Annual Report 2008 - Ministry of Finance and Planning

1. Macro Economic Perspectives
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Government initiatives such as the introduction of an island
wide food programme and minimum purchase price for
paddy and milk, grant of the fertilizer subsidy even amidst
a very high world price environment, interventions by the
government to purchase paddy and enhance investment
in irrigation facilities also boosted the output of agriculture
sector. The provision of agricultural equipment and seeds
especially to farmers in the East to reawaken areas that
suffered due to terrorism, continuous government support
through tax exemptions, credit facilities and interest
subsidies also created a conducive environment to improve
sectoral performance. Government also continued with
the tax structure with a view to discourage agricultural
imports.
Industry Sector Records a Moderate Growth Amidst
Challenges
Withstanding the declining demand following the slowdown
in major economies, the high cost of production stemming
from high oil prices and resultant domestic price increases,
value addition in the industrial sector grew by 5.9 percent in
2008 compared to the 7.6 percent witnessed in 2007. All four
sub sectors namely mining and quarrying, manufacturing,
electricity, gas and water, and construction contributed
favourably for the growth in the sector.
The factory industry grew by 5 percent in 2008, compared
to 6.7 percent growth in 2007. This achievement should
be viewed in a backdrop of relatively high erosion in the
competitiveness stemming from high cost of electricity, fuel,
water and interest cost, coupled with declining demand
conditions in major export destinations and slow domestic
demand due to the tight monetary policy stance adopted by
the Central Bank of Sri Lanka.
The performance of export oriented industries deteriorated
especially towards the latter part of 2008, due to weakening
global economic conditions and stiff competitions from
low cost manufacturing countries such as China, India
and Cambodia. The major export oriented industries being
apparel and leather sectors recorded a slower growth of 3.1
percent in 2008, due to external pressures, consequent to
major buyers adopting a more cautious approach in placing
the orders due to the economic slowdown. Even under
difficult conditions, the apparel and garment exports reached
to US $ 3,469 million in 2008. Easing of the uncertainties in
the EU markets owing to the retention of the GSP + facility
for a further period of three years from 2009 and major
players consolidating through mergers, and being ready to
face competition by adopting eco friendly manufacturing
mechanisms facilitating solid waste management and
low carbon emission, thereby helping the apparel sector to
withstand related global pressures.
Table 1.5
Manufacturing Sector Statistics
Value Addition Number of Projects Industrial Volume
(current price) Rs. Bn Approved by BOI Index (1997=100)
Category 2006 2007 2008 2006 2007 2008 2006 2007 2008
Food beverages and Tobacco Products 242 283 348 30 53 34 151.9 161.5 169.9
Textiles, Wearing Apparel and Leather 114 132 348 35 35 17 142.7 151.6 156.6
Wood and Wood Products 1.2 1.4 1.4 7 14 8 126.9 133.3 140.2
Paper and Paper Products 4 5 6 5 5 2 127.7 134.5 142
Chemical/Petroleum/Coal/Rubber
and Plastic Products 95 113 135 18 27 12 174.5 187 198.5
Basic Metal Products 18 20 23 10 19 15 157.8 171.5 178.3
Fabricated Metal Products,
Machinery and Transport Equipment 39 48 55 9 27 21 144.6 151.5 159.5
Manufactured Products n.e. Specified 1.9 2.2 2.5 10 28 30 133.7 140.8 147.6
Source:
Central Bank of Sri Lanka
Department of Census and Statistics
Board of Investment (BOI)
Ministry of Finance and Planning Sri Lanka
Annual Report 2008