‘Economy trending in right direction’ | Daily News

‘Economy trending in right direction’

Supported by the proactive stabilisation policy measures adopted by the Central Bank and the government, it was possible to move steadily towards achieving overall stability of the economy, opined Central Bank Governor Dr Indrajit Coomaraswamy presenting the eleventh Road Map of the Central Bank yesterday, in Colombo.

“But we do not want to be complacent with the achievements so far, and we acknowledge that several challenges continue to weigh down on the overall macroeconomic performance of the country. Therefore, we need to work hard in order to restore the stability of the economy on a permanent basis to create an enabling environment to raise the living standards of our people, and we believe that the policies outlined in the Road Map will help us in this endeavour,” he said.

The Governor said the economy required broad-based reforms and commitment to enhance the country’s growth potential if the country was to become an enriched nation as envisaged in the government’s vision.

As the agent for macroeconomic stability, the Central Bank will always work hand in hand with the government to enhance economic growth through maintaining low and stable inflation and ensuring financial system stability. “We would also like to note that we will be prepared to introduce new policies and measures not in the Road Map, as warranted by dynamic macroeconomic conditions and market developments. This flexibility is necessary in a world of elevated risks and uncertainties as well as rapid changes.

Apart from inclement weather conditions, the tight monetary policy stance of the Central Bank as well as the relatively tight fiscal policy stance of the government, which were adopted with the aim of regaining macroeconomic stability, partly affected public and private investment spending that also contributed to low economic growth. Consumer price inflation increased mainly due to high food prices associated with weather-related domestic supply disruptions, revisions to indirect taxes and increased prices of imported commodities, making our efforts to anchor inflation expectations challenging.

“Despite these challenges, 2017 was a year when we made significant progress on many fronts through several policy measures taken by the Central Bank in coordination with the government. In response to these measures, macroeconomic stability is being restored and our economy is trending in the right direction. The Central Bank has implemented several proactive policy measures during 2017 in order to achieve the core objectives of maintaining economic and price stability and financial system stability. Three frameworks have been put in place to improve the country’s overall macroeconomic conditions covering monetary policy, inflation and the exchange rate.

The Governor expressed optimism that the government would continue its fiscal consolidation measures in 2018, which will support the Central Bank to pursue its policies towards macroeconomic stability.


 

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