Country Report Sri Lanka February 2009

Summary

The government is expected to regain control of all territory held by the rebel Liberation Tigers of Tamil Eelam (LTTE, Tamil Tigers) by mid-2009. The ethnic conflict will decrease in intensity in 2010.
Unrest will continue in the Tamil community and the LTTE will carry out further attacks on civilian and military targets. Government plans to devolve power to Tamil regions will only produce results in the long term, if at all.
Speculation about a possible early parliamentary election has risen following the early dissolution of a number of provincial councils. The ruling United People's Freedom Alliance will make gains if elections are held in 2009.
Real GDP growth will slow to 3% in 2009, before accelerating again, to 5.7%, in 2010. Shrinking external demand will be partly offset by the positive impact that improving security will have on domestic demand.
The rate of consumer price inflation is expected to remain rapid, despite weakening global food and oil price pressures. The Economist Intelligence Unit forecasts that inflation will average 9.9% in 2009 and 7.4% in 2010.
As government spending on infrastructure investment falls and the cost of imported commodities declines, imports will contract in 2009, helping to reduce the current-account deficit to 2.1% of GDP in that year.
We believe that Sri Lanka’s economic outlook is subject to downside risks. The exchange rate remains an area of particular concern.

In January Sri Lanka's military retook the town of Mullaitivu, the last major centre held by the rebels.
A mob attacked the offices of the International Committee of the Red Cross in February after a defence spokesperson accused the group of stirring up panic.
The chief minister of Western province dissolved the provincial council in February ahead of planned elections. Elections are also due in Central and North Western provinces.
Sri Lankan apparel industry leaders have forecast a decline in exports of 10-15% in 2009 as global demand weakens. Up to 40,000 jobs may be lost.
In January, an Indian company, Bharti Airtel, became the fifth firm to offer mobile telecommunications in Sri Lanka.
Construction began on a yacht marina in the southern city of Galle in January. The project is part of plans to promote the city as a tourism centre.

Source: Country Report

This report covers the following industry codes:
SIC Code: 53;59;22;48;47
NAICS Code: 44;313;517;48