GDP GREW BY 0(2) by pptfiles

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									                   CENTRAL BANK OF SRI LANKA

                             26th June, 2002
PRESS RELEASE                                                              31st March 2006




          GROSS DOMESTIC PRODUCT (GDP) - FOURTH QUARTER OF 2005


On the basis of available data, the economy is estimated to have grown by 6.3 per cent in real
terms in the fourth quarter of 2005 compared with 4.4 per cent growth in the corresponding
period of the previous year. This growth was achieved in an environment of high
international oil prices and rising global competition for exports, particularly garments. All
three sectors performed well with the recovery in agriculture, but growth in the quarter
continued to be affected by the tsunami, particularly in the fishing and hotel and restaurant
services sub sectors. On the basis of the most recent data, during the first three quarters of
the year, the economy is estimated to have grown by 4.4 per cent, 6.0 per cent and 6.7 per
cent, respectively, while on an annual basis, it grew by 5.9 per cent compared with the growth
of 5.4 per cent recorded in 2004.




Sector-wise, the Industry sector recorded the highest growth of 8.6 per cent, while its
contribution to growth remain unchanged. The growth in the Services sector moderated to 5.9
per cent and contributed just over a half of the growth, when compared with a contribution of
77 per cent in the corresponding quarter of the previous year. This was basically due to the
re-bounding of the agriculture sector as a positive contributor to economic growth during the
quarter under reference. The agriculture sector grew by 4.2 per cent and thus contributed
positively to growth, in contrast to the corresponding quarter of 2004, despite the poor post-
tsunami performance of the fishing sub sector.
Agriculture Sector
The Agriculture, fishing and forestry sector grew by 4.2 per cent in the fourth quarter of
2005 compared to a contraction of 2.8 per cent during the corresponding quarter of 2004,
while contributing 12 per cent to overall growth. Most agricultural crops, except tea,
performed well and contributed to an 8.0 per cent growth in the agriculture sub sector. The
recovery of the fishing sub sector continued in the fourth quarter, but over a relatively low
base during the corresponding quarter of 2004.

Within the plantation agriculture sector, tea production declined, particularly due to
unfavourable weather conditions during the latter part of the year, while price levels also
declined in the international markets by 7.3 per cent compared to the fourth quarter of 2004.
Rubber production continued to expand at a rate of 31.7 per cent compared to a contraction of
19.2 per cent in the corresponding quarter of 2004 in response to attractive international
prices and favourable weather. Coconut production increased by 11.9 per cent, while coconut
producer prices declined at a similar rate.

In domestic agriculture, paddy production recorded a bumper harvest with a growth of 28.7
per cent during the Yala season, while paddy producer prices declined by 22.2 per cent
during the quarter. The ‘other’ agriculture sub sector, which covers all other crops in
domestic agriculture and animal husbandry, recorded a growth of 3.3 per cent. During the
quarter, vegetables and subsidiary food crops performed satisfactorily under favourable
weather conditions. Minor export crops grew by 4.8 per cent in volume terms, which was
reflected in the higher export volumes of coffee, cashew nuts, cardamoms, cinnamon, nutmeg
and mace and other oil seeds. Due to the increased value addition in eggs and poultry meat
production, the animal husbandry sub sector grew by 1.6 per cent.

Fish production, though it continued to recover, recorded a decline of 18.7 per cent in the
fourth quarter of 2005, over a contraction of 13.5 per cent during the corresponding quarter of
2004, compared with the decline of 77.6 per cent during the first quarter, while fish prices
increased by 14.6 per cent.


Industry Sector
The Industry sector grew at 8.6 per cent during the fourth quarter of 2005 while contributing
35 per cent to the overall growth in GDP. The Mining and quarrying sector grew by 21.6
per cent compared to a contraction of 1.0 per cent during the corresponding quarter of the
previous year. In the mining sub sector, gem exports expanded by 110 per cent during the
fourth quarter along with expansion in mineral sand production. The quarrying sub sector
grew by 9.5 per cent due to the higher activity levels in the construction sector during the
quarter.

The Electricity and water sector recorded a growth of 23.4 per cent primarily due to the
electricity sub sector performance. Electricity generation increased by 10.4 per cent due to
the growth in hydropower generation by 26.2 per cent, while thermal power generation
declined marginally by 0.8 per cent compared to the fourth quarter of 2004. With the
increased generation of low cost hydropower, the electricity sub sector grew by 26.1 per cent
in value added terms. Hydropower generation accounted for 47.6 per cent of the total power
generation compared to a contribution of 41.6 per cent during the same period in 2004. Water
distribution grew by 2.8 per cent compared to a growth of 5.6 per cent during the fourth
quarter of 2004.



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The Construction sector continued to expand during the fourth quarter with a higher growth
rate of 9.5 per cent over a growth of 6.6 per cent in the corresponding quarter of 2004.
Construction activities related to various projects to rebuild housing and infrastructure
destroyed by the tsunami and other on-going housing and condominium development
projects took place during the quarter. Also, other infrastructure projects, such as for road
development, water supply and irrigation, continued. The growth in the construction sector
was reflected in the increased production and higher import volumes of building materials.

The Manufacturing sector, which grew by 6.4 per cent during the fourth quarter of 2004,
expanded further by 6.2 per cent in 2005. Processing of plantation crops grew by 1.4 per cent
with the increased production in rubber and coconut production, although tea production
declined. The factory industry sub sector grew by 6.4 per cent over a growth of 8.6 per cent
in the fourth quarter of 2004. Export oriented industries such as rubber based products grew
by 35.1 per cent with increased demand in international markets, while apparel exports grew
by a moderate 2.3 per cent under increased competition. Domestic market oriented industries
such as building materials, chemicals, fertiliser and cement grew in a range of 8 to 14 per
cent due to higher domestic demand from other sectors. The small industry sector also
performed well with a growth of 11 per cent with higher production volumes in domestic
agriculture and construction related industries providing the growth impetus.


Services Sector
The Services sector maintained its importance in the economy, recorded a 5.9 per cent
growth and contributed 53 per cent to overall economic growth in the fourth quarter of 2005.
This growth was largely driven by the performance in the post and telecommunications,
domestic trade and financial services sub sectors. Of these sectors, the Transport, storage
and telecommunication sector expanded by 11.8 per cent during this period. The post and
telecommunications sector which has continued to grow at a high pace, expanded further by
24.9 per cent in this quarter. With the latest CDMA technology, subscriber levels of Fixed
Access – Wireless Local Loop phones increased by 159,162 new connections, a notable
expansion for this category. The subscriber level of cellular phones expanded by 52 per cent
and the mobile penetration ratio (Mobile connections per 100 people) was around 17. The
Fixed Access-Wire Line Local Loop category grew by 11 per cent. Meanwhile, the Internet
and e-mail subscriber level grew by 23 per cent in 2005 as against 9 per cent during the
corresponding period in 2004. The cargo handling, storage and warehousing sub sector
expanded by 8.3 per cent in comparison to 18.0 per cent growth in the corresponding quarter
of the previous year. The deceleration was mainly due to lower growth in transhipment TEUs
and a drop in domestic TEUs handled. During the reference period, the Colombo Port,
including South Asia Gateway Terminal (SAGT), handled a significant volume of 636,392
TEUs, lower only to the record 645,178 TEUs handled in the third quarter of 2005. Of the
total TEUs handled, domestic throughput volumes dropped by 3.6 per cent, while the
transhipment TEUs, which account for a two-third share, rose by 14.4 per cent during the
quarter. Meanwhile, air cargo volumes expanded marginally by 1.1 per cent. The transport
sub sector expanded by 4.0 per cent during the quarter. With the satisfactory performance in
the domestic and export trading sectors, road haulage activities grew by 5.3 per cent. In the
air travel category, total passenger kilometres flown by Sri Lankan Airlines and other
domestic airlines increased by 5.9 per cent. The passenger kilometres operated by Sri Lanka
Railways and cluster bus companies declined while the private bus transport category showed
a marginal growth.




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The Wholesale and retail trade, hotels and restaurants sector recorded a growth of 1.9 per
cent in 2005 as against 4.7 per cent in the previous year. The deceleration was mainly due to
the significant drop in the Hotels and restaurant sub sector, and no growth reported in the
import trade sub sector. Although import trade remained flat during the reference period,
investment goods imports expanded by 10.7 per cent. Within the investment goods category,
imports of transport equipment grew significantly, while building materials, machinery and
equipment and other types of investment goods reported moderate growth. Consumer goods
imports dropped significantly by 11.6 per cent in the fourth quarter of 2005. Of consumer
goods imports, imports of food and drink dropped by 23 per cent in the light of the increases
in domestic production. Further, imports of intermediate goods reported a marginal drop.The
export trade sub sector grew by 7.6 per cent during the quarter. All categories of agricultural
exports, tea, rubber, coconut and other agricultural exports, contributed positively to the 8.1
per cent growth in agricultural exports. Industrial exports dominated by textiles and garments
reported a growth of 5.0 per cent in 2005 as against 18.2 per cent in the previous year.
Mineral exports also increased significantly during this quarter. The domestic trade sub
sector, which expanded by 5.8 per cent, was driven by the satisfactory performance in both
the domestic agriculture and industrial sub sectors (domestic factory industry and small
industry). The hotels and restaurants sub sector dropped by 31.8 per cent as against the 11.1
per cent growth in the fourth quarter in 2004. Tourist arrivals decreased substantially by 24.6
per cent and this decline was visible in tourist arrivals from all regions. This decline was also
reflected in foreign guest nights of graded hotels, which had dropped by 36.5 per cent.
Meanwhile local guest nights dropped by only 5.6 per cent.

The Financial services, real estate and business services sector, which includes banking,
insurance and all other financial services, real estate, ownership of dwellings, renting and all
other business service activities, grew by 9.6 per cent in the fourth quarter of 2005 as against
1.3 per cent in the corresponding quarter of the previous year. The growth in the banking
sector was mainly responsible for this growth. The banking sector alone expanded by 14.9
per cent. Although both interest income and interest expenses increased and the interest
spread declined marginally during the reference period, value addition rose due to credit
expansion in the banking sector. Further, non-interest income of licensed commercial banks
had also increased mainly due to the higher gains from trading of securities, foreign exchange
transactions and other fee based services. During the period, the insurance, leasing and non-
bank financial institutions sub sectors grew by 8.7 per cent. Highly diversified non-bank
financial institutions supported the value added growth of the financial services sector with
increases in income from fund and fee-based services. The insurance sector also performed
well during the quarter and contributed to the healthy growth of 11.2 per cent in the financial
services sector. The real estate, renting and business services sub sector grew by 2.9 per cent
against an increase of 0.4 per cent recorded in the corresponding period of 2004. Of the
business services activities sub sector, real estate and advertising services grew at a moderate
level.

The Public administration, other government services and defence and other
community, social and personal services sector grew by 3.5 per cent. Public administration
grew by 0.5 per cent over the higher growth of 5.8 per cent in previous year with the intake of
42,000 unemployed graduates to the public sector during that period. The other community,
social and personal services sub sector recorded a growth of 7.4 per cent due to healthy
growth in private education services and the private health care industry.




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Table 1
                                Gross Domestic Product at 1996 Constant Factor Cost Prices

                                                                                                           Contribution to
                                                              Fourth Quarter            Growth Rate                            Share of GDP
                                                                                                           Change in GDP
                      SECTOR                                     (Rs.Mn)                    (%)                                    (%)
                                                                                                                 (%)
                                                       2003      2004(a)   2005(b)      04/03    05/04    2004(a) 2005(b)    2004(a)   2005(b)

Agriculture                                            49,088     47,693       49,708    (2.8)     4.2       -12       12         18        17
1. Agriculture, forestry and fishing                   49,088     47,693       49,708    (2.8)     4.2       -12       12         18        17
      1.1 Agriculture                                  38,114     37,571       40,581    (1.4)     8.0        -5       18         14        14
                   Tea                                  3,113      3,244        2,997     4.2     (7.6)        1        -1         1          1
                   Rubber                                769         621         818    (19.2)    31.7        -1         1         0          0
                   Coconut                              3,842      3,258        3,645   (15.2)    11.9        -5         2         1          1
                   Paddy                                8,099      6,596        8,491   (18.6)    28.7       -13       11          2          3
                   Other                               22,292     23,853       24,629     7.0      3.3        14         5         9          9
     1.2 Forestry                                       4,330      4,375        4,454     1.1      1.8         0         0         2          2
     1.3 Fishing                                        6,644      5,747        4,673   (13.5)   (18.7)       -8        -6         2          2

Industry                                               64,807     68,730       74,640     6.1      8.6        35       35         26        26
2. Mining and quarrying                                 3,130      3,099        3,767    (1.0)    21.6        -0         4         1          1
3. Manufacturing                                       44,203     47,054       49,975     6.4      6.2        26       17         18        18
    3.1 Processing of tea, rubber and coconut
        kernel products                                 4,787      4,601        4,667    (3.9)     1.4        -2         0         2          2
    3.2 Factory industry                               36,319     39,425       41,948     8.6      6.4        28       15         15        15
    3.3 Small industry                                  3,096      3,028        3,360    (2.2)    11.0        -1         2         1          1
4. Electricity and water                                3,816      4,018        4,959     5.3     23.4         2         6         2          2
    4.1 Electricity                                     3,369      3,546        4,473     5.3     26.1         2         6         1          2
    4.2 Water                                            447         472         486      5.6      2.8         0         0         0          0
5. Construction                                        13,658     14,559       15,939     6.6      9.5         8         8         5          6

Services                                              142,450    151,100   160,015        6.1      5.9        77       53         56        56
6. Wholesale and retail trade , hotels and
   restaurants                                         64,134     67,136       68,429     4.7      1.9        27         8        25        24
   6.1 Import trade                                    31,693     33,626       33,626     6.1      0.0        17         0        13        12
   6.2 Export trade                                     6,289      7,125        7,667    13.3      7.6         7         3         3          3
   6.3 Domestic trade                                  24,313     24,342       25,742     0.1      5.8         0         8         9          9
   6.4 Hotels and restaurants                           1,840      2,043        1,394    11.1    (31.8)        2        -4         1          0
7. Transport, storage and communication                31,434     35,332       39,496    12.4     11.8        35       25         13        14
   7.1 Transport                                       19,591     20,182       20,986     3.0      4.0         5         5         8          7
   7.2 Cargo handling and storage and
        warehousing                                     2,097      2,474        2,679    18.0      8.3         3         1         1          1
    7.3 Post and telecommunications                     9,746     12,676       15,830    30.1     24.9        26       19          5          6
8. Financial Services, real estate and business
   services                                            28,469     28,838       31,598     1.3      9.6         3       16         11        11
    8.1 Financial services                             22,786     23,131       25,725     1.5     11.2         3       15          9          9
    8.2 Real estate, renting and business
services                                                5,683      5,707        5,873     0.4      2.9         0         1         2          2
9. Public administration, other government
   services and defence, other community,
   social and personal services                        18,414     19,795       20,492     7.5      3.5        12         4         7          7
    9.1 Public administration, other govt. services
         and defence                                   10,583     11,197       11,256     5.8      0.5         5         0         4          4
    9.2 Other community, social and personal
         services                                       7,831      8,598        9,236     9.8      7.4         7         4         3          3

Gross domestic product                                256,346    267,524   284,363        4.4      6.3       100      100        100       100


                                                                                                              Source: Central Bank of Sri Lanka
(a) Revised
(b) Provisional




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