Battling with a challenging global environment Sri Lanka's Central Bank is confident of posting 7.5 percent growth in 2013, despite failing to maintain a 6.2 percent budget deficit, its latest report said here on Wednesday.
The budget deficit for 2012 was expected to be reduced to 6.2 per cent of GDP from 6.9 per cent of GDP recorded in 2011.
To achieve that target, the budget 2012 envisaged an increase in government revenue to 14.7 percent of GDP from 14.3 per cent in 2011 and a reduction in recurrent expenditure to 14.8 percent of GDP from 15.4 percent in 2011, while maintaining public investment at around 6.6 percent of GDP.
"However, during the year, the maintenance of fiscal targets became challenging due to a significant shortfall of government revenue, partly reflecting the impact of tight policy measures adopted to strengthen external stability and increased interest expenditure resulting from comparatively high interest rates that prevailed in the domestic market. In this challenging environment, the government maintained the budget deficit at 6.4 percent of GDP in 2012 which was below the 6.9 per cent deficit recorded in 2011, " the Central Bank said in its latest annual report.
However, Central Bank Governor Nivard Cabraal insists that the stage is set for a high growth trajectory over the next few years, starting with the economy rebounding this year with a 7.5 percent improvement up from 6.4 percent last year.
President Mahinda Rajapaksa who was present at the launch of the report called for "positivism" from all if Sri Lanka were to leapfrog to greater socioeconomic prosperity amidst serious global and local challenges.
"People who are prone to criticize will most likely harp on the fact that GDP growth in 2012 has come down to 6.4 percent from 8 percent in the previous year. However they won't take into consideration the serious challenges within which growth was achieved," Rajapaksa said.
He pointed out that the global financial crisis as well as other developments has challenged economic growth in Sri Lanka.
"We have often stressed in global fora that economic sanctions on Iran for example will affect small countries such as Sri Lanka, which is dependent on oil. Despite shocks such as these, the fact that Sri Lanka has been able to maintain single digit inflation for 50 months (slightly over four years), along with 6.4 percent growth last year, are more admirable, reflecting the resilience of the economy," Rajapaksa emphasised.