DailyMirror
Sri Lanka’s economic growth forecasts appear to be in the range of 5.6% and 8.2% next year in view of the challenges of reducing deficits and increasing investment. An economic forecast for expansion by 5.6% in 2010 with an expectation to pick up more strongly to 6.3% in 2011 was outlined as what could be perceived by RAM Ratings Chief Economist Dr. Yeah Kim Leng although others on the panel believed that dreaming of a higher growth was of harmless either.
Key factors supporting RAM Ratings’ growth forecasts include a rebalancing of government spending towards development projects, higher foreign and domestic investments in the construction, services and manufacturing sectors, and a rise in consumer and investor confidence following the end of the armed conflict, Dr. Leng stated. The RAM Ratings Chief Economist who was addressing last morning’s CEO Forum organized by the Institute of Chartered Accountants of Sri Lanka (ICASL) also observed that while recession was averted Sri Lanka’s economy had decelerated sharply in the first quarter of the year with total trade standing at 60%. A drop of 4% is expected in the fourth quarter. Dr. Leng also noted that in the medium to long term, growth prospects were likely to be enhanced by “more efficient resource expenditure” with less contribution to the military sector and diverting increased attention towards productivity led sectors. In essence, a “re-direction of resources to economic development and reconstruction” was highlighted as a crucial requirement for the enhancement of growth prospects in Sri Lanka thereby raising productivity growth by 10% based on a high case scenario of 2% above the baseline forecast. Currently the island’s economic structure is formed with low technological industries whereas medium to high technology is still to enter the market. A competitive advantage is yet to be garnered from these high tech industries in Sri Lanka, with increased productivity.
In his address Dr. Leng suggested that the government establish a mortgage housing corporation to ensure liquidity and provide for low cost housing.
Commenting on the key speaker’s address Hatton National Bank Managing Director/Chief Executive Officer R. Theagarajah believed there was however no harm in dreaming of an 8-8.5% growth. He noted that the challenge for the banking sector was to not rely on the interest rates with the classic model of banking being to cover the overheads with a net interest margins. Therefore, with Sri Lanka’s dependence perceived on other income expected to become very volatile in terms of foreign exchange, it was observed that the slashing of costs was not the solution. On the other hand the requirement was for a “structured adjustment”, the CEO of HNB said. A better consolidated structure was required to ensure that the vision to double per capita income, in a bid to meet this dream, Dr. Theagarajah pointed out.
More dreams were spelt out with a vision for the country’s future with a higher level of achievement expected, according to Ceylon Chamber of Commerce Chairman Dr. Aruna Ekanayaka.
He noted that with the forecasts to meet a 7.5% GDP this year is likely to be a tough call for the government and would depend on whether the budget deficit could be low and prospects for increased job creation in addition to many other factors. “There appears to be a slight increase in exports to Asia for Sri Lanka and that’s the right direction,” he opined.
Moreover, while the opportunity needed for domestic agricultural output, it was noted that there was a need to pay increased attention to the domestic low income micro farm based agriculture.
Further commenting on the Sri Lankan economy, another key panelist ICASL Vice President Sujeewa Mudalige highlighted that this was “the only country in the world that is being discriminatory in taxing the private sector and not the public sector”. He commented that under the present tax system it was not possible to have a tax return for which a simpler tax system was required.
Picture: (L-R):Mr. Sujeewa Mudalige Vice President ICASL, Dr. Aruna Ekanayake Chairman Ceylon Chamber of Commerce, Dr. Yeah Kim Leng Group Chief Economist RAM Holdings Berhad Malaysia, Mr. Adrian Perera Chief Executive Officer Ram Ratings (Lanka) Ltd, Mr. R Theaarajah Managing Director/ Chief Executive Officer Hatton National Bank, Mr. Indr`jith Aponsu Senior Lecturer- Department of Economics/ University of Colombo.