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External Sector Performance – December 2016

The performance of Sri Lanka’s external sector was mixed in December 2016. The trade deficit expanded as a result of the considerable increase in import expenditure, which more than offset the growth in export earnings during the month of December 2016. On a positive note, both earnings from tourism and workers’ remittances grew at a healthy rate, year-on-year, during the month. The government securities market witnessed a net outflow in December, while some inflows to the Colombo Stock Exchange (CSE) were observed.

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Monetary Policy Review - No. 2 of 2017

As per the provisional estimates of the Department of Census and Statistics (DCS), the Sri Lankan economy grew by 4.4 per cent in real terms during 2016 compared to the growth of 4.8 per cent in 2015. Within this annual growth, Industry related activities grew notably by 6.7 per cent driven by construction related activities, while Services related activities grew by 4.2 per cent mainly with the expansion of financial services, insurance and telecommunications. However, Agriculture related activities contracted by 4.2 per cent in 2016, impacted by supply side disruptions on account of floods in the second quarter and drought conditions during the final quarter of 2016. In spite of challenging external factors such as adverse weather conditions and global developments, an acceleration of growth was observed towards end 2016 with the last quarter of 2016 recording a growth of 5.3 per cent, partly supported by the base effect.

Inflation in February 2017

Inflation, as measured by the change in the National Consumer Price Index (NCPI) (2013=100), which is compiled by the Department of Census and Statistics, increased to 8.2 per cent in February 2017 from 6.5 per cent in January 2017, on year-on-year basis. Both Food and Non-food categories contributed towards the year-on-year inflation in February 2017. The low base that prevailed in February 2016 was the significant contributor to the sharp increase in year-on-year inflation in February 2017, in addition to the monthly price increase observed.

The change in the NCPI measured on an annual average basis increased to 5.1 per cent in February 2017 from 4.6 per cent in January 2017.

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