Sri Lanka economy slows in first quarter as expansionary stimulus wears off

June 13, 2007 (LBO) – Sri Lanka's economy slowed sharply to 6.1 percent in the first quarter of 2007 from 7.9 percent last year, as the conflict began to take its toll and the effects of an expansionary stimulus wore off. The government's statistics office said this compared with gross domestic product (GDP) growth of 7.4 percent in the last quarter of 2006, while in the second and third quarters it was 7.8 and 7.9 percent.

Last year Sri Lanka grew by a record 7.7 percent according to the Department of Census and Statistics and 7.4 percent according to the Central Bank, which has a slightly different base year and data structure.

Deflated

With inflation from expansionary monetary and fiscal policies catching up, the implicit GDP deflator rose to 14 percent in the first quarter this year compareD to 6.9 percent in 2006.

The agriculture sector was stagnant, but industry grew by 7 percent and services grew by 7.1 percent, Director General of Statistics Suranjana Vidyaratne said.

Officials said the country was more peaceful in the first quarter of last year and the conflict has now affected even the south of the country, while drought has hit agriculture.

Last year the economy also recei