The Ceylon Chamber of Commerce is pleased to note that the indicators highlighted in the Monetary Policy Review released by the Central Bank of Sri Lanka show continuous improvement in the macro economic performance of the country. GDP growth data for the second quarter of 2014 at 7.8% shows an improvement over the 6.8% for 2nd quarter last year with higher growth in Agriculture and Manufacturing. The enhancement in Agriculture growth despite the drought is commendable as this demonstrates that even though some sub-sectors were adversely affected by the drought the performance of other sub-sectors has compensated for it. We are confident that the growth momentum of the first half could be maintained in the second half to achieve the year-end target.
The Central Bank has also succeeded in maintaining inflation at low levels notwithstanding the adverse externalities. Exports growth has continued and complemented by net flows from trade in services and capital inflows have led to a healthy Balance of Payments position.
Credit to the private sector is yet to see an improvement. To encourage the Commercial banks to lend to the private sector the Central Bank has introduced some restraining measures on Commercial banks placing excess funds with the Central Bank’s Standard Deposit Facility (SDF) and a reduction in interest rates for further deposits with the SDF. This will have a twofold push on commercial banks to increase their lending portfolios to the private sector; through reduced rates and by enhanced promotion of lending options. As the impact of pawning advances wades off and with these new measures we believe that there will be an improvement in credit growth.
