The Asian Development Bank (ADB) believes Sri Lanka’s growth would reduce to 7% due to global setbacks and highlighted income inequality as one of the key challenges.
The Bank’s Senior Country Economist Tadteru Hayashi told the media in Colombo last Tuesday that they expected the country’s growth to be at 7%, inflation at 8% and the current account balance to remain a deficit at 6.4% this year.
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| Rita O’Sullivan |
In view of the changing global conditions expected in 2013, the ADB opined a return to previous high figures of growth at 8% with inflation at 7% and the current account balance at -6% of the GDP.
He noted that growth was “moderate” but strong due to global demand and tighter demand management policies.
Inflation in Sri Lanka was impacted due to pressure exerted from currency depreciation and an energy price hike in February this year, he said.
Exports are likely to be affected due to slow demand from Europe; Mr. Hayashi said adding that the trade gap however, is expected to“stabilize.”
The ADB is looking towards encouraging public private partnerships in financially viable projects and in assisting the development of capital markets. The Bank also seeks to catalyze private investment through the use of ADB’s credit enhancement products.
ADB’s Country Director Rita O’Sullivan addressing the media said they would assist in critical areas of skills development and teacher training in a bid to build up on the required efficient human resources capacity in the country.
She noted that the rise in inequality in Asia was evident here as well adding that regionally this was linked to capacity favoured over labour; skilled over unskilled; and cities over rural areas.
Ms. O’Sullivan spoke of the ongoing country programme that would include the above areas of inclusiveness, capital markets development and more private investment that would ensure higher growth.
The report highlights challenges for policy makers, including tackling income inequality and reducing pressure on natural resources, both of which threaten the sustainability of future growth and poverty reduction. This will require stepped up investment in rural areas and more comprehensive social security safety nets, as well as stronger management of water and other natural resources, and improving energy efficiency.
Currently the ADB is involved in infrastructure development, a key component in the government’s development policy, she said.
It was also pointed out there was a need to engage in increased investments in the lagging regions to reduce disparities that would ensure a reduction in poverty levels and in inequality of incomes.
At present, the Bank has invested in projects related to transport, energy, water supply and sanitation, and urban development sectors.
The ADB’s report on the region stated that the income divisions were rising with the richest 1% of households accounting for 6% - 8% of total income. In this respect, 20% of the total income went to the wealthiest 5% in most countries. |
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