The Economy in 2011 at a Glance

Monday, April 9, 2012 - www.ft.lk

Growth, inflation and unemployment:

Economic growth increased to its highest level of 8.3% – the first time the country recorded above 8% growth in two successive years.
Per capita income increased to US dollars 2,836 from US dollars 2,400 in the previous year.
Inflation remained subdued at single digit levels for the third consecutive year.
Unemployment declined to 4.2%, the lowest level recorded thus far.
Substantial improvements in youth unemployment.

External Sector

Growth of exports, which was at 22.4% was far outpaced by the growth of imports at 50.7%
Trade deficit widened sharply to 16.4% of GDP.
Tourist arrivals crossed 850,000 with earnings recording US dollars 830 million.
Workers’ remittances reached US dollars 5.1 billion
Current account deficit remained substantially higher at 7.8% of the GDP compared to the average deficit of around 3.1% over the last ten years.
Foreign direct investments in the country exceeded US dollars 1 billion for the first time.
The balance of payments recorded a deficit of US dollars 1.1 billion.
Gross official reserves by year end were US dollars 6.0 billion compared to US dollars 6.6 billion as at December 2010.
The rupee depreciated by 2.6% against the US dollar by year end.

Fiscal Sector

Emphasis on fiscal consolidation continued in 2011.
A shortfall in revenue was reflected in the decline in the revenue to GDP ratio to 14.3% from 14.6% in 2010.
Total expenditure and net lending was maintained at 21.4% of GDP.
Overall fiscal deficit was 6.9% of GDP, marginally above the targeted level.
Government debt to GDP ratio fell to 78.5% from 81.9% in 2010, the first time in nearly 30 years that the ratio was lower than 80%.
Government issued the fourth international sovereign bond, amounting to US dollars 1 billion.

Monetary and Financial Sector

Key policy interest rates were reduced in January 2011 to enhance investments by the private sector.
The Statutory Reserve Ratio was raised by 1 percentage point to 8% in April in order to permanently absorb a part of excess liquidity.
Monetary expansion, at 19.3% on average, continued to remain above the targeted level.
Market interest rates were broadly stable during the first three quarters of the year but began increasing thereafter.
Stability of the financial system continued to be well safeguarded.
A new Finance Business Act was enacted while several new Directions were issued.
Non-performing loan ratios declined over the year.
Banking system remained well capitalised despite a decline in the capital adequacy ratios.
Further progress was made towards improving access to finance with the expanding branch network of financial institutions.