Sri Lanka's growth slows as exports weaken, with forecasts uncertain this year

COLOMBO (AFP) - Sri Lanka's economic growth slowed to 6.4 per cent in 2012 from a scorching 8.2 per cent the previous year, data showed on Friday, hit by declining exports and weaker farm output.

The economy grew by 6.3 percent in the final financial quarter to December from a year earlier, the statistics department said, picking up from 4.8 per cent growth in the July-to-September quarter.

Sri Lanka's Treasury chief Punchi Banda Jayasundera has forecast the economy will pick up in the current 2013 financial year to Dec 31 and grow by seven to 7.5 per cent.

However the International Monetary Fund has said it believes Sri Lanka's recovery will be constrained by continued slow recovery in the country's main trading partners, particularly the United States and the European Union.

Sri Lanka's economy surged after security forces crushed a Tamil separatist insurgency in May 2009 and declared an end to 37 years of ethnic bloodshed which claimed up to 100,000 lives, according to UN estimates.

But the global economic downturn has weighed on exports and poor weather has hit farm output. Sri Lanka's exports fell 7.4 per cent in 2012 to US$9.77 billion (S$12 billion), according to government trade figures.

Sri Lanka's central bank has been keeping interest rates on hold in an effort to foster economic growth despite inflation running at close to 10 per cent.

Global ratings agency Moody's in a report released on Thursday said that growth in the six-percent range appeared to be "a more sustainable path for the economy".

Post-war reconstruction efforts, higher farm output in ex-conflict areas and a revival in tourism resulted in growth climbing to eight percent in 2010 and 8.3 per cent in 2011 from an average of five per cent logged from 1997 to 2009.