2016年-世界发展银行全球_Sri_Lanka_Development_Update_Fall_2016_45页_1mb

SRI LANKA DEVELOPMENT UPDATE (Fall 2016)

Core Content

Recent Developments

• Global Economy: The global economy remained sluggish in 2015 with growth at 2.4%, while South Asia showed resilience, particularly due to low commodity prices.
• Sri Lanka's Economic Performance: Sri Lanka's macroeconomic performance deteriorated in 2015 due to a combination of global economic challenges and domestic policy choices.
• Fiscal Deficit: The fiscal deficit rose sharply to 7.4% of GDP in 2015, driven by increased salary expenditures, subsidies, reduced consumption taxes, and higher interest costs.
• Monetary Policy: The central bank tightened monetary policy in the first quarter of 2016 and again in July due to high credit growth and inflationary pressures.
• IMF Support: The IMF approved a 36-month Extended Fund Facility (EFF) of USD 1.5 billion in June 2016 to support macrofiscal stability and structural reforms.
• World Bank Support: The World Bank approved a USD 100 million Development Policy Financing (DPF) to support the government's reform agenda.
• Growth and Inflation: Economic growth decelerated to 3.9% in the first half of 2016, with inflation rising to 3.0% by August 2016, partly due to currency depreciation and demand pressures.
• External Buffers: External buffers deteriorated despite increased tourism and swap facilities, with official reserves declining to 3.5 months of imports by July 2016.

Outlook, Risks and Policy Options

• Outlook: A relatively favorable outlook is projected for Sri Lanka, supported by policy reforms, though downside risks are substantial.
• Growth Projections: Growth is expected to remain unchanged in 2016 and grow marginally beyond 5.0% in subsequent years, driven by private consumption and postponed FDI.
• Inflation Trends: Inflation is expected to remain elevated in 2016 and 2017 due to the impact of currency depreciation and the VAT increase, though low international commodity prices will maintain downward pressure.
• External Account: The current account deficit is projected to reach its narrowest point in 2016, but will widen thereafter due to rising global commodity prices.
• Key Risks:
  • A growth slowdown could increase the public debt burden.
  • Tightening global financial conditions may elevate capital outflows and currency pressure.
  • Continued economic issues in the Middle East, EU, and Russia could affect exports and remittances.
• Policy Options:
  • Strengthening revenue and improving debt management are key to fiscal consolidation.
  • Implementing structural reforms in fiscal operations, competitiveness, and governance is essential for long-term growth.

Challenges

• Systematic Country Diagnostic (SCD): The SCD identified five key development challenges:
  1. Fiscal Challenge
  2. Promoting More and Better Jobs for the Bottom 40 Percent
  3. Inward versus Outward Orientation of the Economy
  4. Relationship Between the Public Sector and Private Sector
  5. Social Inclusion Challenges

Key Economic Indicators

• Growth Drivers: Non-tradable sectors (transport, services, construction) were the main contributors to growth, while tradable sectors declined in importance.
• Sector Contributions:
  • Services contributed the most to growth (3.0 percentage points).
  • Construction sector was a drag, contributing negatively to growth.
  • Agriculture and fisheries, which employ about one-third of the labor force, contributed 0.4 percentage points to growth.
• Inflation: Headline inflation rose to 4.0% in August 2016, with core inflation at 4.1%, driven by demand-side pressures and currency depreciation.
• Fiscal and Debt Trends:
  • Public debt-to-GDP ratio reached 76.0% in 2015.
  • The fiscal deficit for 2016 is projected at 5.7% of GDP.
  • Tax revenues increased slightly to 13.0% of GDP, but not enough to reduce the deficit.
  • Public investment and net lending rose to a four-year high due to cost overruns in capital projects.
• External Financing: External financing needs are expected to increase in future years as state bank and government Eurobonds mature.

Main Points and Key Information

Main Points

• Sri Lanka's economy faced significant challenges in 2015, including a deteriorating fiscal deficit, rising public debt, and inflationary pressures.
• The government implemented policy reforms to address these challenges, including tax changes, fiscal consolidation, and structural reforms.
• The IMF and World Bank provided financial and policy support to stabilize the economy and promote sustainable growth.
• The outlook for Sri Lanka is cautiously optimistic, but risks remain due to global economic conditions and domestic policy implementation.
• The SCD identified critical development challenges, emphasizing the need for structural reforms and social inclusion.

Key Information

• Growth Drivers: Non-tradable sectors (transport, services, construction) were the main contributors to growth, while tradable sectors (manufacturing) have declined in importance.
• Inflation: Headline inflation increased to 4.0% in August 2016, with core inflation at 4.1%.
• Fiscal Deficit: The fiscal deficit reached 7.4% of GDP in 2015 and is projected at 5.7% for 2016.
• Public Debt: Public debt-to-GDP ratio reached 76.0% in 2015, with treasury guarantees at 5.4% of GDP.
• IMF and World Bank Support: The IMF approved a USD 1.5 billion EFF, and the World Bank approved a USD 100 million DPF to support reforms.
• Challenges: The SCD highlights fiscal, employment, economic orientation, public-private relationship, and social inclusion as critical challenges for Sri Lanka's development.

Conclusion

Sri Lanka's development update for Fall 2016 outlines the economic performance, policy measures, and future outlook. While the country showed resilience in the face of global economic headwinds, it still faces significant fiscal and structural challenges. The government's reform agenda, supported by international institutions, aims to improve macroeconomic stability, competitiveness, and social inclusion. However, the success of these reforms will depend on effective implementation and addressing the identified risks.