Growth is better than expected – CB

Central Bank has termed the first quarter economic growth as better than expected, according to a report filed by Reuters.

“It is better than what we expected,” Reuters quoted Central Bank Assistant Governor K.D Ranasinghe as saying.

“For the full year our forecast is 7.2 per cent,” he added.

A Reuters poll of 10 analysts last week had predicted first quarter growth at 7%.

“Industrial sector growth will be sluggish due to the slowdown in Sri Lanka’s exports to Europe, while the service sector might be hit by credit restrictions,” said TKS Securities Head of Research Danushka Samarasinghe was quoted as saying by Reuters.

On Friday, the IMF revised down its forecast for Sri Lanka’s economic growth to 6.75 per cent this year, from an earlier estimate of 7.5% and below the Central Bank target of 7.2%, citing tighter credit and a weaker currency.

Reuters in its report on the GDP said Sri Lanka’s gross domestic product (GDP) grew at a faster than expected pace in the first quarter of 2012, but tough policy measures and an uncertain global economic outlook threaten the island nation’s full-year growth prospects.

The $59 billion economy expanded by 7.9 per cent year-on-year in the March quarter, slowing from 8.0 per cent in the same quarter last year and an 8.3 per cent in the fourth quarter of 2011, Government data showed on Monday.

The farm sector jumped a record 11.4 per cent growth year-on-year in the first quarter, from a contraction of 4.3 per cent last year, which officials attributed to favourable weather conditions.

However expansion in the industrial and service sectors, which account for 87 per cent of the GDP calculation, slowed.

The industrial sector expanded at 10.8 per cent from 11.1 per cent a year ago, while the service sector gained 5.8 per cent, its lowest since the last quarter of 2009 and down from a 9.5 per cent.

The island nation’s central bank has raised key policy rates twice since February to more than two-year highs, restricted bank lending, and allowed the rupee to weaken against the dollar in a bid to avert a balance-of-payments crisis.