Sri Lanka’s economy grew by around 3.1% in 2017, below the envisaged levels of the Central Bank of Sri Lanka (CBSL), as a result various factors including disruption from droughts and floods, as well as policy tightening. In 2018, the economy grew by about 3.3% during the first nine months and final results are expected to be about 3.4 %. Compared with her regional Asian peers (almost all over 5%), Sri Lanka’s growth is below and thus the upside potential is significant.
The reasons for the subdued economic performance were attributed to weak domestic demand, continued tightening of monetary policy, Government spending on consumption, stagnation in essential infrastructure investment and lower net exports. This was further compounded by inconsistent economic policy making driven by political instability.
In September 2018, the Government launched ‘Vision 2025’. The program planned to address constraints to growth over the next three years, consistent with IMF program. These structural reforms may have affected the economic performance in the short-term but they should have a constructive impact on the economy in the future.
On a Positive Note
The economy is expected to grow by 4.5 and 4.3% in 2019 according to the ADB and IMF’s forecasts respectively. The CBSL’s vision towards acceleration of economic growth was clearly indicated on its Monetary Policy Review: No. 7 – 2018.
“In order to accelerate growth on a sustainable basis, it is essential that growth enhancing structural reforms are carried out within a coherent and transparent framework, rather than relying on unsustainable short-term monetary and fiscal stimulus, which leads to overheating of the economy.”
WHY CHOOSE SRI LANKA
Sri Lanka can be regarded as one of the most liberalized economies in Asia. Investors are provided with preferential tax rates, exemptions from exchange control, government guarantees on investment agreements and 100% repatriation of profits. Total foreign ownership is welcome in almost all areas of the economy, with only a few areas restricted to foreign investment.
SRI LANKA AND M POWER CAPITAL
Financial markets in Sri Lanka have unprecedented change over the past few years, speciﬁcally with the end to the protracted civil war, creating a number of opportunities for corporates.
Recent developments in capital markets, volatility in equity markets, the government’s development initiatives have created new avenues for foreign investment and new provisions for debt ﬁnance, which have collectively changed the ﬁnancial landscape for businesses.
Our team of experienced corporate ﬁnance /private equity professionals have the market experience, skills, and resources to help you position your company achieve a sustainable return on capital invested.