Ceylon Chamber projects GDP growth this year at dismal 0.6%

The Economic Intelligence Unit of the Ceylon Chamber of Commerce has projected in a quarterly economic review that GDP growth this year will be only 0.6% with the drought-hit agricultural sector contracting 1.5%.

The Chamber estimate is considerably lower than the optimistic view recently taken by Treasury Secretary P. B. Jayasundera who estimated full year GDP growth will be around 2% to 3%.

The Central Bank has already published 1.3% growth for the first quarter and 0.4% for the second, giving an average of 0.9% for the first half of this year prior to the Katunayake airport attack and the resulting economic repercussions.

The Chamber said that its latest projects have been prepared prior to the US attack on Afghanistan and the announcement of elections in Sri Lanka.

The Chamber’s quarterly economic review also projects that the 12-month Treasury Bill interest rate will fall to around 16% at year end from over 19% at mid-year. The Central Bank has already reduced repo and reverse repo rates and the anticipated slow down in economic activity is expected to dampen pressure on interest rates, the Chamber said.

The Chamber’s inflation project for this year is 14% by the year end with the quarterly economic review saying that "the sharper than expected slowdown in the local and global economies has dampened consumer demand," leading to a continued moderation in price levels.

It warned that if there be shortages in food supplies and rise in food prices for the if the US launches military action, the inflation rate could increase.