Sri Lanka - Economy

Economy

According to the International Monetary Fund, Sri Lanka has a yearly gross domestic output of US$59 billion as of 2010. It has a GDP of US$116 billion in terms of purchasing power parity. Sri Lanka is next only to Maldives in the South Asian region in terms of per capita income, with a nominal value of US$2,877 and PPP value of US$5,673. It recorded a GDP growth of 8.3% in 2011.

In the 19th and 20th centuries, Sri Lanka became a plantation economy, famous for its production and export of cinnamon, rubber and Ceylon tea, which remains a trademark national export. The development of modern ports under British rule raised the strategic importance of the island as a centre of trade. From 1948 to 1977 socialism strongly influenced the government's economic policies. Colonial plantations were dismantled, industries were nationalised and a welfare state established. In 1977 the Free market economy was introduced to the country, incorporating privatisation, deregulation and the promotion of private enterprise.

While the production and export of tea, rubber, coffee, sugar and other commodities remain important, industrialisation has increased the importance of food processing, textiles, telecommunications and finance. Main economic sectors of the country are tourism, tea export, clothing, rice production and other agricultural products. In addition to these economic sectors, overseas employment contributes highly in foreign exchange, most of them from the Middle East. As of 2010, the service sector makes up 60% of GDP, the industrial sector 28% and the agriculture sector 12%. The private sector accounts for 85% of the economy. India is the largest trading partner of Sri Lanka. Economic disparies exist between the provinces, with Western province contributing to 45.1% of the GDP, Southern province and Central province, 10.7% and 10% respectively. With the end of the war, Northern province reported a record 22.9% GDP growth in 2010.

The per capita income of Sri Lanka has doubled since 2005. During the same period, poverty has dropped from 15.2% to 7.6%, unemployment has dropped from 7.2% to 4.9%, market capitalisation of CSE has quadrupled and budget deficit has doubled. 90% of the households in Sri Lanka are electrified, 87.3% of the population have access to safe drinking water and 39% have access to pipe-borne water. Income inequality has also dropped in recent years, indicated by a gini coefficient of 0.36 in 2010. Sri Lanka's cellular subscriber base has shown a staggering 550% growth, from 2005 to 2010. Sri Lanka was the first country in the South Asian region to introduce 3G (Third Generation), 3.5G HSDPA, 3.75G HSUPA and 4G LTE mobile broadband Internet technologies.

The Global Competitiveness Report published by the World Economic Forum has listed Sri Lanka as a transitive economy, from factor-driven stage to efficiency-driven stage, ranking 52nd in the global competitiveness. It also ranked 45th in health and primary education, 32nd in business sophistication, 42nd in innovation and 41st in goods market efficiency out of the 142 countries surveyed. Sri Lanka ranks 8th in the World Giving Index, registering high levels of contentment and charitable behaviour in its society. In 2010, The New York Times placed Sri Lanka at number 1 position in 31 places to visit. Dow Jones classified Sri Lanka as an emerging market in 2010, and Citigroup classified it as a 3G country in February 2011. Sri Lanka ranks well above other South Asian countries in Human Development Index (HDI) with 0.696 points.

Although poverty has reduced by 50% during last 5 years, malnutrition remains a problem among children. 29% of the children under 5 years of age are reported to be underweight. Nearly 58% of infants between 6 and 11 months and 38% of children between 12 and 23 months are anaemic. While Dengue remains the major infectious disease, non-communicable diseasees (NCDs) account for 85% of ill health, disability and early death in Sri Lanka. Sri Lankans have a life expectancy of 77.9 years at birth, which is 10% higher than the world average. Infant mortality rate stands at 8.5 per 1000 births and maternal mortality rate at 0.39 per 1000 births, which is in par with figures of the developed countries. The universal, "pro-poor" health care system adopted by the country has contributed much towards these figures.

Sri Lanka's road network consists of 35 A grade highways and 1 Controlled-access highway (E01). The railway network, operated by the state-run national railway operator, Sri Lanka Railways, spans 1,447 kilometres (900 mi). Sri Lanka also has three deep-water ports, at Colombo, Galle, and Trincomalee, in addition to the newest port being built at Hambantota. Its flag carrier airline is the SriLankan Airlines. Fitch Ratings has affirmed Sri Lanka's Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BB-' with a "stable" outlook.