Sri Lanka's annual economic growth slowed in the first quarter to its weakest pace in two years, on signs that high interest rates and the uncertainty of renewed civil war are taking a toll. Gross domestic product in the latest quarter rose 6.1 percent from a year earlier, the central bank said on Friday, edging back from a 6.2 percent expansion in the fourth quarter.
The central bank said its 7.5 percent full-year target hinged on a recovery in agricultural output. Analysts say soaring short-term interest rates are forcing companies to delay investments, while uncertainty stemming from renewed civil war hangs over investors and consumers.
The GDP figures suggest a marked turn from strong growth last year when the economy expanded 7.4 percent, its strongest growth since 1978, with telecoms and industry leading the way. But high international oil prices in a land that produces no crude and weak agriculture output are challenging its 2007 target of 7.5 percent.
There are other worrying signs for the economy. The rupee is running at record lows against the US dollar, which analysts tie to the island's large trade deficit of more than $1 billion following a rally this year in world oil prices and a jump in food prices.
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