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POLL-Sri Lanka Q1 GDP seen growing 6.4 pct; full-year 6.5 pct
June 14, 2010 / 6:08 AM / 7 years ago

POLL-Sri Lanka Q1 GDP seen growing 6.4 pct; full-year 6.5 pct

* What: Sri Lanka’s Q1 economic growth figures

* When: Tuesday, June 15, around 1.00 p.m. (0730 GMT)

REUTERS FORECAST:

* Forecast: Gross domestic product (GDP) likely expanded 6.4 percent in the first quarter from a year earlier, picking up from annual growth of 6.2 percent in the fourth quarter last year. Ten analysts gave a range of estimates from 3.3 percent to 10.4 percent. The median of forecasts for full-year growth is 6.5 percent, with estimates from 5.5 percent to 7.1 percent.

FACTORS TO WATCH:

- Exports have rebounded along with the global economic recovery while tourist arrivals have risen sharply since the end of the country’s 25-year civil war in May 2008. Tourism is a key foreign exchange earner for the $42 billion economy along with remittances from Sri Lankans working overseas, garments and tea. - Analysts will be closely watching for signs of stronger contributions from the private sector and a further recovery in the manufacturing and services sector. The first quarter saw strong government spending due to two national elections, but many companies remained reluctant to take out new loans to expand and hire new staff.

- Buoyed by heavy government spending on the war and development, Sri Lanka’s economic growth was 6 percent or more annually from 2005 to 2008, before slowing to an eight-year low of 3.5 percent in 2009 due to the global economic crisis. - Private-sector growth could be spurred further if taxes are cut in the budget which will be presented on June 29. The government slashed the import levy and simplified the tax system earlier this month.

- Further delays in the disbursement of a loan payment from the IMF could impact investor confidence in the economy. The IMF froze the latest tranche, part of a multi-billion loan, earlier this year after the government missed deficit targets. [ID:nSGE64K0EV]

MARKET IMPACT:

- Sri Lanka’s stock market .CSE has hit record highs as the end of the war boosts investors’ confidence. Shares could extend gains on a stronger-than-expected Q1 growth number.

- The central bank might keep policy rates at multi-year lows for the third quarter as well while keeping a tab on inflation to encourage more private sector borrowing and help boost 2010 growth, which the central bank now expects to be 7 percent.

Following are the poll’s forecasts for the GDP numbers expected to be released on Tuesday: --------------------------------------------------------------

Q1 GDP (in pct) 2010 GDP (in pct) Median

6.4 6.5 Average 6.3

6.4 Minimum 3.3

5.5 Maximum 10.4 7.1 No. of analysts 10 10

NOTE: Analysts from the following institutions participated: Commercial Bank of Ceylon, Hatton National Bank, SC Securities, Acuity Stockbrokers, Frontier Research, Asia Capital, Frands Consultants, Standard Chartered Bank, CT Smith Research, City Bank, and National Development Bank. (Reporting by Shihar Aneez; Editing by Kim Coghill)

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