(Adds details, quotes)
By Shihar Aneez and Ranga Sirilal
COLOMBO, Jan 3 (Reuters) - Sri Lanka's economic growth in
2018 is forecast at between 5-5.5 percent, bouncing back from an
anticipated four-year low of less than 4 percent last year,
central bank Governor Indrajit Coomaraswamy said on Wednesday.
The turnaround was expected in the wake of a stronger global
economy, but the governor's deputy said the central bank would
be cautious easing monetary policy, though official interest
rates stand at four-year highs.
Tight fiscal and monetary policies along with periods of
both drought and floods contributed to last year's slower
"Economic growth is expected to pick up to between 5-5.5
percent. The economy is stabilising and on the right path but
growth is still a challenge," Coomaraswamy told the heads of
banks, financial institutions, stockbrokerages and state-owned
firms at an event to unveil economic policies for 2018.
The central bank has kept policy interest rates unchanged
since the last rise in March 2017, having embarked on a
tightening cycle in December 2015.
During that time the central bank had raised rates three
times and increased commercial banks' statutory reserve ratio
(SRR) once to prevent sharp fall in the rupee and curb
Private sector credit growth has slowed to a near three-year
low of 15.4 percent year-on-year in November from a four-year
high of 28.5 percent hit in May 2016.
Coomaraswamy said the central bank expect to maintain 15
percent credit growth this year and the decision to ease
monetary policy in future would be "data-driven".
Consumer inflation was up 7.1 percent in December from a
year earlier, slowing from a record high of 7.8 percent hit in
October. The central bank is targeting inflation between 4-6
percent this year.
Deputy Governor Nandalal Weerasinghe said the central bank
will be cautious before easing the monetary policy.
"We don't necessarily need to loosen the monetary policy
achieve a growth which is below the potential," he told
reporters after the policy announcement.
"Our forecast is right now 5-5.5 percent growth. If that is
not going to realised, then obviously we have to take measures
in future. If this trend of declining inflation and growth being
below potential continue, I don't see any reason why we should
tighten monetary policy."
(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Simon
First Published: 2018-01-03 07:24:00
Updated 2018-01-03 13:26:28
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