CB predicts better economic prospects for 2020

• Says upturn next year will lead to 6.5% GDP growth by 2025
• Insists implementation of sound policies will decide success of plans
• Private sector experts endorse improved optimism
  
   

By Charumini de Silva

The Central Bank this week hinted at better prospects for the economy next year, a forecast which was also backed by the private sector.

Delivering the keynote address at the Asia Securities 3rd Annual Sri Lanka Investment Conference titled ‘2020: A big innings on a tricky wicket?’ he said that the upturn next year would lead to 6.5% GDP growth by 2025, provided that the Government was determined to efficiently implement policies outlined by President Gotabaya Rajapaksa.

CB Senior Deputy Governor Dr. Nandalal Weerasinghe

Dr. Weerasinghe highlighted tourism, exports of diversified goods and services, fisheries, agriculture development via advanced technology and banking and capital market reforms as key low-hanging fruits that the Government could focus on to implement in the immediate future.

“The sectors have been identified and clear strategies have been outlined to address the issues, but the execution will decide how successful these plans are,” he said.

In terms of the economic outlook from next year onwards, the Central Bank projects the real GDP growth to reach around 6.5% over a period of five years, while per capita to GDP is expected to grow to $6,500 from current 4000 levels. 

Following the keynote address a panel discussion comprising private sector leaders also endorsed Dr. Weerasinghe’s forecast and optimism. The panel consisted of John Keells Holdings PLC Chairman Krishan Balendra, Hatton National Bank PLC Managing Director and CEO Jonathan Alles, Ceylon Biscuits Ltd Group Managing Director Sheamalee Wickramasingha and Axiata Group Executive Vice President and Regional Chief Executive for South Asia Dr. Hans Wijayasuriya.

Dr. Weerasinghe in his presentation also said the unemployment rate was expected to maintain around 4% and the average annual inflation to be within 5%.

He said this year they expected the budget deficit to remain around 5.7%, but from next year onwards it would be 4% on average.

“Next year there will be some deviation in the budget deficit because of the immediate impacts of the tax stimulus announced by the Government recently. However, the overall indication is to maintain fiscal consolidation either through expenditure management or through revenue enhancement,” he added.  

With regard to economic policy framework he said managing foreign indebtedness via promotion domestic investment, reducing import expenditure and raising export income, eliminating all unnecessary expenditure to reduce budget deficit, reducing trade deficit by promoting domestic resource based exports and import substitution, making State sector expenditures sources of income for domestic industry, shifting export economy to value added industries and reducing import taxes on raw materials and intermediate goods were important steps to efficiently manage the economy.

Dr. Weerasinghe said less productive agriculture would not help the larger population in the country and it had been rightly identified by the Government this time with clear strategies outlines to overcome those challenges.

“Agriculture development through advanced technology could strengthen the sector in many areas. This includes; fertiliser, seeds and planting material, packaging and storage, marketing and transport, research for agricultural innovation, helping paddy farmers, promotion of export crops and other export crops as well as sugar manufacturing,” he added.

The Deputy Governor also said developing systems with the help of banks to provide relief for businesses and industries was important to look beyond industrialisation.

Pointing out that policy documents are not new he stressed that it all drained down to implementation of the policies.

“Everyone is aware of the problems as well as the solutions, but execution of it where the truth lies. The early signs shows that the Government is working on a more rational way, but the differentiation can only be made by efficient decisions that will have a positive impact on people and the economy at large,” he said.