Sri Lanka’s economy has expanded by 4.2 percent, year-on-year, during the third quarter of this year, recovering from a growth slump which saw economic growth contract to 1.5 percent in the first quarter of the year which recovered to 2.1 percent during the second quarter.

The economy grew by 6.3 percent during the third quarter of 2008 and averaged above six percent for the first three quarters of 2008 but contracted to 4.3 percent during the fourth quarter as the affects of the global financial crisis began to be felt.

The Deputy Director of the department, Nalini Kumarasinghe, said Sri Lanka’s economy has entered into a ‘V-shaped’ growth and is recovering from the global financial crisis.

She said the turnaround was led by the peace factor after the thirty-year war came to an end last May after security forces militarily defeated the LTTE.

The Gross Domestic Product (GDP) grew by 4.2 percent during the quarter led by a 4.4 percent growth in the industrial sector and 5.1 percent growth in the services sector. The agriculture sector recorded negative growth of 0.9 percent, the Department of Census and Statistics realising economic data for the third quarter said.

"Growth recorded by various sectors indicates that it is driven by demand for locally produced goods and services," Ms Kumarasinghe said.

Under wholesale and retail trade, Import trade declined by 1.5 percent during this quarter while domestic trade expanded by 8.7 percent. Export trade expanded by 0.7 percent.

The industrial sector grew by 4.4 percent during the third quarter, an improvement from 1.9 percent and three percent growth for the first and second quarters respectively. It grew by 5.6 percent during the third quarter of 2008.

Mining and quarrying grew by 5.6 percent during the quarter. The manufacturing subsector grew by 3.2 percent with the country’s leading export, apparels, growing by 1.1 percent. Electricity gas and water grew by 6.7 percent, with the electricity sector growing by 6.6 percent.

The construction sector grew by 6.4 percent led by infrastructure development activities of the government, the statistics department said.

The services sector grew by 5.1 percent during the third quarter improving from one percent and 1.1 percent growth for the first and second quarters of the year. It grew by 5.5 percent during the third quarter of 2008.

The hotels and restaurants subsector grew by 20.6 percent during this period. Transport and communications grew by 7 percent. The banking, insurance and real estate subsector grew by 6.8 percent

The agricultural sector recoded a negative growth rate of 0.9 percent during the third quarter after recoding positive growth rates of three percent and 4.5 percent for the first and second quarters of the year.

Paddy production declined by 28.4 percent while export crops such as tea and rubber declined by 4.8 percent and 3.4 percent respectively.

The fisheries subsector expanded by 12.7 percent while the production of highland crops, vegetables and fruits expanded by 6.9 percent, 7.7 percent and 6.9 percent respectively.

Coconut production grew by 2.1 percent.