After growing at a robust 7% in the first half of 2012, economic growth slowed in the second half to record annual expansion of 6.4% (Figure 3.21.1).
This was the first time growth fell below 8% sin...
ce the civil conflict ended, largely reflecting weak external demand, tight monetary conditions, and bad weather, as 15 of the country’s 25 districts suffered
drought that affected agriculture and hydropower generation. Economic performance was underpinned by a strong showing in industry, which provides 30% of GDP and is estimated to have grown by 10.3%, as in 2011. A doubling of growth in construction accounted for the
resilient performance, as expansion moderated in mining and quarrying,
manufacturing, electricity, gas, and water.
In the service sector, which is the largest component of GDP, contributing some 59% to GDP, growth slowed to 4.6% in 2012, well below 8.6% a year earlier. Marked slowdowns in key subsectors such as wholesale and retail trade and transport and communications reflected subdued international trade and the impact of policy measures implemented in early 2012 for macroeconomic stabilization.
Agriculture, which contributes some 11% to GDP, performed well
in the first half of 2012, reaching double-digit growth of 10%. However,
severe drought followed by floods during the second half brought growth for the year to 5.8%—still recording a substantial recovery from the weak,
weather-affected performance in the previous year. Inflation, measured by the year-on-year increase in the Colombo
consumer price index, continued to remain in single digits during 2012, averaging 7.6% for the year (Figure 3.21.2).
However, inflation rose to around 9% in the second half with pressure on nonfood prices coming
from increases in government-administered prices for fuel and electricity
in February 2012 and the depreciation of the Sri Lankan rupee. Food inflation also increased during the year as import duties were increased on selected food items and domestic food supplies were disrupted by drought and flooding.
Central Bank of Sri Lanka. 2011. http://www.cbsl.
gov.lk; Department of Census and Statistics of Sri Lanka.
http://www.statistics.gov.lk (accessed 14 February 2013)
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