ADB commends Sri Lanka’s performance in 2011

The Asian Development Bank’s report “Outlook 2012” which analyses economic conditions of Asian countries states that the Sri Lankan economy grew at 8.3% in 2011 as the country continued to absorb the benefits of the end of its long-running civil conflict in May 2009.

It says that industrial output accounting for a little less than one-third of GDP expanded by 9.6%, and within that, manufacturing grew by 8.1%, led by the export-oriented readymade garment industry. Construction and mining came in at double-digit growth, reflecting projects started since the conflict ended.

Referring to the Services, the largest component of GDP amounting to three-fifths, the report says that it increased by 8.8%. Hotel and restaurant activity was up by one-third, reflecting a 30.8% increase in tourist arrivals.

Transport and communications grew with further integration of the Northern and Eastern provinces with the rest of the economy.

It points out that agricultural output, however, was hit by adverse weather and heavy flooding in early 2011 and was down in the first half, but it picked up in the second to show annual growth of 2.5%.

The report says that the private consumption remained the main drive of economic expansion, fueled by remittances, greater demand from the northern and eastern provinces, and salary increases for civil servants and the defense forces.

Investment activity also strengthened owing to implementation of major infrastructure development initiatives (especially in transport, energy, water, sanitation, and irrigation) and rising business investment, including international companies seeking a foothold in a fast-expanding economy. Private investment focused on tourism, telecommunications, manufacturing and housing.

The report further states that the overall inflation remained in single digits in 2011, averaging 6.7% and little changed from a year earlier.  Food inflation, though, was volatile, reflecting flood damage, crop failures, and price pressure early in the year and later, declining prices as production recovered.

Nonfood inflation trended upward, due to strong demand and price increases for diesel, petrol, kerosene, liquefied petroleum gas, and bus fares late in 2011 and in February 2012, when it reached 9.2%. Fuel prices were suppressed during 2011 as international oil prices shot up by 41%. (niz).