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Local economist cautions country still vulnerable to external shocks

By Yohan Perera

The United Nations Economics and Social Commission for Asia and Pacific (ESCAP) is upbeat on the prospects of Sri Lanka’s socio-economic growth in 2003 as well as in the medium term on the strength of the peace process and other measures.

ESCAP’s Economic Survey 2003 report released in Colombo yesterday has indicated that Sri Lanka is posting a recovery in economic and social development with an economic growth rate of 5.3% this year and reduced inflation rate of 6.7% in 2003.

While forecasting that the country’s economy would grow further by 6.3% in 2005, the ESCAP report has suggested that concrete progress in the resolution of the North/East
conflict will boost trade, investment and economic growth in the country.

On a regional level the ESCAP report also deals with the military action in Iraq stating that it will have a negative impact on global recovery while suggesting that higher energy prices might benefit the energy producing economies. It further says that conflict in the Middle Eastern region have sharply restricted investment activity and tourism in an around the countries involved.

According to the report sustaining growth in the ESCAP region which has been 5% will also depend primarily on stimulating domestic demand.

Institute of Policy Studies (IPS) Economist Dr. Dushni Weerakoon who addressed the launch of the report at the UNDP Office pointed out that the recovery had been due to the development in the tourist industry brought on by 17% increase of tourist arrival , market liberalization that has been gathering momentum in 2002 and high level of value added service. Though ESCAP has painted a positive picture Dr. Weerakoon cautioned that the sluggish economies in US, Europe as well as the SARS epidemic might have a negative impact on Sri Lanks’s economy.

While stating that the massive donor support would give a kick start to the economy she called for better management of it and proportionate distribution. “Sri Lanka should improve the aid utilization rate” she added.

UNDP Deputy Resident Representative Ms. Christine Spoerel said that the ESCAP report is a valuable tool as it provides an overview of the macro economic situation in the ESCAP region. She further said that the report titled “Asia Pacific Economies: Resilience in Challenging Times” also addresses various issues pertinent to developing countries.

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