SCB downgrades Lanka’s growth


Standard Chartered Bank (SCB) yesterday (13) downgraded Sri Lanka’s economic growth forecast for 2013 from 7.2 percent to 6.2 percent due to a slower-than-expected recovery.

“We see three reasons for a slower-than-expected recovery as the economy adjusts to bold central bank policy measures aimed at addressing growing imbalances: (1) more fiscal consolidation is required; (2) inflation is elevated, limiting room for near-term policy easing; and (3) the recovery in Sri Lanka’s main trading partners, the EU and US, remains slow. That said, Sri Lanka looks well positioned to achieve slightly faster growth in 2013 than 2012?s 6.5% given that the policy bias is shifting towards supporting growth,” Standard Chartered Bank said in a report titled ‘Standard Chartered Asia Focus: Transforming, rebalancing, outperforming’ released Wednesday (13).

“In light of these concerns, we lower our 2013 GDP growth forecast to 6.7% from 7.2%; this also reflects the fact that 2012 was likely 6.5%, below our most recent 6.8% forecast,” Standard Chartered Bank said.

meanwhile, Sri Lanka is facing higher external pressure due to lack on a program with the IMF and also slower growth, Moody’s Investors Service, a rating agency said. “Although the govt will likely continue to make gradual progress in reducing its deficit, the debt burden will remain high,” Moody’s said. “The absence of a new funding program is credit negative from the perspectives of external payments and growth.