Economy

The Sri Lankan economy has been liberated from a civil war that deterred investors for decades. The shift in "country risk" is reflected in T Bill interest rates falling below 10% while the foreign currency reserves have grown to a record high to stabilise the currency.

Despite the war, the economy showed resilience to record a 6.03% average GDP growth rate over the last five years.

Infrastructure Development

The implementation of Infrastructure development projects in Highways, Power plants, Port and Airport development, and reconstruction of the North and East provinces have been accelerated, to broad base economic growth across the provinces. Regions that were previously unreachable due to war offer new markets in key industries that will help expand the economy and create employment, during 2010 and 2011.

Interest Rates and Inflation

Annual Average Inflation measured by the Consumer Price Index (CPI) declined to 3.90% from a year ago, to give the Central Bank room to cut interest rates. The Central bank has brought interest rates down to a five year low. The benchmark 364 day Treasury bill has shed over 16 bps YTD to stand at 9.17%. Reducing interest rates will also help the government reduce the budget deficit, and stimulate the economy.

Currency & Exports

Exports grew by 6.5% in 2008 despite the global economic downturn making an impact on the country's foreign revenue. The impact however has been less than feared. Declining imports have helped shrink the Trade Deficit below the Private Remittance from overseas.

The country's achievements and potential for growth were recognized by the Executive Board of the IMF when it approved a 20 month stand by arrangement of US$2.6 billion in July 2009. The foreign currency reserves now exceed USD 5 billion.

2010 Onwards

The priority of the Sri Lankan government will be the reconstruction of the North and East. The private sector and the government are both investing heavily in Ports, Tourism and Healthcare while the Banking and Telecom sectors are expanding rapidly. The benefits of peace are expected to kick in from 2010 leading to Sri Lanka's emergence as the shipping and tourism service hub for South Asia.

Colombo Stock Market

The 235 companies listed on the CSE with a Market capitalisation of over 1.5Trillion Rupees (Approx USD 10.5Billion) contributes substantially to the GDP of the country. The key sectors Telecom, Ports, Tourism, Banking, Petroleum and Plantations that drive the economy are well represented on the Colombo Stock Exchange. The benchmark All Share Price Index (ASPI) has grown YTD by 43.48% bearing testament to the economic opportunity expected to realise during 2011.

Last update – 2010/07/21