Saturday, 5 July 2014 02:15
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Reuters: Sri Lanka’s economy can achieve its growth target this year without risk of overheating, Central Bank Governor Ajith Nivard Cabraal said on Friday, despite interest rates at multi-year lows.
Central Bank Governor Ajith Nivard Cabraal
The Central Bank has been maintaining low interest rates since January and yields in Government treasuries have also dropped to multi-year lows.
The country’s economy expanded 7.6% in the first quarter of this year, slowing from 8.2% in the previous quarter. The Central Bank has estimated growth of 7.8% for 2014, higher than last year’s 7.3%.
“Such growth is satisfactory and could be achieved without any risk of overheating according to our current estimates. Hence, we do not see a need to become more aggressive,” Cabraal told a Reuters market forum.
Moody’s Investors Service, while keeping a stable outlook for Sri Lanka’s banking system, said on Thursday that the economy remains one of Asia’s fastest-growing economies.
Srikanth Vadlamani, a Moody’s Vice President and Senior Analyst, said in a statement it estimated loan growth of 14% this year which it does not view as excessive. Sri Lanka’s economy achieved record growth of 8.2% in 2011 due to higher credit growth and imports, backed by low interest rates and a firm rupee.
However, the Central Bank had to tighten monetary policy, devalue its currency and allow for a flexible exchange rate to cool down the economy. Growth slowed to a three-year low of 6.4% in 2012.
