Sri Lanka expects economy to expand by 8% this year

June 30, 2006 (LBO) – Sri Lanka's economy is expected to grow by a better-than-expected 8.0 percent, this year a senior government official said a day after the central bank forecasted year end growth of 7.0 percent. The bank cautioned that economic expansion would remain vulnerable to an upsurge in violence, as sporadic attacks on military positions have left over 820 people dead since last December.

Central Bank's governor designate Nivard Cabraal said the country has done well with gross domestic product (GDP) growing at 8.1 percent during the first quarter of this year, despite higher oil prices and fears of the island slipping back to war.

"In the first quarter we have seen very encouraging indicators and I am confident that 8.0 percent GDP growth can be achieved this year," he said in his capacity as outgoing Secretary to the Plan & Implementation Ministry.

"It is a tough call, but we can see growth rates increasing in all sectors," Cabraal told reporters on Friday.

He said soaring oil prices and worsening security situation, remained the two biggest challenges to this South Asian island of 19.5 million people.

"Oil price increase is by far the biggest challenge," Cabraal said. "The ne