October, 21, 2015
Sri Lanka's economy should grow between 6.0-6.5 percent this year given strong credit growth after key policy rates have been held at record lows since April, Central Bank Governor Arjuna Mahendran said on Tuesday.
On an annual basis, economic growth accelerated to 6.7 percent in the second quarter from 4.4 in January-March.
"Judging by the growth of the bank credit, I think that momentum can easily be maintained," Mahendran told Reuters. "So I think we should end up the year some where above 6-6.5 percent, which is our baseline."
Third-quarter growth is expected to be announced in mid-December.
Private sector credit grew at a three-year high of 21.3 percent on year in August, up from 21.0 percent in July. The pace of expansion has been rising since June 2014.
Sri Lanka's economy grew 4.5 percent last year, when growth data was revised with a new base year.
The central bank has left the key policy rates at record lows to facilitate the economic growth while taking some steps including floating the rupee currency and curbing imports of vehicles.
"With that, we should see some impacts on the balance of payments in terms of a positive direction in the near future," Mahendran said. "So it is really not appropriate at this point to move policy decision in either direction. I think we will wait probably for a while."
In the first seven months of this year, Sri Lanka had a balance of payments deficit of $1.21 billion, compared with a $2.02 billion surplus in the same period a year earlier.
The rupee has fallen 4.1 percent since it was floated on Sept. 3.
Shiran Fernando, an analyst at Colombo-based Frontier Research, said the central bank is "happy to wait and see" whether to amend policy, but called data "a bit worrying".
"Whether the credit will continue to pick further is something they will be conscious about and also the external numbers suggested exports have fallen sharply in August," he said. (Editing by Richard Borsuk)