The Asian Development Bank (ADB) has cut its growth forecast for Sri Lanka in 2012 and 2013 as part of an overall downgrade for the entire South Asian region, the latest report released by the organization said here on Friday.
In its Asian Development Outlook (ADO) Update, ADB is forecasting Sri Lanka's GDP to grow by 6.5 percent this year, down from the 7.2 projection earlier.
In 2013 it predicts that growth will be 7 percent, lower in comparison to 8 percent forecast previously.
ADB also significantly downgraded the revision for overall South Asian sub region, 5.5 percent in 2012 and to 6.4 percent in 2013, almost entirely from weakness in India.
"Economic growth in South Asia is under pressure from the continued weakening of the global economic environment and tight monetary policies adopted to rein in domestic inflation," ADB's ADO Update said.
It pointed out that South Asia will slow sharply while still combating inflation. Downward revision for India slows the forecast for South Asia's growth from 6.6 percent to 5.5 percent in 2012 and from 7.1 percent to 6.4 percent in 2013.
Sri Lanka, the ADO Update said GDP growth remained high at 7.9 percent in the first quarter of 2012 owing to robust industrial expansion. It slowed markedly to 6.4 percent in the second quarter, however, dragged down by weak expansion in services at 4.5 percent, as import and export trade dropped sharply.
The Central Bank last week downgraded Sri Lanka's growth target from 7.2 percent to 6.7 percent due to supply issues brought on by a severe drought, which has ravaged agriculture production.
However, Finance Ministry Secretary Dr. P.B. Jayasundara in a subsequent interview stated that he expects growth to be as low as 6.5 percent, predictions that are echoed by ADB. Last year Sri Lanka's growth was 8.3 percent./.