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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » ADB’s 2013 projection of SL GDP at 6.8%, lower that CB target of 7.5 %

ADB’s 2013 projection of SL GDP at 6.8%, lower that CB target of 7.5 %

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Kumar

Kumar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
The Asian Development Bank (ADB) on Tuesday projected Sri Lanka’s economic growth this year at 6.8 per cent, much lower than the Central Bank (CB) of Sri Lanka’s target of 7.5 per cent.

The CB figure was released along with the presentation of the 2013 annual report to President Mahinda Rajapaksa on Tuesday, the same day the ADB figures were released.

In its Asian Development Outlook 2013 (ADO 2013), the bank said growth was expected to be 7.2 per cent in 2014.
http://sundaytimes.lk/news/news/32390-adbs-2013-projection-of-sl-gdp-at-68-lower-that-cb-target-of-75-.html

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics

Well 6.5% even is better than developed economies right?

Vptilak


Manager - Equity Analytics
Manager - Equity Analytics
I think CB can predict our growth rather than any other agency local or international.

salt

salt
Vice President - Equity Analytics
Vice President - Equity Analytics
@slstock wrote:
Well 6.5% even is better than developed economies right?

This is a misconception. Level of growth is related level of per capita income.
At per capita income of 40,000 level : 2% -3% is equal to
Per capita income of 1,000 level growth of 7%-8%

sriranga

sriranga
Co-Admin
ADB’s flagship annual economic publication Asian Development Outlook 2013 (ADO 2013), released yesterday, says Sri Lanka’s economic growth is expected to recover gradually to 6.8% in 2013 and to 7.2% in 2014.

Sri Lanka’s performance in 2012 reflected a strong showing in industry, which grew by 10.3%, driven by a doubling of growth in construction. Services sector growth, however, slowed down due to subdued international trade and the impact of tightened monetary policy measures. The agriculture sector suffered from drought and floods.

Earnings from garments fell due to slackened economic conditions in the US and European Union and the loss of the Generalised System of Preferences Plus facility, while tight monetary policy, Sri Lankan rupee depreciation, and high tariffs led to a decline in consumer and intermediate goods imports. Foreign direct investment inflows in 2012 are estimated to remain at $1 billion level which is same as in 2011.

Merchandise exports are projected to grow at a slow pace of 4% in 2013 and 5% in 2014, while imports are projected to grow by 6% in 2013 and 10% in 2014 without widening the current account share of GDP. ADO 2013 notes that Sri Lanka’s policymakers will need to address the challenge of narrowing the budget deficit by improving tax efficiency and widening the tax base.

Inflation continued to remain in single digits at 7.6% during 2012, although non-food price rises came from increases in government-administered prices for fuel and electricity and rupee depreciation. The 2012 budget deficit estimated to meet the target, which was achieved by reducing current expenditure.

Inflation is expected to improve marginally in 2013 to 7.5% due to declines projected for global commodity and oil prices and exchange rate stabilisation. As further energy price adjustments are expected to address the current operating losses of the Ceylon Electricity Board, the monetary policy stance will most likely remain as set in end 2012 to limit inflation expectations.

Asia’s Energy Challenge, the special theme chapter highlights the complex balancing act the region faces to deliver energy to all its citizens while scaling back its reliance on fossil fuels. Sri Lanka achieved remarkable progress in the power sector by increasing the national electrification ratio from 29% in 1990 to an estimated 94% in 2012.

However, high costs still plague the sector. Due to their intermittent nature and technical constraints, unconventional renewable energy sources cannot contribute significantly to the electricity supply. Therefore, ADO 2013 recommends that Sri Lanka strengthens its energy sector by diversifying its traditional energy mix and by improving cost reflective tariff mechanism.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.

In 2012, ADB approved four new projects for a total of $ 352 million in urban, water and energy sectors for Sri Lanka. ADB’s portfolio performance continued to improve in 2012, disbursing over $ 300 million. This contributed to achieve the highest disbursement ratio (24.4%) for the country during last five years.

As of 31 March 2013, ADB approved a total of 164 loans, with cumulative lending of $ 5.676 billion to Sri Lanka. In addition, ADB provided $ 358 million grant assistance (including ADB administered co-financed grants) for projects and $ 120.6 million through 256 technical assistance grants.

The current portfolio includes 49 ongoing loans for 29 projects with a net loan amount of $ 2.3 billion with cumulative contract awards and disbursements of $ 1.423 billion and $ 1.138 billion, respectively. The ongoing portfolio primarily is for transport, urban and water and energy sectors, which contribute for 84% of the loan amount.
http://www.ft.lk/2013/04/10/sri-lankas-economy-to-recover-in-2013-14-adb/

http://sharemarket-srilanka.blogspot.co.uk/

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics

Economic Growth of 6.5% is better than 2% . Period.

But let be clear here for educational purposes and we do not confuse people.


Per capita income and Economic Growth are 2 different things.


1)
Definition of 'Economic Growth'
An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation. For comparing one country's economic growth to another, GDP or GNP per capita should be used as these take into account population differences between countries.
http://www.investopedia.com/terms/e/economicgrowth.asp

2) Per capita income is usually the GNI or sometime GDP divided by the population. S

"per-capita income is the overall income of a population divided by the number of people included in the population, it does not always give an accurate representation of the quality of life due to the function's inability to account for skewed data. For instance, if there is an area where 50 people are making $1 million per year and 1,000 people making $100 per year the per capita income is $47,714, but that does not give a true picture of the living conditions of the entire population. "

http://www.investopedia.com/terms/i/income-per-capita.asp


One thing to agree is higher economic growth rate does not necessarily translate to immediate improvement of take home average salary or standard of living . Size of population and how fast GDP is growing relative to it , is what we need to look at. In that sense comparing 7% economic growth in Sri Lanka with 2-3% in UK is not suitable.

However with time ,Economic growth can improve standard of living with better education, healthcare, transportation, savings , policies etc.





@salt wrote:
@slstock wrote:
Well 6.5% even is better than developed economies right?

This is a misconception. Level of growth is related level of per capita income.
At per capita income of 40,000 level : 2% -3% is equal to
Per capita income of 1,000 level growth of 7%-8%

kukumarx


Manager - Equity Analytics
Manager - Equity Analytics
Currently in SriLanka, there is a paradox which I cannot understand. Can someone on this forum please help with an explanation?

Over the last year,(essentially after the Rupee depreciation) Business conditions have become very difficult. Prices of most goods have moved up sharply. People have less disposable income and I can see that it is difficult for most people to manage.

Yet we talk of this growth in the economy. How is it possible? What is happening "in Sri Lanka" currently

Is there big income growth in the hands of a few people and shrinkage in the hands of others? (Growth in inequality-as is happening in China?)

Is the data from the department of Census and statistics accurate? (Lots of the numbers generated are guesstimates- see http://www.sundaytimes.lk/130324/columns/economic-growth-puzzles-and-paradoxes-over-pluses-38321.html )

Can someone on this forum knowledgeable on this topic please help with an explanation?

D.G.Dayaratne


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
You have given an answer to yourproblem in para 3

" is there big income growth in the hands of a few people and shrinkage in
the hands of others? (Growth in inequality-as is happening in China?)"

As far as i know Census and Stats Dept figures are accurate
You can cross check these figures with other relevant figures
BUT
Centrel Bank misuse
figures on political grounds



Last edited by D.G.Dayaratne on Wed Apr 10, 2013 12:32 pm; edited 1 time in total (Reason for editing : to explain more)

kukumarx


Manager - Equity Analytics
Manager - Equity Analytics
@D.G.Dayaratne wrote:You have given an answer to yourproblem in para 3

" is there big income growth in the hands of a few people and shrinkage in
the hands of others? (Growth in inequality-as is happening in China?)"

As far as i know Census and Stats Dept figures are accurate
You can cross check these figures with other relevant figures
BUT
Centrel Bank misuse
figures on political grounds

Thank you!

So now we can add "economic model " to our list of imports from China Smile

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
GDP is the value addition of the the economy. So for example taking timber and making a chair is a value addition.

The GDP is broken down into different sectors i.e. manufacturing, services etc

Developing countries have low value addition whilst developed countries have high value addition. This is mainly due to two things, the final product is more expensive in a developed country or production is higher.

For example people talk about GDP in USA/UK etc, but they fail to realise that if you take a land and build a house, you have created at least $300,00 of value. In these countries, large developers can take massive loans and build thousands of identical houses in a year.

Also look at the agricultural output of these countries. If you look at smaller European countries, they produce the same quantity of fruit and vegetables as us. However they show a higher GDP ...... this is because the final sale price of these products is higher. Wink

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