 Sri
Lanka >> Economy |
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| Summary
financial year 2003-2004 |
The
growth in output evident from 2002 continue through
2003 in an improved macro-economic environment with
stronger fiscal discipline, greater stability in prices
and exchange rates, lower interest rates and the implementation
of economic reforms. In 2004, growth is expected to
be faster and more broad based, provided that the
cease-fire and the peace process continue, and appropriate
economic policies and reforms will be pursued.
Developments in 2003
• The economy projected to grow by 5.5 per cent
in 2003 compared with 4.0 per cent in 2002. During
the first half of 2003, the economy grew by 5.6 per
cent and the annual growth projection is well on target.
• The cease-fire between the government and
the LTTE since February 2002 and sound economic management,
contributed to this comparatively high economic growth.
Greater fiscal discipline, declining interest rates,
a stable foreign exchange market and falling inflation
were the constituents of that sound economic management.
• Growth is projected to be broad-based. All
three major sectors are expected to contribute to
overall economic growth. Industry and Services sectors
are anticipated to grow by 5.8 per cent and 6.8 per
cent, respectively. The Agriculture sector is projected
to grow by 1.7 per cent. The Services sector will
contribute two thirds of the overall growth (66 per
cent). The contributions of the Industry and Agriculture
sectors will be 28 per cent and 6 per cent, respectively.
In agriculture, the domestic agriculture sub-sector
performed well, but the plantation agriculture sub-sector
faced difficulties during the first half of the year.
Paddy production in the Maha season was 1.91 million
metric tons, the highest ever production for a Maha
season. Total cultivated area under paddy increased
by 18 per cent during the season benefiting from the
cessation of conflict in the North and the East, and
increased availability of water resources. The increase
in acreage was 25 per cent in the North and East.
However, the average yield per hectare declined as
marginal lands were cultivated. According to provisional
estimates, paddy production in Yala also reached a
new high level. In addition, the production of vegetables,
subsidiary food crops and minor export crops increased
during the first half and this trend is expected to
continue in the second half. The increase in domestic
agricultural production contributed to dampen inflationary
pressure during the year.
• Plantation agriculture however, faced problems
during the first half. Tea production dropped by 4
per cent mainly on account of floods affecting low
grown tea areas during the second quarter. Tea production
is projected to perform better in the second half,
containing the drop in annual production to about
3 per cent. The decline in coconut production by 7
per cent during the first half of 2003, was due to
the lagged effect of the drought. However, the declining
trend in coconut production during the past three
years is expected to turn around from the second half
of 2003.
Annual production in 2003 is projected to increase
by 4.5 per cent. Rubber production, which increased
by 5 per cent during the first half, is projected
to grow at the same rate during the second half. The
increase in production was a response to the increase
in prices, by around 70 per cent, caused by the prevailing
global supply shortage. Overall, the agriculture sector
is projected to grow by 1.7 per cent during 2003.
• Recovery in the Industry sector was a significant
feature during the first half of 2003. Although the
Agriculture and Services sectors had recovered during
the first half of the previous year, the Industry
sector had lagged behind. All sub-sectors of the Industry
sector, which had contracted during the first half
of the previous year, regained their growth momentum
during the first half of 2003. Recovery in this sector
impacted positively on the Services sector as the
demand for related services increased.
• During the first half of 2003, the Industry
sector is estimated to have grown by 6.9 per cent
and all sub-sectors of Industry contributed to this
growth. Growth in the Electricity, gas and water sectors
was notable. The recovery in electricity generation
in contrast to the power cuts in the previous year
and increased generation of lowcost hydro power enhanced
value addition in the overall sector. The annual growth
of the subsector is projected to be 23per cent. Manufacturing
for export, which had suffered a severe setback since
the second half of 2001, recaptured its growth momentum
as evident from growth in industrial exports. Despite
the slow.
recovery in world trade, the textiles and garment
sector grew by over 15.3 per cent during the second
quarter of 2003. The export manufacturing sub-sector
is projected to grow during the second half too, though
at a slower pace due to the base effect, compared
with the first half. The construction sub-sector,
which had experienced a setback during the past two
years, showed signs of recovery during the first half
of 2003. For the year as a whole, this sector is projected
to grow by 4.5 per cent. Construction activity was
mainly concentrated in housing construction. The industry
sector, as a whole, is projected to grow by 5.8 per
cent during 2003.
• The Services sector remained buoyant during
the first half of the year and grew at 7.2 per cent.
Of service activities, the banking, insurance and
real estate sector is estimated to have grown by 12.8
per cent. Growth in the commercial banking subsector
benefiting from the continuing sharper decline in
deposit rates than in lending rates was partly responsible
for this high growth. This high growth is expected
to continue during the second half. The Transport,
storage and communications sector, which grew by 5.6
per cent during the first half of 2002, is estimated
to have grown by 9.9 per cent in the first half of
2003. The telecommunications sub-sector accounted
mostly for this growth, its final output expanding
by 23.7 per cent. Value added in port service rose
by 12.1 per cent during the first half of the year.
This high growth reflects enhanced productivity at
the Sri Lanka Ports Authority (SLPA) and aggressive
marketing by the Jaya Container Terminal (JCT) and
the South Asia Gateway Terminal (SAGT), both providing
world class container terminal
facilities. As this fast growth was achieved on a
low base in the previous year, growth in the port
services sector is projected to decelerate during
the second half of the year.
In 2003, a further recovery is expected in the Wholesale
and retail trade sector. During the first half of
the year, this sector grew by 5.6 per cent, against
2.1 per cent during the first half of 2002. The recovery
in exports trade was noticeable in this sector. In
2002, although imports had recovered from the contraction
in 2001, the export trade sub-sector had lagged behind
owing to slower recovery in world trade. In 2003,
the export sector is projected to grow by 8.6 per
cent. Reflecting the increase in production and improved
consumer confidence, the domestic trade sector is
projected to grow by 4.4 per cent in 2003.
• The residual services category which is not
classified under a main heading is projected to grow
by 4.5 per cent in 2003. This growth will
come mainly from the hotel services sub-sector reflecting
the upsurge in tourist arrivals. Hotel and related
services, which had suffered a setback in the first
half of 2002, recovered strongly in 2003 with the
increase in tourist arrivals, mainly from India, UK,
Germany, France and Japan. This trend in tourist arrivals
are expected to continue during the second half of
the year as well. Further, value added in private
educational services, private health services and
lotteries is also projected to grow during the year.
• GDP at current market prices is projected
to be approximately Rs.1,788 billion, an increase
of 12.8 per cent over the previous year. This increase
combines a 5.5 per cent production growth and a 7.1
per cent increase in the price level. Accordingly,
GDP per capita for 2003 is estimated at Rs.91,762,
an increase of 10.1 per cent over the previous year’s
Rs.83,382, which surpasses the combined increase in
inflation and population growth, indicating an overall
improvement in living standards, on average. In US
dollar terms, per capita GDP is estimated to increase
by 9.3 per cent, from US dollars 872 to 953.
| Composition
of Expenditure 2003 |
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Outlook for 2004
• The economy is projected to grow by at least
6.0 per cent in 2004. This growth is projected to
be broadbased, deriving from further growth in all
three sectors; agriculture (2.9 per cent), industry
(6.1 per cent) and services (7.0 per cent).
• In the plantation sector, growth will come
from a recovery in tea and coconut production. Tea
production, which suffered a temporary setback in
2003, is projected to increase by about 3 per cent
and reach 310 million kg in 2004. Assuming that favourable
prices will prevail, rubber production is projected
to improve further, while coconut output is expected
to grow by 6 per cent, reflecting the lagged effect
of favourable weather conditions in 2003. The output
of paddy and other crops is expected to perform well
in 2004.
• All the sub-sectors in the Industry sector
are projected to grow in 2004. Export manufacturing,
electricity generation, construction and mining activities
will contribute to this projected growth. In export
manufacturing, output in the textiles and apparel
product category is expected to grow with a recovery
in international markets, continuous improvements
in product quality, and closer relations with buyers
in international markets. The output of the domestic
market oriented industries is expected to grow in
response to increased consumer demand arising from
lower interest rates and higher per capita income.
• The Services sector is projected to grow by
7 per cent in 2004, contributing almost two thirds
of the overall growth. This sector will benefit from
the continued growth momentum in telecommunications,
tourism and trade.
• The per capita income is projected to surpass
US dollars 1,000 for the first time.
• However, the realisation of these results
will depend on several major factors: that the peace
process will continue, that macroeconomic management
will improve further, that economic reforms will gather
pace, that economic policy uncertainties will be reduced
and that external assistance will be utilised efficiently.
As mentioned ealier, improvements in the power supplies
and basic infrastructure facilities and reforms of
the labour market are critical to the continuation
of the growth momentum observed in 2003.
Key
Economic Indicators
| |
2001 |
2002
(Prov.) |
Annual
Projections
2003(a) |
First
Half |
| |
|
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|
2002
Actual |
2003
Provisional |
DEMOGRAPHY
Mid year population (‘000 persons)
(b)
Growth of mid year population (per cent) (b)
Population density (persons per sq.km.) (b)
Labour force (‘000 persons)
Labour force participation rate (per cent)
Unemployment rate (per cent of labour force) |
18,732
1.4
299
6,773
48.8
7.9 |
19,007
1.5
304
7,145
50.3
8.8 |
19,273
1.4
307
6,920
50.0
7.5 |
7,017
49.5
9.8 |
7,149 (c)
49.9 (c)
8.7 (c) |
OUTPUT
GDP at current market prices (Rs. billion)
GNP at current market prices (Rs. billion)
Per capita GDP at market prices (Rs.) (b)
Per capita GNP at market prices (Rs.) (b)
Per capita GDP at market prices (US$) (b)
Per capita GNP at market prices (US$) (b)
|
1,407
1,382
75,133
73,795
841
826 |
1,585
1,560
83,382
82,076
872
858 |
1,788
1,766
91,762
91,608
953
941 |
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REAL
OUTPUT (percentage change)
GNP
GDP
Sectoral classification of GDP(d)
Agriculture
Industry
Services |
-1.3
-1.5
-3.4
-2.1
-0.5 |
4.1
4.0
2.5
1.0
6.0 |
5.9
5.5
1.7
5.8
6.8 |
1.7
1.4
3.2
-3.0
3.1 |
6.2
5.6
-0.2
6.9
7.2 |
AGGREGATE
DEMAND AND SAVINGS (per cent of GDP)
Consumption
Private
Government
Investment
Government
Public corporations
Private
Net import of goods & non factor services
Export of goods & non factor services
Import of goods & non factor services
Domestic savings
Net factor income (e)
National savings |
84.2
74.0
10.3
22.0
3.0
2.8
16.2
-6.2
37.3
43.6
15.8
4.6
20.3 |
85.4
76.4
8.8
21.3
2.0
2.6
16.7
-6.7
36.2
42.9
14.5
5.1
19.7 |
85.4
77.7
7.7
22.2
2.7
2.3
17.2
-7.7
35.8
43.5
14.6
5.2
19.8 |
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PRICES
AND WAGES (percentage change)
Sri Lanka Consumers’ Price Index
(1995-1997 = 100)
Colombo Consumers’ Price Index (1952 = 100)
Greater Colombo Consumers’ Price Index (Jan.-Jun.
1989 = 100)
Wholesale Price Index (1974 = 100)
GDP deflator
Nominal wage rate index for workers in all wages
boards
Nominal wage rate index for central government
employees |
12.1
14.2
11.0
11.7
12.4
4.9
20.8 |
10.2
9.6
10.6
10.7
8.3
7.4
16.3 |
6.0 - 7.0
7.1 |
12.2
9.6
12.5
12.4
9.2
2.9
23.0 |
4.2
8.5
4.7
5.1
7.2
11.7
- |
GOVERNMENT
FINANCE (per cent of GDP)
Revenue
Expenditure and net lending
o/w Current expenditure
Public investment
Current account deficit(-)/surplus(+)
Overall deficit
Deficit financing
Foreign
Domestic
Privatisation proceeds
Government debt
Foreign
Domestic |
16.7
27.5
21.6
5.9
-4.9
-10.8
10.8
1.4
8.8
0.6
103.2
45.3
58.0 |
16.5
25.4
20.8
4.6
-4.4
-8.9
8.9
0.6
8.0
0.4
105.3
45.5
59.8 |
16.4
24.3
19.2
5.1
-2.7
-7.8
7.8
2.7
4.3
0.8
100.1
42.9
57.2 |
8.0
12.4
10.2
2.2
-2.2
-4.5
4.5
0.2
4.2
0.1
99.6
43.9
55.7 |
7.6
11.5
9.4
2.3
-1.8
-3.9
3.9
0.9
2.7
0.3
97.9
42.5
55.4 |
EXTERNAL
TRADE (percentage change )(f)
Terms of trade
Export unit value index (1997 = 100)
Import unit value index (1997 = 100)
Export volume
Import volume |
-1.7
-5.2
-3.6
-8.0
-10.7 |
3.9
-4.3
-7.9
2.0
11.0 |
-0.4
3.6
4.0
6.6
8.7 |
6.2
-10.1
-15.4
-8.0
5.8 |
10.4
10.4
0.0
7.0
7.2 |
EXTERNAL
FINANCE (US$ million)
Trade balance
Exports
Imports
Services and income account (net)
Current private transfers ( net)
Current official transfers (net)
Current account balance
Overall balance
Current account balance (per cent of GDP)
External assets (months of same year imports)
Overall debt service ratio (per cent of X G &
S)
Total external debt and liabilities (per cent
of GDP) |
-1,157
4,817
5,974
-92
984
22
-244
220
-1.5
4.5
13.2
61.4 |
-1406
4,699
6,106
15
1,097
26
-268
338
-1.6
4.9
13.2
62.1 |
-1,706
5,191
6,899
77
1,183
29
-416
390
-2.3
5.2
11.6
58.0 |
-864
2,012
2,876
12
521
18
-268
160
-2.5
5.0 |
-701
2,378
3,078
32
592
20
-337
187
-2.3
5.2 |
EXCHANGE
RATES
Period average
Rs./US$
Rs/SDR
End - period
Rs/US$
Rs/SDR |
89.36
113.75
93.16
116.97 |
95.66
123.93
96.73
130.99 |
|
94.98
120.03
96.10
127.85 |
97.00
134.22
97.14
136.07 |
MONETARY
AGGREGATES
(percentage change Point to Point)
Narrow money (M1)
Broad money (M2b)
Net external assets of the banking system
Net domestic assets
Domestic credit from the banking system to
Government (net)
Public corporations
Private sector
Reserve money
Money multiplier for M2b (Value)
Velocity of M2b (Value)
|
3.2
13.6
6.6
14.8
36.7
6.7
8.9
7.0
4.88
2.76 |
14.0
13.4
49.3
7.8
-4.1
5.4
12.0
12.3
4.92
2.69 |
11.5
13.5
53.1
4.9
-15.5
-17.5
15.1
13.0
4.95
2.68 |
15.6
17.9
30.4
15.7
31.6
-15.7
6.9
14.7
4.92
- |
13.3
12.1
41.4
6.5
-11.7
-0.6
13.4
10.1
5.01
- |
INTEREST
RATES (per cent per annum at end year)
Treasury bill rate
91 days
364 days
Repurchase rate (overnight)
Rediscount rate (overnight) / Reverse repo rate
Deposit rates
Commercial banks’ weighted average deposit
Commercial banks’ 12 month fixed deposit
(max.)
NSB savings
NSB 12 month fixed deposit
Lending rates
Com.banks’weighted average prime lending
Bills purchased & discounted |
12.92
13.74
12.00
14.00
10.8
14.5
8.4
13.0
14.3
13.0-24.0 |
9.92
9.91
9.75
11.75
7.5
11.0
6.0
10.0
12.2
10.0-23.0 |
|
12.98
13.72
11.50
13.75
9.6
14.0
7.0
11.0
14.0
12.50-24.0 |
8.39
8.46
8.25
10.25
6.0
9.5
6.0
8.5
10.6
8.75-23.00 |
CAPITAL
MARKET
All Share Price Index (1985 = 100)
Milanka Price Index (1998 December = 1000)
Value of shares traded (Rs. million)
Net purchases by non nationals (Rs.million)
Market capitalisation (Rs.billion) |
621.0
1,031.0
13,905.0
-1,024.8
124.0 |
815.1
1,374.6
30,183.0
2,442.4
162.6 |
711.4
1,222.0
14,689.3
1,804.5
144.0 |
1,048.9
2,062.5
22,046.2
2,030.4
247.7 |
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(a)
Provisional estimates for 2003 are based on information
available up to September 2003.
(b) Mid year population, population growth, population
density, per capita GDP and per capita GNP data have
been revised from 1990 on the basis
of provisional estimates from the Census of Population
and Housing - 2001
(c) 1st quater 2003
(d) The sectoral classification has been revised in
accordance with the classification used in the World
Bank publication, World Development
Indicators, which classifies the International Standard
Industrial Classification (ISIC) - Revision 3 as follows:
The revised sectoral classification
is Agriculture (ISIC division 1-5), Industry (ISIC
division 10-45) and Services (ISIC division 50-99).
Accordingly Agriculture includes the
Forestry and Fishing sub sectors and Industry comprises
the Mining and quarrying, Manufacturing, Electricity,
gas and water supply and
Construction sub sectors. All other sub sectors are
classified under Services.
(e) Includes workers’ remittances.
(f) A series of new trade indices has been introduced
from 1998.
| Quarterly
GDP Growth Rates |
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| Sources |
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