Sri Lanka recorded an economic growth rate of 8.5 percent in the second quarter of 2010, the highest ever recorded quarterly GDP growth since 2002.

According to the figures released by the Department of Census and Statistics, the economic output of Sri Lanka as measured by Gross Domestic Product (GDP) for the (Q2) (April-June), of 2010 at constant (2002) prices is estimated at Rs.Bn 635.0 as against Rs.Bn 585.5 in the Q2 of 2009, registering an 8.5 percent growth rate.

The report says the three major sectors of the economy namely, Agriculture, Industry, and Services registered significant growth rates of 5.1 percent, 9.2 percent and 8.8 percent respectively, in the Q2 of 2010 over the same quarter of previous year.

The Agriculture sector contributed 11.9 percent to the total GDP while Industry was responsible for 28.1 percent and Services accounted for 60.0 percent of the total.

Within the Agriculture Sector Minor Export Crops grew by 20.7 percent, Paddy by 10.3 percent and Fishing by 18.3 percent as the agricultural activities in the war-ravaged Northern and Easter provinces picked up and fishing restrictions eased.

The report noted that the marine fish production increased by 134.1 percent in the Northern Province and by 45.8 percent in the Eastern Province while overall fish production in other regions except the North and the East decreased by 2.1 percent in the second quarter as more fishermen from the South migrated to North.

The Services sector posted a substantially higher growth rate of 8.8 percent higher over the 1.2 percent recorded a year earlier.

The Census and Statistics Department attributes the growth in the Q2 2010 due to the recovery of its major sub sectors such as Wholesale & retail trade, Hotels & restaurants and Transport & communication.

Hotels and restaurant sector has experienced significant growth of 25.2 percent in Q2 as opposed to a negative 0.4 percent for the same period last year. Tourists arrivals have jumped from 81,027 in the Q2 2009 to 118,243 in the Q2 2010 indicating a 45.9 percent increase.

Reduction of import duty on vehicles in the latter part of the quarter contributed to an increase of 78.6 percent in the total number of new vehicles registered in Q2 as opposed to a 36.2 percent decline in the same quarter of previous year.

Here is the press release issued by the Department of Census and Statistics :

The Gross Domestic Product (GDP) of Sri Lanka for the second quarter (Q2) 2010 at current and constant (2002) prices is hereby released by the Department Of Census & Statistics(DCS).

The economic output of Sri Lanka as measured by Gross Domestic Product (GDP) for the (Q2) (April-June), of 2010 at constant (2002) prices is estimated at Rs.Bn 635.0 as against Rs.Bn 585.5 in the Q2 of 2009, registering an 8.5 percent growth rate. This growth rate is noteworthy as it is the highest ever recorded quarterly GDP growth since 2002. The three major sectors of the economy namely, Agriculture, Industry and Services registered significant growth rates 5.1 percent, 9.2 percent and 8.8 percent respectively, in the Q2 of 2010 over the same quarter of previous year. The sub sectors which registered relative significant growth among the sectors in the second quarter of 2010 are “Minor export crops”,20.7 percent, “Paddy”,10.3 percent ”Fishing”,18.3 percent, “Manufacturing”, 8.9 percent, “Construction”, 9.3 percent, “Wholesale & retail trade”, 8.8 percent, “Hotels & restaurant”,25.2 percent, “Transport & communication”,12.9 percent, and “Banking, Insurance & real estate”,8.5 percent.

The percentage share of the three major sectors, the Agriculture, Industry and Services to the total GDP reported as 11.9 percent, 28.1 percent and 60.0 percent respectively.

The index number of GDP implicit price deflator rose to 209.9 in the Q2 of 2010, from 190.8 in the same quarter of 2009 giving an inflation rate of 10.0 percent for the Q2 2010.

Colombo consumers’ price index (2002=100) which reflects the average price level of consumer goods increased to 215.4 in the Q2 2010 from 204.6 in the Q2 of 2009. Accordingly, the year on year (YOY) inflation rate is recorded as 5.3 percent in the Q2 of 2010 whereas it was 2.4 percent in the same quarter of 2009.

Agriculture sector

The “Agriculture, forestry and fishing” sector showed a 5.1 percent growth during the Q2 of 2010 as against the growth of 5.0 percent during the same quarter previous year.

The growth rate of Tea production is registered as 7.0 percent for the Q2 2010 as against (-) 7.0 percent for the Q2 2009, attributed to recovery driven by the favorable weather conditions, and increased demand along with the satisfactory prices in global market.

The value added of Rubber production grew by 3.9 percent for this quarter as against the 4.5 percent the same quarter of the last year. The major reason for this growth was due to the increase in average price of Rubber (at Colombo auction) which rose from Rs167.22 per Kg in Q2 2009 to Rs 395.09 per Kg in Q2 2010. This indicates 136.3 percent price increase in Q2 2010, which resulted the progress made in maintenance of rubber estates and tapping activities although the heavy rain bared the industry.

The value addition of Coconut production showed a 7.9 percent decrease in this quarter although it was 3.1 percent growth in the same quarter previous year. The fall in the growth in this quarter is attributable to the drought prevailed in the first half of 2009.

The growth rate of Miner export crops (MEC) was recorded as 20.7 percent during the Q2 2010 whereas it was (-) 2.0 percent for the same quarter previous year.
The paddy grew by 10.3 percent for the Q2 2010 as against the growth rate of 12.2 percent in Q2 2009. The highest ever recorded paddy sown area, extent harvested, total production, and production per unit of land in a Maha season since 1952, were recorded in 2009/2010 Maha season.

The sub sector of Livestock production grew by 3.2 percent for the Q2 2010. The milk production increased by 9.1 percent from 58.1 million Liters in Q2 2009 to 63.4 million Liters in Q2 2010. The restored peace across the country supported the growth of livestock farming, especially in the East, North Central province and Monaragala district which were badly exposed to the unrest for years. Milk production increasing programs that wear launched a couple of years ago, also supported this positive growth. The increasing cost of production for chicken and eggs reduced production by 5.2 percent and 0.9 percent respectively.

The sub sector of Highland crop for the Q2 2010 grew by 5.4 percent. Among the major crops the Maize and Red onion grew by 11.4 percent and 50.8 percent respectively.

The sub sector of vegetables production grew by 2.9 percent in the Q2 2010. This growth was pushed by the production increases of Tomatoes, Red pumpkin, Ash plantain and Beans. Heavy rain during this quarter caused to reduce the production of Carrot, Leeks, Cabbage and Brinjals.

The overall fishing industry grew by 18.3 percent in Q2 2010. Of these “Inland fishing” grew by 15.7 percent and “Marine fishing” grew by 18.6 percent. The prevailing favorable rainfall for fish growing, the extension of aquiculture activities supported the growth of inland fish production in the North, East and the North central provinces. The growth of Marine fishing industry was at a satisfactory level in the wake of imposed time restrictions for fishing being gradually lifted. Marine fish production in Northern and Eastern provinces increased by 134.1 percent and by 45.8 percent respectively, although overall fish production in other regions except the North and the East decreased by 2.1 percent in the Q2 of 2010, due to the migration of fishermen from the south to Northwards.

Industry sector

The real terms value added of the industry sector grew by 9.2 percent in the Q2 2010 against 3.0 percent growth in Q2 of 2009. The manufacturing sector which is the largest portion of industry sector grew by 8.9 percent in the Q2 of 2010.

The growth rate of Gem mining in the Q2 2010 recorded an 8.5 percent. The export value of precious stones and semi precious stones increased by 11.2 percent in the reference period.

The factory industry grew by 9.2 percent. The higher growth of factory industry was supported by the higher growth of textile, wearing apparel & leather products by 7.9 percent, Chemicals, Petroleum, coal, rubber & plastics products by 16.5 percent and Non-metallic products by 15.9 percent.

The export earnings of apparel sub sector increased by 9.4 percent. The export quantity of Chemical products, Rubber tires, tubes etc. and other articles of rubber products increased by 17.9 percent, 90.4 percent and 23.0 percent respectively.

The growth rate for the sub sector of “Electricity, Gas and Water” is 7.5 percent for the reference quarter against 4.3percent growth in the Q2 2009. The overall electricity generation grew by 8.2 during the quarter while Hydro power generation recorded a 37.7 percent growth and the Thermal power recorded a (-) 7.1 percent growth.

In real terms, the construction sector indicated a 9.3 percent high growth rate for the Q2 of 2010 compared with the growth of 5.4 percent in the Q2 last year. This growth was driven by the introduction of new development projects and the large scale projects already in operation.

The disbursement of loans for the development of houses, business premises, other buildings and construction & property developments have increased by 19.1 percent during the reference period. The cement production increased by 23.5 percent in this quarter against the same quarter previous year which recorded a (-) 8.7 percent. Volume index of imported building materials increased by 32.1 percent in this quarter and it had decreased by 29.3 percent for corresponding period of last year. Total capital expenditure, including Highways development and widening & improvement of roads has increased by 47.3 percent during the reference period.

Service sector

The recorded 8.8 percent higher growth rate has been achieved in the Q2 2010 due to the recovery of its major sub sectors such as Wholesale & retail trade, Hotels & restaurants and Transport & communication. The growth rate in the same quarter of 2009 however, was as low as 1.2 percent.

The export trade sector recorded a 5.0 percent growth rate at constant prices for the Q2 2010. Export earnings recorded as Rs Mn 211,619 in the Q2 of 2010 against Rs Mn 179,264 in the same quarter of 2009 indicating a 18.0 percent increase. According to trade indices of Central Bank of Sri Lanka, Export volume and export price level increased by 5.2 percent and by 12.2 percent respectively during the reference quarter.

The import trade sector grew by 13.2 percent in the reference period as against a 22.2 percent drop in the same quarter of the previous year. Total expenditure for imports increased to Rs Mn 368,903 in Q2 2010 against Rs Mn 260,372 in the same quarter of previous year recording 41.7 increase. According to trade indices of Central Bank of Sri Lanka, the import volume and import prices increased by 16.4 percent and by 18.8 percent respectively for the Q2 2010 over the same quarter of previous year.

Domestic trade sector grew by 7.5 percent in the Q2 2010. This was mainly due to higher agricultural and industrial productions which are mostly supplied to the domestic market.

Hotels and restaurant sector experienced significant growth in economic output in Q2 2010, as its value addition indicated a 25.2 percent growth against (-) 0.4 percent of the same quarter 2009. Tourists arrival increased from 81,027 in the Q2 2009 to 118,243 in the Q2 2010 indicating a 45.9 percent increase. This promising increase was mainly supported by the prevailing peace across the country and also easing off of the global economic recession to a certain extent. Tourist earnings increased by 60.9 percent and room occupancy rate increased from 35.5 in Q2 2009 to 50.8 in Q2 2010.

Transport & communication sector indicated a 12.9 percent growth in the Q2 of 2010 as against that of 5.7 percent growth in the same quarter of the last year. Passenger and goods transportation, Cargo handling, Ports and civil aviation, and post & telecommunication indicated growth of 13.0 percent, 15.9 percent and 12.1 percent respectively for this quarter.

Total number of new registration of vehicles increased by 78.6 percent in Q2 as against 36.2 percent decline in the same quarter of previous year. Registration of Buses, Three wheelers and goods transport vehicles has increased by 786.3 percent, 139.3 percent and 235.7 percent respectively in the second quarter of 2010.The boom of new registration of vehicles has been chiefly fuelled by the reduction of import duty in the latter part of Q2 2010.

Passenger kilometers flown and passengers income in Sri Lankan air lines have increased by 20.7 percent and 30.3 percent respectively in this quarter due to increased tourist arrivals and added extra turns of flights. Passenger kilometers traveled, and daily operated buses of Sri Lanka transport board have increased by 19.0 percent, and by 2.6 percent respectively in the Q2 of this year compared to same period of last year.

Cargo handling and Ports & civil aviation recorded 15.9 percent growth in this quarter due to satisfactory performance of international trade sector as a result of gradual recovery of the global economy. The amount of total cargo throughput and container handling of port authority have increased by 26.6 percent and 21.0 percent respectively. Cargo carriages of Sri Lankan air lines increased by 19.7 percent in this quarter.

Banking, Insurance & Real estate sector grew by 8.5 percent in the Q2 2010 against the growth rate of 5.4 percent in the same quarter of 2009. Average interest income of both the Licensed Commercial Banks (LCBs) and Licensed Specialized Banks (LSBs) dropped by 9.9 percent mainly due to reduction in lending rates in the second half of 2009. The interest expenses also dropped by 26.7 percent as deposit’s interest rates reduced. These led to increase in net interest income of almost all financial institutions thereby increasing profit of the overall banking sector. Non-interest income, loans, and advances have shown dramatic increase letting financial sector to expand.