Forecast for 2006, however, is a tad higher than the International Monetary Fund's expectations of 7.0 percent.
"The recent escalation of hostilities could pose a risk to future economic prospects," the IMF said in a statement this week following its review the island's performance in the first half of the year.
"The setbacks in the peace process, which have caused some weakening in confidence, could further affect investment going forward," the IMF said.
Sri Lanka's tottering peace process, is in tatters with over 3,300 people killed as fighting between government forces and Tamil Tiger rebels intensified since last December.
Peace talks in October did not generate an outcome for an early settlement, bringing the four-year ceasefire close to collapse and the security situation has deteriora