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Message: <blockquote data-quote="Y2K" data-source="post: 3791979" data-attributes="member: 35049">* The president, Mahinda Rajapakse of the People's Alliance (the largest party in the ruling United People's Freedom Alliance, or UPFA), will pursue populist policies, with an emphasis on rural development and infrastructure. Continuing political volatility and a lack of will in the UPFA make the passage of major reforms such as privatisation unlikely. The UPFA is expected to strengthen its position in parliament at the next election, despite public concern over high inflation, as the main opposition party, the United National Party, remains weak.    * The government is expected to regain control of most territory controlled by the rebel Liberation Tigers of Tamil Eelam (LTTE, Tamil Tigers) by end-2009, paving the way for a winding down of direct conflict and an easing of security restrictions. Unless the government is able to kill the rebels' leader, Velupillai Prabhakaran, however, the LTTE will continue to conduct terrorist attacks and wage guerrilla warfare. Efforts to devolve power to provincial authorities and increase the speed of economic development are unlikely to ease tensions between the Tamil minority and the Sinhalese majority in 2009-13.    * The Economist Intelligence Unit expects the budget deficit (including grants) to fall during 2011-13, to stand at 5.5% of GDP in 2013. Slippage against fiscal targets is likely, owing to the government's populist tendencies and a failure to achieve revenue-collection goals. Partly as a result of the country's reliance on aid from multilateral agencies (which are in favour of free markets), and partly as a consequence of the need to improve the fiscal position, the government may implement some economic liberalisation measures.    * GDP growth will average around 5.4% a year in 2009-13. The services sector will remain the primary driver of the economy in this period. Annual average consumer price inflation will ease downwards to 4% in 2013. The easing of inflationary pressures will be the result of supply-side improvements, including increased local food and energy production.    * The Sri Lanka rupee will be vulnerable in 2009 owing to security concerns and high inflation. Moreover, the currency could come under pressure amid the ongoing disruption affecting global financial markets. However, depreciation will slow to manageable rates in 2010-13, taking the exchange rate to an average of SLRs134:US$1 in 2013, compared with SLRs108.1:US$1 in 2008. The current-account deficit will average 4.7% of GDP a year in 2009-13, mainly owing to a large trade deficit. Rising tourism exports will help to reduce the current-account deficit (as a percentage of GDP) later in the forecast period.Key indicators    2008    2009    2010    2011    2012    2013Real GDP growth (%)    5.3    4.2    5.1    6.0    6.2    6.4Consumer price inflation (av; %)    21.8    13.0    7.4    6.2    5.4    4.0Budget balance (% of GDP)    -6.4    -6.6    -7.0    -6.3    -5.8    -5.5Current-account balance (% of GDP)    -4.7    -4.9    -5.1    -4.6    -4.0    -4.0Lending rate (av; %)    19.0    15.5    11.7    11.2    10.4    11.4Exchange rate SLRs:US$ (av)    108.1    115.7    121.6    125.8    129.8    134.0Exchange rate SLRs:¥(av)    1.021    1.123    1.238    1.327    1.384    1.430</blockquote>

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