ADB says Sri Lankan economy to grow 5%

  • Business
  • Wednesday, 28 Apr 2004

COLOMBO, Sri Lanka (AP) - The Asian Development Bank expects Sri Lanka's economy to grow 5 percent in 2004 and 5.5 percent next year if political uncertainty doesn't slow down economic reforms. 

In its Asian Development Outlook report released Wednesday, the Manila-based ADB said the economy would be driven by a higher global demand for exports - mainly textiles - and stronger tourism. 

But the report warned that President Chandrika Kumaratunga's political alliance, which emerged as the largest in the April 2 parliamentary elections, had not outlined a reform program to drive growth. 

The report also said peace talks with Tamil Tiger rebels may face uncertainty. 

"This government's approach to economic policies and to the peace process suggests that peace negotiations and reform implementation will face a period of considerable uncertainty,'' the ADB said. 

Kumaratunga's party takes a hardline stance against the rebels and is against privatisation. 

"Growth in the key export markets of the United States and the European Union as well as a resilient tourism sector are encouraging signs for the economy,'' the report said in a positive note about the tropical island's economy. 

The ADB said exports would likely grow 10 percent this year and 9 percent in 2005. 

The United States is Sri Lanka's largest export market, accounting for roughly 40 percent of the country's overseas sales. Sixty-one percent of Sri Lanka's textile and garment exports go to the United States, thanks to tariff concessions. 

But that agreement ends in late 2004, leaving Sri Lanka open to greater competition from countries such as China and parts of the Middle East.  

Textiles and garments are Sri Lanka's biggest export earners. 

Exports grew 9 percent last year on higher demand for agricultural products. 

Imports - especially consumer goods and crude oil for power generation - are expected to rise 12 percent in each of the next two years, compared to a 9 percent increase in 2003. 

Sri Lanka's war-battered economy grew about 5.8 percent in 2003, bouncing back from a 1.5 percent contraction in 2001, when the island was hit by a global economic downturn, the war with the rebels and a drought. - AP 

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