The Central Bank says the Sri Lankan economy is estimated to have grown by 4.1 per cent during the third quarter of 2016 compared to the growth of 5.6 per cent in the corresponding period of the previous year. Services activities grew by 4.7 per cent, while Industry activities grew notably by 6.8 per cent during this period.

However, Agriculture related activities continued to report a contraction, for the second consecutive quarter, by 1.9 per cent, impacted by the adverse weather conditions. Favorable developments in leading economic indicators as well as the lower base in the fourth quarter of 2015 are likely to steer economic growth upwards in the final quarter of 2016.

Headline inflation, as measured by the Colombo Consumers’ Price Index , increased to 4.1 per cent, on a year-on-year basis, in December from 3.4 per cent in November 2016. Rupee liquidity in the domestic money market returned to surplus levels in December, while market interest rates, which increased in response to monetary tightening measures adopted by the Central Bank, appear to have broadly stabilised during the month. In the external sector, mainly due to the effect of a one-off increase in the expenditure on imports, the deficit in the trade balance increased substantially in October 2016.

Earnings from tourism as well as workers’ remittances continued to grow at a healthy pace. Gross official reserves were estimated at 5.6 billion USE dollars by end November 2016, while the Sri Lankan rupee has depreciated by 3.6 per cent against the US dollar thus far during the year.

Taking into consideration the developments discussed above, the Monetary Board, at its meeting held yesterday, was of the view that the current monetary policy stance of the Central Bank is appropriate. Accordingly, the Monetary Board decided to maintain the Standing Deposit Facility Rate and the Standing Lending Facility Rate of the Central Bank unchanged at 7.00 per cent and 8.50 per cent, respectively.