In recent years the economy of Sri Lanka has shown a strong upward trend with per capita GDP touching almost $4,000. Since 1977, the Sri Lankan government has been implementing privatization and an open economy for global competition thereby encouraging foreign investments. Subsequent to the quelling of the leftist Janatha Vimukhti Peramuna (JVP), privatization and reforms received a major boost and stress on export oriented growth further assisted in reviving the economy's performance escalating GDP growth to 7% in1993.Realising Sri Lanka's growth potential major international companies like NTT, Shell and Caltex have made huge investments.
- In the ensuing years the economy of Sri Lanka witnessed many upheavals resulting in uneven economic growth but the overall average annual GDP growth was at 5.2% in 1999-2000. Since 2002, following the change in management the country's economy gradually recovered.
- Defense expenditures were reduced which helped in paying more attention on getting the country's larger public sector debt under control. Increased direct foreign investment (FDI), lower interest rates, revival of the stock exchange and increased tourist arrivals have benefited the economy immensely. In 2002 the economic growth escalated to 4% aided by the strong service sector growth. In 2004 GDP growth was at 5.2%
Major Economic Sectors
The major industries of Sri Lanka are:
- Rubber processing
- Agricultural products
- Insurance and Banking
- Clothing and Textiles
- Petroleum refining
- For a long time Sri Lanka's economy has been dependent on agricultural products, garment export and tourism. In recent years the agricultural sector has lost its relative significance with its percentage share in the total GDP following a downward trend.
- The percentage share of agriculture in the total GDP has declined from 28.7% (1984) to 17.8% (2004). The country's average annual growth rate of agriculture was - 0.7% in 2004.
- In the last decade the economy has witnessed significant contributions from other sectors like industrial exports, and the IT sector. There has been a steady growth in revenue from the software companies of Sri Lanka over the last few years with many US and European companies outsourcing their software developments to Sri Lankan organizations.
The percentage share of the services sector in the total GDP is the highest among the various sectors of the economy of Sri Lanka. In 2004 it was at 55.4%. In recent years the percentage share of the industrial sector has been stagnant. In the year 2004 it was at 26.8%.
Sri Lanka's major exports include tea, apparels, ceramics and porcelain. Other agricultural exports are rubber, spices, and coconuts and in recent times foliage plants and flowers are also being exported.
The tourism industry plays a major role in the country's economy with around 400,000 tourist arrivals every year.