2017年-世界发展银行全球_Sri_Lanka_Development_Update_June_2017_38页_1mb

Sri Lanka Development Update Summary (June 2017)

Core Content

The Sri Lanka Development Update for June 2017 outlines the country's economic performance, outlook, risks, and policy priorities. It emphasizes the need for structural reforms to shift from a public investment, non-tradable sector-driven growth model to a private investment, tradeable sector-led model, and to improve competitiveness and attract more foreign direct investment (FDI).

Main Points

1. Recent Developments

• Sri Lanka's economy recorded broadly satisfactory performance in 2016 despite significant challenges.
• The corrective policy measures from 2016 helped in early signs of stabilization.
• The construction sector rebounded strongly due to resumption of infrastructure projects and increased private construction activities.
• However, adverse weather conditions (floods and droughts) negatively impacted the agriculture sector and related industries, leading to a slowdown in real GDP growth to 4.4% in 2016.
• Public finance improved with the fiscal deficit decreasing from 7.6% of GDP in 2015 to 5.4% in 2016, driven by increased revenues and rationalization of expenditures.
• The government passed the Right to Information Law, marking a significant step in transparency and governance.
• The country regained GSP+ concessions from the European Union in May 2017.

2. Outlook and Risks

• A relatively favorable outlook is projected due to ongoing policy reforms.
• Growth is expected to reach 4.7% in 2017 and slightly exceed 5.0% in subsequent years, driven by private consumption and investment.
• Inflation is expected to rise in 2017 due to weather-related supply disruptions and increased VAT collection, but low international commodity prices will provide some downward pressure.
• The external sector is expected to benefit from the reinstatement of GSP+ and growing tourism, although drought could negatively impact exports and increase petroleum imports.
• The fiscal deficit is projected to narrow to 5.2% of GDP in 2017 and further reduce to 3.5% by 2020.
• External risks include weak growth in key partner countries and global financial conditions that may increase debt costs.
• Domestic risks include delays in passing structural reforms and the increasing frequency and impact of natural disasters.

3. Policy Priorities

• Structural reforms are crucial for sustained and equitable growth.
• Reforms should focus on improving competitiveness, promoting trade and FDI, and enhancing governance.
• Fiscal consolidation must be maintained, creating fiscal space for public investments in health, education, and social protection.
• Improving the tax system and increasing revenue collection is essential.
• The government must address the weak external liquidity position and refinancing risks through active liability management.
• Enhancing the country's resilience to natural disasters is a key priority, both physically and financially.

Key Issues and Special Focus

Special Focus: Unleashing Sri Lanka's Trade Potential

• Improving the country's outward orientation is critical for achieving development goals and transitioning to an Upper Middle Income Country.
• Restrictive trade policies have created an anti-export bias, leading to a dramatic decline in trade.
• Sri Lanka attracts lower FDI than peer economies, and the investment climate needs improvement to attract new firms.
• The World Bank supports the Climate Resilience Improvement Project (CRIP) to enhance physical and financial resilience to natural disasters.

Key Economic Indicators

• The fiscal deficit decreased from 7.6% of GDP in 2015 to 5.4% in 2016.
• Public debt increased to 79.3% of GDP due to rising real interest rates and past currency depreciation.
• Official reserves declined to 3.1 months of imports by end-2016.
• The Sri Lankan rupee depreciated by 4% against the US dollar during the year.
• The inflation rate increased from 2.7% in 2015 to 5.4% in 2016, with core inflation reaching 5.5% in May 2017.

Key Challenges

• The country's weak competitiveness and inward-oriented growth model need to be addressed.
• The low volume of FDI and shortcomings in the investment climate are barriers to economic development.
• Natural disasters have increasingly impacted the economy, necessitating improved resilience and disaster preparedness.
• The need for comprehensive and coordinated reform efforts is emphasized, with the government and bureaucracy playing a critical role.

Support from Development Partners

• The IMF supported the fiscal and monetary policy measures through an Extended Fund Facility (EFF) program, which includes fiscal consolidation, flexible inflation targeting, and reforms in public financial management.
• The World Bank and Japan International Cooperation Agency provided budget support for policy reforms.
• The Asian Development Bank supported capital market development.

Conclusion

Sri Lanka has the potential for sustained growth and poverty reduction, provided it continues to implement structural reforms and improves its competitiveness and resilience to natural disasters. The report highlights the importance of fiscal discipline, improved tax administration, and enhanced policy communication to ensure the success of these reforms.