A major problem faced by private sector today is that there is a lack of stability and a lack of consistency and predictability in policy-making. “However this is being addressed and the country can now see some improvements,” said Governor Central Bank, Dr Indrajit Coomaraswamy.
Speaking at a Seminar organised by the Ceylon Chamber of Commerce, and the launch of the exclusive Economic Intelligence Unit Publication: “seminar on Economic + Sector Review and Outlook 2018 Report” he said that some progress has been made in terms of stabilization. The Governor said that today one can be cautiously satisfied that the country has made some progress.
“We are seeing foreign money coming into the stock exchange, and the securities market.
Fitch and S&P have taken away the negative outlook on their sovereign rating, and we now have a stable outlook. Of course with Moody’s we still have a negative outlook, but there has been progress in terms of Fitch and S&P.
There is a degree of confidence that has been percolating through as far as the Sri Lankan economy is concerned, but we’re still on a journey. I’m not for a moment saying that we’ve cracked it, far from it.”
“As far as growth is concerned it is more muted than we’d like it to be. We end the year with a little fewer than 4% growth. In our view, the potential growth rate is about 5.75%. So there is an output gap that we feel needs to be addressed.”
He said the thing that has to be avoided at all costs was to try to boost the growth rate by loosening macroeconomic policy in inappropriate ways, and this was something the country has done again and again in the past.
“However this time we are determined that we will not go for this sugar-high in terms of not artificially boosting the growth rate through inappropriate macroeconomic policy. Sri Lanka, if one were to categorize it in the post-1977 years, has been a high budget deficit, high inflation, high nominal interest rate, overvalued exchange rate economy which is diametrically the opposite of the successful countries of East and Southeast Asia,” the governor added. “The government is seriously considering strengthening the fiscal responsibility management act as it sets targets for the budget deficit and for the debt as a percent of GDP figures..”
“We had an increase in the trade deficit despite a noteworthy turnaround in export performance. You’d have seen the papers today screaming headlines: a record in exports in 2017. I don’t think there’s much to be proud of in this achievement, because we are still way down as far as exports are concerned, but we are on our way up.”
He identified the current Trade policy as the jewel in the crown. “If we’re able to complete the FTA and trade negotiations with India, China, Singapore, the country will be the only country in the world with preferential access there three nations.”
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