Sri Lanka's current potential economic growth rate to exceed 6.7%
A recent IMF study used a number of statistical and modelling based methodologies to conclude that Sri Lanka’s current potential economic growth rate is 6.7%.
This implies that the economy is likely to over-heat if the growth rate exceeds 6.7% on a sustained basis, i.e inflation would rise above the mid-single digit target and the balance of payments/reserves would come under pressure.
The government growth target is 8%. The challenge, therefore, is to explore ways and means of raising the potential growth rate 6.7% to reach the target rate8%, assuming that the IMF estimation of the potential growth rate is credible.