Sri Lanka missed its budget deficit target for the first time in the post-conflict period, as the country reported a fiscal deficit of 6 percent of gross domestic product (GDP) for the year 2014, amid revenue collection shortfalls and higher expenditure.
The government aimed to reduce the deficit to 5.2 percent of GDP in 2014 from 5.9 percent of GDP in the previous year.
Nevertheless, the public debt as a percentage of GDP declined to 75.5 percent by end-2014 from 78.3 percent by end-2013.
In the meantime, the economy that was initially projected to grow 7.8 percent, recorded a growth of 7.4 percent in 2014, in comparison to the growth of 7.2 percent in 2013.
According to the Central Bank, the growth was largely impacted by the poor performance of the agriculture sector. The unemployment rate in 2014 edged down to 4.3 percent from 4.4 percent in 2014.
In nominal terms, GDP in 2014 amounted to US $ 74.9 billion, compared to US $ 67.2 billion in 2013. Accordingly, GDP per capital increased to US $ 3625 from US $ 3,280 in 2013.
The Central Bank meanwhile said public investment on economic and social infrastructure development amounted to Rs.442.4 billion or 4.5 percent of GDP in 2014.
The new government formed in January 2015 is in the process of reviewing the ongoing and proposed mega infrastructure projects to ensure their financial viability, environmental feasibility, equitability and their overall contribution to the economy.
The Central Bank said the new government faces an enormous challenge of “articulating a coherent medium-term policy framework, which addresses possible shortcomings of previously announced policies as well as the challenges already identified.”
Going forward, the Sri Lankan economy is projected to reach upper middle-income levels in terms of per capita GDP and sustain the favourable high growth and low inflation nexus in the medium term, supported by appropriate economic policies.