Focus on rural infrastructure
The government is focussing on establishing and maintaining projects that will uplift the lives of rural people.
"We have been and will continue to establish and maintain infrastructure projects together with other such projects that will be felt by the rural people," President Mahinda Rajapaksa said addressing the gathering at the 58th annual report launch of the Central Bank on Tuesday.
He said that there are 20 more fly-over bridges just like the one in Kelaniya, which was launched recently, in the pipeline throughout the country, which will help reduce auto oil wastage and traffic issues.
He noted that the government is aware of the rising prices of essential goods which the urban middle and law income groups cannot bear. "We have reduced the prices of 15 such items to help them counter this situation and will further look into doing similar things," he said.
Despite tight demand management policies by the Central Bank, inflation exceeded the original expectation for 2007. " The tight monetary policy measures of the Central Bank helped to reduce inflation gradually during the first half of 2007. However, the substantial increase in international market prices of oil, the complete removal of fuel subsidies since July 2007 and sharp rises in several other commodity prices in international markets led to an upward adjustment in domestic prices of several goods and services, particularly during the second half of the year. The pass-through of international price increases, though it led to a one-off increase in prices, will have a favourable impact on containing future inflation by eliminating the need for subsidising the same through the expansionary borrowings of the government,” Dr. P.N. Weerasinghe Central Bank’s Director Economic Research said.
The economy grew by 6.8 percent in 2007, the annual average rate of unemployment reached its lowest ever recorded level of 6.0 percent, while the per capita income rose further to US$1,617 in 2007.
The economic growth in 2007 was mainly driven by the performance in industry and services sectors which grew by 7.6 percent and 7.1 percent, respectively, while the agriculture sector grew moderately by 3.3 percent.
The Central Bank annual report said that the services sector has made the highest contribution of 62 percent to the overall growth, while the industry and agriculture sectors contributed 32 percent and 6 percent, respectively.
However, the shares of GDP from the services, industry and agriculture sectors remained almost unchanged at 60 percent, 28 percent and 12 percent, respectively. In the services sector, posts and telecommunications, cargo handling, transport, and financial services were the key performing sectors. Construction, export manufacturing, and mining and quarrying activities performed well in the industrial sector. Most of the agricultural activities achieved relatively high growth rates, but the drop in the production of two major crops, such as tea and paddy, dampened the overall growth performance of the sector. The report noted that the expansion of the economy generated more employment opportunities, contributing to a further drop in the annual unemployment rate from 6.5 percent in 2006 to six percent in 2007, the lowest annual unemployment rate ever reported.
The textile, wearing apparel and leather products category, which is the major export oriented industrial sub-sector of the country, recorded a higher output with the increased utilisation of GSP+ duty concessions. When asked whether the US economy's slowdown will affect the local apparel sector, Weerasinghe noted that it will not impact the local apparel manufacturers. “The first item that they will cut down on will not be apparel, but things such as travel, electronic items, etc,” Weerasinghe said.
Deputy Governor Central Bank W. A. Wijewardena noted that the US is a 15 trillion dollar economy and Sri Lanka exports commodities that are not much exposed to the shocks that the US is currently experiencing.