Reduced credit in private sector a temporary development, CB says
View(s):Reduced demand for credit to the private sector in Sri Lanka’s economy is a temporary phenomenon and most likely to rebound in the second quarter of the year, the Monetary Board of the Central Bank (CB) said.
It said private sector credit is likely to rise supported by declining market lending rates, sufficient liquidity levels and increased demand for exports from the advanced economies.
The broken letter “N” of the word “BANK” is hung with a wire to the main signboard of Sri Lanka's Central Bank in Colombo. REUTERS
In a media statement on its monthly policy review, the CB said the Monetary Board, at its meeting on Thursday was of the view that the current monetary policy stance is appropriate, and therefore, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at current rates.
In the detailed statement, the CB said the economy again emphasised its strong potential with broadbased GDP growth taking place in all three sectors of the economy in 2013. Well sustained by low and stable inflation, the economy, which grew by 7.3 per cent in 2013 compared to 6.3 per cent in 2012, signalled a shift towards a higher and sustainable growth trajectory.
According to recently released data from the Department of Census and Statistics, the final quarter of 2013 recorded a GDP growth of 8.2 per cent and showed a surge in performance in the agriculture and industry sectors, while the services sector growth indicated some moderation.
“Substantiating the deceleration seen in consumer price inflation during the year, the GDP deflator for 2013 recorded 6.7 per cent, declining from 8.9 per cent in 2012,” it said.
Consumer price inflation remained at mid-single digit levels in February 2014 recording the 61st consecutive month in single digits. Both year-on- year headline and core inflation moderated in February recording 4.2 per cent and 3.1 per cent, respectively, compared to 4.4 per cent and 3.5 per cent, respectively, in January 2014. “Looking ahead, inflation is expected to remain at mid single digits throughout 2014. Although the outlook for inflation remains encouraging from a demand perspective, the Central Bank will continue to closely monitor possible supply disruptions resulting from the drought conditions experienced in certain parts of the country,” the statement said.
Earnings from exports grew by 23.2 per cent, year-on-year, during January 2014 while expenditure on imports increased by 7.9 per cent during the month.
The trade deficit contracted by 5.9 per cent in January to US$756 million. Inflows, on account of workers’ remittances recorded a healthy increase in January while earnings from tourism gathered momentum during the first two months of 2014.