This section of the report is addressed especially to our international audience, with a view to providing them with an insight into Sri Lanka.
This report provides a broad based, overview of the economic social situation and physical features of Sri Lanka and lays a foundation to get an in-depth understanding of Sri Lanka’s future direction as it continues to transform itself into a Regional Economic Hub.
The Democratic Socialist Republic of Sri Lanka, known as Ceylon before May 22, 1972, is positioned approximately 31 km off the Southern coast of India. Its strategic location along the path of major shipping routes is being harnessed in a multi-pronged manner to position the country as a preferred partner in international maritime commerce.
Total Area | 65,610 Sq.km |
Land Area | 62,705 Sq.km |
Capital | Sri Jayawardenapura |
Commercial Capital | Colombo |
2012 | 2012 | 2010 | 2009 | 2008 | |
Mid-year population (Persons in mn) |
20.33 | 20.87 | 20.65 | 20.45 | 20.22 |
Labour Force (Persons in mn) |
8.47 | 8.56 | 8.11 | 8.07 | 8.08 |
Labour Force Participation Rate (%) |
47.2 | 47.8 | 48.1 | 48.7 | 49.5 |
Unemployment Rate (% of Labour Force) |
4.0 | 4.2 | 4.9 | 5.8 | 5.4 |
Population and Vital Statistics (2012) | 2012 |
Age Distribution (2011): | |
0-14 Years | 26.99% |
15-64 Years | 69.19% |
65 Years & Over | 6.47% |
Population Density (2012) | 324 persons per sq.km |
Infant Mortality Rate (2009) | 9.4 per 1000 live births |
Dependency Ratio (2011) | 48.4% |
Human Development Index (2012) | 0.715 |
Ranking Among 186 Countries | 92 |
Literacy Rate(2011) – Overall Average | 92.2% |
Literacy Rate (2011) – Male | 93.5% |
Literacy Rate (2011)_ Female | 91.1% |
In an environment of increasing macroeconomic challenges, the Sri Lankan economy grew by 6.4%. The preceding two consecutive years witnessed a strong economic growth of 8% but this was followed by high credit and monetary expansion, along with a widening trade deficit propelled by high import demand. With the intention of strengthening the macroeconomic environment, the Government introduced a comprehensive policy package in early 2012, whose impact on the trade deficit and private sector credit growth was experienced within a relatively short period of time.
As a share of GDP (%) | Rate of Change (%) | |||||
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |
Agriculture Sector | 11.1 | 11.2 | 11.9 | 5.8 | 1.4 | 7.0 |
Industrial Sector | 30.4 | 29.3 | 28.8 | 10.3 | 10.3 | 8.4 |
Services Sector | 58.5 | 59.5 | 59.3 | 4.6 | 8.6 | 8.0 |
Gross Domestic Product (GDP) | 100.0 | 100.0 | 100.0 | 6.4 | 8.2 | 8.0 |
This was achieved despite the existence of some upward pressure on inflation from the second quarter of 2012, mainly due to supply side factors. The upward trend in energy prices and transport costs that mirrored the rise in oil prices in the international market, the pass-through of the depreciation of the rupee, supply disruptions due to unfavourable weather conditions that prevailed in major cultivation areas, resulted in inflation edging up to the year on year percentage of 9.2.
2012 | 2011 | 2010 | 2009 | 2008 | |
GDP at Market Prices (Rs. bn) | 7,582 | 6,544 | 5,604 | 4,835 | 4,411 |
GDP per capita (US$) | 2,923 | 2,836 | 2,400 | 2,057 | 2,014 |
GDP growth (%) | 6.4 | 8.2 | 8.0 | 3.5 | 6.0 |
Colombo Consumers’ Price Index (2006/07=100) Annual Average | 7.6 | 6.7 | 6.2 | 3.5 | - |
Colombo Consumers’ Price Index (2006/07=100) year on year end period | 9.2 | 4.9 | 6.8 | 5.0 | - |
Fiscal Deficit (% of GDP) | -6.4 | -6.9 | -8.0 | -9.8 | -7 |
Current Account Balance (% of GDP) | -6.6 | -7.8 | -2.2 | -0.5 | -9.5 |
Higher policy rates coupled with the credit ceiling, tight liquidity in the market and increased cost of funds due to high deposit interest rates, triggered commercial banks to adjust their lending rates upwards during the 2012 period. The weekly average weighted prime lending rate (AWPR), which is a reflection of rates applicable on loans and advances granted by commercial banks to their prime customers, was seen to be on an upward trend during 2012 and increased by 363 basis points to 14.40% by the end of 2012, while the monthly average AWPR also increased.
2012 | 2011 | 2010 | 2009 | 2008 | |
(Percentage per annum at end year) | |||||
Treasury Bill Rate - | |||||
91 Days | 10.00 | 8.68 | 7.24 | 7.73 | 17.33 |
364 Days | 11.69 | 9.31 | 7.55 | 9.33 | 19.12 |
Commercial Banks - | |||||
Weighted Average – Prime Lending Rate (AWPR) | 14.40 | 10.77 | 9.29 | 10.91 | 18.50 |
Weighted Average – Deposit Rate (AWDR) | 10.10 | 7.24 | 6.23 | 8.01 | 11.63 |
The upward movement in policy interest rates, the increase in the borrowing needs of the government and tight liquidity conditions brought about an increase in the yield rates of Government Securities in the primary market. The weighted average yield rates (WAYR) on 91-day, 182-day and 364-day Treasury Bills increased markedly by 244 basis points, 390 basis points and 357 basis points respectively, to 11.12%, 12.61% and 12.88% respectively by end of June 2012.
The focus of the exchange rate policy in 2012 was to provide greater flexibility in the establishment of the exchange rate by restricting the Central Bank’s intervention in the domestic foreign exchange market. The rupee depreciated by 14.56% against the dollar in the first half of 2012. Nevertheless, the rupee appreciated thereafter by 4.83% in the second half of the year.
The rupee depreciated against the US dollar by 10.43% to Rs. 127.16 by the end of 2012 and the annual average exchange rate was at Rs. 127.60 against the US dollar in 2012 compared to Rs. 110.57 in 2011.Further the rupee also depreciated against the Pound Sterling by 14.61%, the Euro by 12.31% against the Indian Rupee by 7.45% and against the Japanese Yen, moderately by 0.88% with the deceleration of activity in Japan.
As At 31st December | 2012 | 2011 | 2010 | 2009 | 2008 |
Annual Average Rs./US$ | 127.60 | 110.57 | 113.06 | 114.94 | 108.33 |
End Year Rs./US$ | 127.16 | 113.90 | 110.95 | 114.38 | 113.14 |
Sovereign credit ratings give investors insight into the level of risk associated with investing in a particular country and also include political risks. The following is the credit ratings obtained by Sri Lanka in 2012.
Sri Lanka’s Sovereign Credit Rating and Country Outlook | ||||||
Standard & Poor’s | Fitch Ratings | Moody’s | ||||
Rating | Outlook | Rating | Outlook | Rating | Outlook | |
2009 | B | Negative | B+ | Negative | - | - |
2010 | B+ | Stable | B+ | Positive | B1 | Stable |
2011 | B+ | Positive | BB- | Stable | B1 | Positive |
2012 | B+ | Stable | BB- | Stable | B1 | Positive |