The International Monetary Fund (IMF) has projected Sri Lanka's growth rate at around 6.25 per cent this year, observing that the country has achieved notable progress on a number of economic fronts over the past few years.
Sri Lanka's estimated growth rate in 2012 was 6 per cent.
"Real GDP growth is projected to increase to around 6.25 per cent in 2013. The recovery will likely be constrained by the need to continue fiscal consolidation, high inflation, which limits the room for near-term monetary easing, and a continued slow recovery in Sri Lanka's main trading partners, particularly the US and EU," the IMF said at the conclusion of its consultation with Sri Lanka on Wednesday.
Noting that an excess supply gap is expected to emerge, which should contribute to reducing inflation pressures through the year, the IMF said its recent mission to Sri Lanka agreed with the authorities that lowering inflation to mid-single digits in coming years would bolster macroeconomic stability.
This, along with structural reforms to enhance productivity and competitiveness, would support robust growth over the medium term, it said.
Following the Colombo visit of its staff mission led by John Nelmes from January 30 to February 13, the IMF said Sri Lanka has achieved notable progress on a number of economic fronts over the past few years: growth has been robust, inflation has declined from high double digits, fiscal and external consolidation is underway, and the Standby Arrangement was successfully completed.
"The economy continues to adjust to the bold policy measures undertaken by the authorities early last year to address emerging imbalances.
"Credit growth and domestic demand have slowed to a more sustainable pace, the trade deficit has narrowed, and a small balance of payments surplus was achieved last year," it said.
At the same time, external demand was undermined by continued weakness in the global economy, and agriculture production was hampered by drought that prevailed for much of 2012.
As a consequence, real GDP growth is estimated to have slowed to 6 per cent last year, and inflation rose to upper single digits, the IMF said.