while the inflation remained low at 4.9%. Sri Lanka earned US$ 5.2 billion in remittances in 2011 and unemployment remained low at 4.3%, the Central Bank report noted. For 2012, the Central Bank has lowered the original estimate for growth from 8% to 7.2% due to the recent policy measures but expected the economy to rebound to 8.6% in 2013. The monetary authority expects a slight reduction in the trade balance this year from the US$ 9.7 billion in 2011 to US$ 9.2 billion in 2012 due to the recent policy measures taken by the Bank. Inflation is projected to remain in single-digit levels this year even as higher commodity, fuel and energy prices will add to the uncertainty on price movements. Curtailing fuel expenses by promoting energy efficient production technologies and increasing the use of renewable energy sources and energy conservation is a must to sustain Sri Lanka's growth momentum, the Bank suggested in its outlook for next year and beyond. The Central Bank suggested improving demand for exports through diversification of markets and products, strengthening foreign inflows and Foreign Direct Investments (FDIs) through appropriate policies and macroeconomic environment, and improving labour productivity and addressing structural rigidities in the labour market. The Bank also suggested restructuring Sri Lanka's education system to generate a human capital base with the skills necessary to sustain this new growth. Senior Minister of International Financial Corporation Dr. Sarath Amunugama, Economic Development Minister Basil Rajapaksa, deputy Minister of Finance and Planning Geethanjana Gunawardena, and Secretary to the president Lalith Weeratunga were also present at the occasion.