Sri Lanka Business Forecast Report Q1 2010 - New Report Published
Newly released report, Sri Lanka Business Forecast Report Q1 2010, provides detailed company analysis
Published on January 13, 2010by Press Office(Companiesandmarkets.com and OfficialWire)LONDON, ENGLAND
We expect 2010 to be another challenging year for Sri Lanka in spite of the end of the civil war against the Liberation Tigers of Tamil Eelam (LTTE) in May 2009. The conclusion of a lasting peace agreement should be easier to achieve once President Mahinda Rajapaksa has strengthened his grip on power in elections in early 2010. We expect economic growth to remain weak in 2010 on the back of poor domestic and external demand, but to accelerate in 2011 and 2012 as reconstruction efforts and other foreign direct investment pick up. However, a continuation of growth of 6.0+% will be conditional on far-reaching economic reform, a policy option not favoured by the current administration. We expect President Rajapaksa to consolidate his power by calling presidential elections in early 2010 to capitalise on the surge in popular support following the ending of the 25-year civil war in May 2009. A renewed presidential mandate will likely be followed by parliamentary polls to give Rajapaksa the legislative backing with which to achieve a political resolution of the conflict with Tamil separatists. We believe the influence of Beijing as Sri Lanka's most important ally will continue to grow in coming years, with Chinese investment helping the Sri Lankan economy recover from the global economic downturn. We maintain our 4.4% real GDP growth forecast for 2010, in spite of our upward revision of expected 2009 growth from 2.2% to 3.3%, as weak external demand and higher unemployment should hold back consumer spending. However, we expect real GDP growth to accelerate in 2011 and 2012 as gross fixed capital formation and exports gather pace. The strong contribution of gross fixed capital formation will help Sri Lanka post real growth rates of 6.1% and 6.5% in 2011 and 2012 respectively. We expect real GDP growth to peak at 6.8% in 2013 as reconstruction projects reach completion and foreign direct investment starts to slow. Despite the government's military victory over the rebels, which should ease security concerns, the underlying issues affecting Sri Lanka's business environment are mostly unchanged. These problems include corruption in the judiciary (and particularly in the contract-bidding process) as well as inadequate physical infrastructure. Although the government is pressing ahead with its infrastructure programme, it relies on increasingly scarce foreign funding to do so. More broadly, the business environment is unlikely to see a significant improvement under President Mahinda Rajapaksa, who has been pursuing a more nationalistic and less business-friendly economic policy than his predecessor.
Sri Lanka Business Forecast Report Q1 2010: http://www.companiesandmarkets.com/r.ashx?id=S82OR6W3G195588
