Tuesday, December 18, 2007

THE ECONOMIST - COUNTRY FORECAST : SRI LANKA

Forecast
Nov 14th 2007
From the Economist Intelligence Unit
Source: Country Forecast

Security is likely to remain poor in Sri Lanka, particularly in the north and east, as the military pursues its offensive against the rebel Liberation Tigers of Tamil Eelam (LTTE, Tamil Tigers). The government is reluctant to initiate reforms that might grant the autonomy desired by the Tamil minority, suggesting that military options to resolve the conflict, rather than political ones, will be preferred. The political scene is likely to remain turbulent, hampering the implementation of economic reform. Real GDP growth is forecast to average 5.2% a year in 2008-09, supported by strong growth in manufacturing, private consumption and investment, but downside risks continue to be posed by the security situation and rapidly rising prices. Inflows of remittances will help to limit the current-account deficit in 2008-09.

Key changes from last update

Political outlook

The government repaired some of the damage done to its prestige by the LTTE's October raid on an air force base, when it killed S P Thamilselvan, the head of the rebels' political wing, in November.


Economic policy outlook

Under pressure from the government, in October plantation firms agreed to give their workers a further wage rise. In return, the Ceylon Workers Congress party (whose core constituency is made up of plantation workers) agreed to rejoin the government.


Economic forecast

Year-on-year consumer price inflation reached 19.6% in October. Owing to the fact that the money supply and credit are still growing rapidly, and that there is little sign of significant fiscal tightening, the Economist Intelligence Unit has revised up its forecast for average inflation in 2008-09, to 11.3%. In related revisions, GDP growth forecasts have been lowered, and the Sri Lanka rupee is expected to depreciate against the US dollar at a faster pace.

[ http://www.economist.com/countries/SriLanka/PrinterFriendly.cfm?Story_ID=10126999 ]

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