* Private sector credit to expand 16%
* Broad money growth 14.5%
* Net credit to government Rs. 42bn
* World Bank Doing Business ranking to be improved to
30th position from 102
The Central Bank estimates economic growth to reach 8.5 percent in 2011 and accelerate to 9 percent in 2012 and 9.5 percent in 2013 and said it would follow a duel approach of carrying out an economic analysis and monetary analysis to a secure low and stable rate of inflation in years to come. Central Bank Governor Ajith Nivard Cabraal announced these growth projections while delivering the ‘Road Map: Monetary and Financial Policies for 2011 and Beyond’, and said economic growth for 2010 is estimated at 8 percent. He said broad money growth had declined during the first half of 2010 but then picked up to record a growth rate of 15 percent which enabled the economy to grow by 8 percent. He said the increase in private sector credit led to growth in broad money.
For growth to reach 8.5 percent in 2011, broad money would have to grow by 14.5 percent while a growth rate of 9 percent in 2012 and 9.5 percent in 2013 would also require broad money to expand by 14.5 percent each year. Sri Lanka’s economy grew by 3.5 percent in 2009.
Cabraal said the 8.5 percent economic growth this year, would be broad based across the agricultural, services and manufacturing sectors.
He said the economic and monetary analysis would be carried out simultaneously while a multipronged strategy, not dependent on policy rates alone, would be used in the event inflation was to rise.
Private sector credit...
Cabraal said credit to the private sector is expected to expand by 16 percent this year.
Net credit to the private sector increased by 20.3 percent to Rs. 1.41 trillion in October from Rs. 1.17 trillion a year ago. In September, credit to the private sector amounted to Rs. 1.36 trillion.
Credit to the private sector from domestic banking units grew by 22.7 percent in October to Rs. 1.25 trillion from Rs. 1.02 trillion a year ago, while credit from domestic banks amounted to Rs. 1.21 trillion in September.
Credit from foreign sources to the private sector grew much slower at 4 percent, reaching Rs. 156.3 billion in October from Rs. 150.2 a year ago. In September 2010, loans from foreign sources amounted to Rs. 150.1billion.
A year ago net credit to the private sector had declined by 6.6 percent with loans from the domestic banking sector declining by 6.1 percent.
Cabraal said lending rates had declined by 2 percent in 2010 and 2.7 percent in 2009.
Net credit to government...
Cabraal said net credit to the government would amount to around Rs. 42 billion this year (2011).
Net credit to the government grew at 8.2 percent, reaching Rs. 656.5 billion in October from Rs. 606.7 a year ago, but it is a decline compared with Rs. 693.1 billion the previous month, September 2010.
BOP surplus...
The Central Bank Governor said the Balance of Payments would record a US$ 350 million in 2011. He said the surplus would amount to US$ 900 million in 2010 on higher inflows of worker remittances, estimated to grow by 24 percent in 2010 to US$ 4.1 billion.
FDIs in 2010 are estimated at US$ 500 million, reflecting declining global capital flows, but FDIs and inflows to the private sector are expected to reach US$ 1.5 billion this year.
Cabraal said long term inflows to the government this year is expected to reach US$ 1.7 billion.
He said relaxation of exchange controls and the improving investment climate would also attract portfolio investments in to the country.
He said steps have been taken to improve Sri Lanka’s sovereign ratings and also improve its World Bank Doing Business ranking from the current 102nd position out of 183 countries to 30 by 2016.
GDP deflator...
Unlike an inflation index, the GDP deflator reflects the rate of increases in prices of all goods and services produced in a country for a given year.
The GDP deflator for 2010 is estimated at 7 percent, it is 6 percent for this year, 5.5 percent in 2012 and 5 percent in 2013.
Cabraal also said the rupee would appreciate against the dollar this year, but not at the expense of exchange rate stability.
source - www.island.lk
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