Sri Lanka’s year-on-yearconsumer price inflation is expected to have marginally risenfrom a record low in September due to increasing consumerdemand amid the island nation’s post-war economic recovery.
The median forecast of nine analysts predicted Septemberconsumer prices will have risen to 1.0 percent, compared to itsrecord low 0.9 percent in August.
Record world oil and commodity prices drove it to asix-year high of 28.2 percent in June 2008.
The 12-month moving average inflation is expected to slowto a near six-year low of 6.6 percent. It is currently at 8.5percent, its lowest since December 2003. It hit a 6-year highof 23.4 percent in October.
"We see an increase in consumer demand," DanushkaSamarasinghe, head of research at Asia Securities, said.
"Consumer sentiments have changed on confidence overeconomic recovery, though we still need to see growth incommercial banks’ lending."
The central bank cut its key policy rates by 50 basispoints this month, resulting a sharp fall in yields ofgovernment securities, to compel commercial banks to increaseprivate sector lending and spur economic growth.
The central bank has said consumer prices will rise to 5-6percent by the end of 2009 and remain in single digitsthroughout 2010, saying renewed economic activity in the formerwar zone and post-war optimism will drive the island’s $40 billion economy.
The International Monetary Fund (IMF) on Sept. 22 raisedSri Lanka’s economic growth forecast for 2009 to the centralbank’s minimum growth target of 3.5 percent. It predicted 3.0percent when it approved a $2.6 billion loan to Sri Lanka inJuly. Economists have said consumer prices will rise on an expected increase in tax and energy prices as the government has agreedwith the IMF to trim its fiscal deficit to 7 percent.
Sri Lanka’s economy grew at a four-year low of 6 percent in2008, compared to 6.8 percent in 2007, due to the centralbank’s inflation-busting policy of tightly controlling themoney supply.
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