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Sri Lanka’s Growth to Beat India's Growth
Sri Lanka’s economic growth is set to outstrip India’s for the first time since 2000 as record foreign investment and government spending fuel a resurgence.
Sri Lanka's $50 billion gross domestic product will increase 8.5 percent this year, up from 8 percent in 2010 and bucking a global slowdown, Central Bank of Sri Lanka Deputy Governor Dharma Dheerasinghe said.
India’s $1.7 trillion economy, Asia’s third-biggest, is likely to grow 8.2 percent in 2011 according to estimates by the International Monetary Fund, the slowest pace since 2009.
“We had problems during the last global recession, but it was in the background of a war situation,” Dheerasinghe said in a phone interview on Aug. 17 from the capital Colombo. “History won’t repeat for Sri Lanka. In the medium term, growth can even be 9 percent.”
The return to peace in Sri Lanka is luring overseas money and tourists back to the tear-drop shaped Indian Ocean island. A $1 billion sale of sovereign dollar bonds last month was more than seven times oversubscribed. President Mahinda Rajapaksa’s government has pledged to spend $1 billion annually for at least three years from 2010 on projects such as a coal-fired power plant, a four-lane expressway and a container shipping hub.
Investors Undeterred
The global stock slide that wiped off $6 trillion in market value since July 24, triggered by the U.S. credit downgrade and a deepening European debt crisis, hasn’t deterred investors in Sri Lanka. The Colombo All-Share Index surged almost 10 percent in the period, compared with a 12 percent slump in India’s benchmark Sensitive Index.
The Sri Lanka gauge plunged 41 percent in 2008, the worst on record, a year before government troops defeated the separatist LTTE, ending the rebels’ quest for an independent state in the north and east. Post-war growth helped make the index the world’s second-best performer in 2010.
“The end of the 26-year conflict has brought a new-found optimism that is boosting consumer and business confidence,” said Samantha Amerasinghe, a Colombo-based economist at Standard Chartered Plc. “Prospects look much brighter today and Sri Lanka’s economic rebound remains intact despite the current uncertain and challenging global environment.
”
‘Peace Dividend’
Dollar-denominated bond sales by Sri Lanka are attracting more investors as credit-rating companies raise their outlooks. Last month, Fitch Ratings upgraded Sri Lanka’s ranking by a notch to BB-, three levels below investment grade. Standard & Poor’s boosted the outlook for its B+ rating to positive, while Moody’s Investors Service did the same on its B1 view, citing a “peace dividend.” Moody’s and S&P rank Sri Lanka four levels below investment grade.
The Philippines, rated two levels higher than Sri Lanka by S&P, doesn’t plan to sell bonds overseas as markets are volatile, Finance Secretary Cesar Purisima said on Aug. 11. The country last sold 15-year dollar bonds in March.
“We are thinking favorably about an investment in Sri Lanka,” said Walter Rossini, who oversees 250 million euros ($360 million) of assets at Aletti Gestielle SGR SpA in Milan. “Political instability is becoming a thing of the past and future risks are less. Growth prospects have never been better.”'
The July sale of 10-year government notes yielded 3.32 percentage points above similar-dated U.S. Treasuries. That compares with a spread of 3.73 percentage points at a previous sale in September, 2010, and almost 4 percentage points in October, 2007, at the height of the civil war.
Volatility Victims
Sri Lanka may still be vulnerable to a global recession should investors flee emerging markets for safe havens, according to Koen Vanderauwera, a fund manager at KBC Asset Management SA in Luxembourg. India’s stock-market capitalization is almost 60 times that of Sri Lanka’s, Bloomberg data show.
“We may not be able to take an exposure in Sri Lanka yet,” he said. “Such investments are going to be victims of uncertainties arising from global political uncertainties, volatile equity and commodity markets.” KBC has about 160 billion euros under management, according to its website.
Sri Lanka’s GDP grew at the slowest pace in eight years in 2009 as a slowdown in Europe and the U.S. crimped demand for exports that account for 16 percent of the economy. Shipments, mostly garments and tea, rose an annual 34 percent to $832 million in May this year, according to the central bank.
Reclaimed Land
Sri Lanka received a record $236 million in realized foreign investment in the first quarter of 2011, with tourism attracting the most inflows, the Board of Investment said June 7. The nation is aiming to increase visitors almost fourfold to 2.5 million by 2016 after a record 46 percent jump last year.
The government has reclaimed land held by the LTTE, accounting for 24 percent of Sri Lanka, making more resources available for development, Dheerasinghe said.
As part of the post-war infrastructure drive, the country is targeting investment of $3.4 billion to expand its ports, looking to create a shipping hub capable of competing with Singapore and Dubai.
The country’s first coal-fired power plant was finished earlier this year and next month sees the opening of a four-lane toll expressway that will slash the time it takes to travel from Colombo to the south.
“The bond issue’s success showed the demand and positive outlook,” said Dheerasinghe. “Even if the global economy reaches the crisis levels of 2009, it won’t hurt us as badly as we are now a strong country. Investors won’t rush to pull out of Sri Lanka.”
Sri Lanka to Beat India as Spending Counters Global Slowdown - Bloomberg
Sri Lanka’s economic growth is set to outstrip India’s for the first time since 2000 as record foreign investment and government spending fuel a resurgence.
Sri Lanka's $50 billion gross domestic product will increase 8.5 percent this year, up from 8 percent in 2010 and bucking a global slowdown, Central Bank of Sri Lanka Deputy Governor Dharma Dheerasinghe said.
India’s $1.7 trillion economy, Asia’s third-biggest, is likely to grow 8.2 percent in 2011 according to estimates by the International Monetary Fund, the slowest pace since 2009.
“We had problems during the last global recession, but it was in the background of a war situation,” Dheerasinghe said in a phone interview on Aug. 17 from the capital Colombo. “History won’t repeat for Sri Lanka. In the medium term, growth can even be 9 percent.”
The return to peace in Sri Lanka is luring overseas money and tourists back to the tear-drop shaped Indian Ocean island. A $1 billion sale of sovereign dollar bonds last month was more than seven times oversubscribed. President Mahinda Rajapaksa’s government has pledged to spend $1 billion annually for at least three years from 2010 on projects such as a coal-fired power plant, a four-lane expressway and a container shipping hub.
Investors Undeterred
The global stock slide that wiped off $6 trillion in market value since July 24, triggered by the U.S. credit downgrade and a deepening European debt crisis, hasn’t deterred investors in Sri Lanka. The Colombo All-Share Index surged almost 10 percent in the period, compared with a 12 percent slump in India’s benchmark Sensitive Index.
The Sri Lanka gauge plunged 41 percent in 2008, the worst on record, a year before government troops defeated the separatist LTTE, ending the rebels’ quest for an independent state in the north and east. Post-war growth helped make the index the world’s second-best performer in 2010.
“The end of the 26-year conflict has brought a new-found optimism that is boosting consumer and business confidence,” said Samantha Amerasinghe, a Colombo-based economist at Standard Chartered Plc. “Prospects look much brighter today and Sri Lanka’s economic rebound remains intact despite the current uncertain and challenging global environment.
”
‘Peace Dividend’
Dollar-denominated bond sales by Sri Lanka are attracting more investors as credit-rating companies raise their outlooks. Last month, Fitch Ratings upgraded Sri Lanka’s ranking by a notch to BB-, three levels below investment grade. Standard & Poor’s boosted the outlook for its B+ rating to positive, while Moody’s Investors Service did the same on its B1 view, citing a “peace dividend.” Moody’s and S&P rank Sri Lanka four levels below investment grade.
The Philippines, rated two levels higher than Sri Lanka by S&P, doesn’t plan to sell bonds overseas as markets are volatile, Finance Secretary Cesar Purisima said on Aug. 11. The country last sold 15-year dollar bonds in March.
“We are thinking favorably about an investment in Sri Lanka,” said Walter Rossini, who oversees 250 million euros ($360 million) of assets at Aletti Gestielle SGR SpA in Milan. “Political instability is becoming a thing of the past and future risks are less. Growth prospects have never been better.”'
The July sale of 10-year government notes yielded 3.32 percentage points above similar-dated U.S. Treasuries. That compares with a spread of 3.73 percentage points at a previous sale in September, 2010, and almost 4 percentage points in October, 2007, at the height of the civil war.
Volatility Victims
Sri Lanka may still be vulnerable to a global recession should investors flee emerging markets for safe havens, according to Koen Vanderauwera, a fund manager at KBC Asset Management SA in Luxembourg. India’s stock-market capitalization is almost 60 times that of Sri Lanka’s, Bloomberg data show.
“We may not be able to take an exposure in Sri Lanka yet,” he said. “Such investments are going to be victims of uncertainties arising from global political uncertainties, volatile equity and commodity markets.” KBC has about 160 billion euros under management, according to its website.
Sri Lanka’s GDP grew at the slowest pace in eight years in 2009 as a slowdown in Europe and the U.S. crimped demand for exports that account for 16 percent of the economy. Shipments, mostly garments and tea, rose an annual 34 percent to $832 million in May this year, according to the central bank.
Reclaimed Land
Sri Lanka received a record $236 million in realized foreign investment in the first quarter of 2011, with tourism attracting the most inflows, the Board of Investment said June 7. The nation is aiming to increase visitors almost fourfold to 2.5 million by 2016 after a record 46 percent jump last year.
The government has reclaimed land held by the LTTE, accounting for 24 percent of Sri Lanka, making more resources available for development, Dheerasinghe said.
As part of the post-war infrastructure drive, the country is targeting investment of $3.4 billion to expand its ports, looking to create a shipping hub capable of competing with Singapore and Dubai.
The country’s first coal-fired power plant was finished earlier this year and next month sees the opening of a four-lane toll expressway that will slash the time it takes to travel from Colombo to the south.
“The bond issue’s success showed the demand and positive outlook,” said Dheerasinghe. “Even if the global economy reaches the crisis levels of 2009, it won’t hurt us as badly as we are now a strong country. Investors won’t rush to pull out of Sri Lanka.”
Sri Lanka to Beat India as Spending Counters Global Slowdown - Bloomberg
. Alot of big loans to be repaid the comming hundreds of years .
