By Chandeepa Wettasinghe
The rebased gross domestic product (GDP) of the country may not exceed the 6 percent growth seen in the first quarter of 2015 for the rest of the year, according to a high-ranking official of the Central Bank, who was speaking on post-war trends, recent developments and outlooks, at a discussion organised by the Ceylon Chamber of Commerce (CCC).

“2015 first quarter saw a growth of 6 percent. Going forward—we’re still working on the numbers—looking at the last year’s numbers from 2Q to 4Q, growth rates had a higher increase, which means there’s a higher base. It will be a challenge for us to at least reach 6 percent growth based on the numbers we see right now,” Central Bank Deputy Governor Dr. P.N. Weerasinghe said.

Both the Central Bank and multilateral agencies estimate 2015 growth to be around 6.5-7.2 percent, taking 2002 as the base year.  Weerasinghe said that he was analysing the figures apolitically and that it is technically incorrect to compare the estimates based on 2002 and 2010 base years.
 
Meanwhile, Weerasinghe said that unemployment will remain low between 4 to 5 percent, while the Central Bank expects inflation to remain below 5 percent as experienced in the past six years.

“We’re not concerned about the monetary policy due to low rates... credit growth is at a reasonable rate, so the economy is not going to be overheated,” he added.     

According to him, the debt to GDP ratio is at 70 percent, signifying a high figure.                   

“Debt consolidation is something to focus on in the future. Since Sri Lanka is developing, we’re no longer eligible for concessionary loans,” Weerasinghe added.

He noted that 53 percent of the loans taken so far have been developmental loans, while commercial loans represent 34 percent. 

Weerasinghe said that the country must focus on foreign direct investments (FDIs); he expects investments to pick up after the elections, with investments and inflows into the stock exchange. He explained that foreign reserves are at US $ 7.5 million and are getting further boosted by the swap arrangement the Central Bank has with the Reserve Bank of India.  He further added that there has been greater flexibility in exchange rates in the recent times.  

He noted that the country needs a broad tax base with direct taxation instead of exemptions to increase government revenue. He also stressed the need to formalize the small and medium enterprises (SMEs), harness the service sector, increase exports, conduct research and development into new potential sectors, increase labour force participation and productivity and improve the doing business climate to create a level-playing field.

“(But) what is lacking is the strong leadership to implement policies,” Weerasinghe said. CCC CEO/Secretary General Mangala Yapa said that the private sector too has extremely similar recommendations, which have already been submitted for evaluation for the next budget. “We, from the private sector, see a somewhat similar view, so the policymakers will have to come up with reforms,” he said.