The Changes in Economic Activities in Sri Lanka

Group Assignment

The changes in economic activities in Sri Lanka.

Task 1 brief description about the national income of Sri Lanka and its recent developments

Sri Lanka is concentrating on long-term strategic and operational development challenges as it endeavours to alteration to an upper middle-income country. Important tasks include boost up investment, comprising in human capital, realigning public expenditure and policy with the requirements of a middle-income country, increasing the role of the private sector, together with the provision of a proper environment for increasing production and exports, and confirming that development is comprehensive (The World Bank, 2014).

The Gross Domestic Product (GDP)

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Figure: Sri Lanka GDP Growth Rate

Source: Trading Economics and Department of Census and Statistics- Srilanka

The World Bank (2014) states, economic improvement in Sri Lanka has been among the quickest in South Asia in current years. The Sri Lankan economy reached an actual GDP growth of 7.4 per cent in 2014 in contrast to 7.2 per cent in 2013. Among various growing in the global economy, continued national economic activities supported sustain the development in the Industry and Services sectors. The Services sector, which signifies 57.6 per cent of GDP, raised by 6.5 per cent in 2014 against to the development of 6.4 per cent in 2013, with significant impact from Wholesale and retail trade, Transports and communications, and Banks, insurance and etc. The share of the Industry segment within GDP amplified further to 32.3 per cent, with a sectoral development of 11.4 per cent in 2014 compared with 9.9 per cent in the earlier year. The Construction sub sector recorded the maximum impact to the growth of the Industry sector. Meanwhile, affected by adverse climate conditions, the Agriculture sector, which signifies 10.1 per cent of GDP, contributed only a little bit to real GDP growth.

Investment and Consumption

The expansion in both investment and consumption activities supported the growth of GDP in 2014. As per the expenditure approach, increased investment expenditure was due to both private and public sector investments. The growth in private consumption expenditure was supported by lower domestic interest rates and higher disposable incomes. As a result, expenditure on imports of consumer goods increased significantly. Higher contribution from the growth in imports relative to exports, however, resulted in a marginal deterioration of net external demand in nominal terms during the year.

National savings

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Figure: Sri Lanka National Savings

Source: Trading Economics and Department of Census and Statistics- Srilanka

In 2014 National savings enhanced 20 per cent of GDP to 21.1 per cent of GDP. The improvement in domestic savings during the year was due to the continuous expansion in private savings amidst an increase in government dissaving. National savings, improved to 27.0 per cent of GDP as a combined result of continued inflows in the form of workers’ remittances and the deceleration in the negative development of net factor income from abroad (NFIA) compared to the previous year. These developments contributed to a narrowing of the savings-investment gap to 2.7 per cent of GDP in 2014 from 3.7 per cent of GDP in 2013.