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| Thursday, 20 January 2005 |
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Tsunami hits Lanka's economic growth, fuels inflation - IMF COLOMBO, Wednesday (AFP) The losses suffered by Sri Lanka from the tsunami that battered its coastal areas last month are likely to be worse than expected, with economic growth, the balance of payments and inflation all likely to suffer, an IMF report released Wednesday said. Preliminary indications, the report said, were that the December 26 tsunami which pounded fishing villages and tourist resorts in Sri Lanka would have "an adverse impact on 2005 GDP growth of one percentage point." The IMF cut its Gross Domestic Product (GDP) growth projection for Sri Lanka from five percent to four percent and it forecast a rise in inflation of 14 percent in 2005, up from a previous estimate of 12 percent. The report, prepared mainly by the IMF's Asia and Pacific department and posted on its website Wednesday, warned that the "broader macro-economic impact will clearly be substantial. "The fishing industry has been devastated, agricultural production may be affected and tourism will suffer, especially in the short term," it said, adding that a full needs assessment would likely only be ready by the end of January. The Sri Lankan government had initially put the cost of rebuilding its battered coastline at about 1.3 billion dollars but has recently revised this to 3.5 billion dollars, which it hopes will be funded by international donors. "The impact on balance of payments prospects will also be significant," the IMF report said, forecasting the 2005 trade deficit at 2.69 billion dollars, up from a pre-tsunami projection of 2.28 billion dollars. Although major export sectors - textiles and garments - have not been affected, tourism earnings were expected to fall some 15 percent compared to 2004. "While some of the financing needs will be met by increased aid flows, preliminary estimates by staff indicate that Sri Lanka will be hard pressed to keep international (forex) reserves at the pre-tsunami level (about 2.3 months of imports)," the report said. |
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