Sri Lanka's economy grows 8.3%

The economy has apparently recorded a growth of 8.3% in 2011, a record but this particular citizen does not feel particularly well off.

One reason is that my pay has been stuck at virtually the same level as it was in 2008. Wages were frozen due to the poor performance of the company. There were also unfortunately, too few job opportunities opening, and what ones that did open up were taken by 'Sri Lankan 'returnees', fleeing recession in the West, so I was unable to shift to a better job. Expenditure, however has been growing steadily.

I more or less gave up alcohol a few years ago, it was simply getting too expensive and I constantly thank the heavens that I don't smoke but despite my frugal habits things have been getting expensive. The official inflation indicator omits both of these so I'm roughly in line with that at least, but still the costs keep mounting.

I remember telling a friend when we were budgeting for trip in the mid 1990's that we only needed to budget for the meat items, however many vegetables we bought it would never come upto more than 500-600 rupees. Now buy a handful of vegetables or fruit and you are down two thousand rupees.

What exactly does the growth in GDP mean to me?

Well, to start with, it is a fairly crude measure of output, have a look at the definition for GDP. It is generally stated in real terms, which means after discounting inflation. One problem with Sri Lanka's GDP number is that the inflation index probably understates real inflation because it omits items like tobacco, alcohol and has been re-jigged a few times to show lower numbers. Second it just adds Government spending, whether productive or not, so high levels of Government spending contributes to an improved GDP growth rate, even if it does not benefit a large number of its citizens.

When GDP numbers are a bit ropey, a good proxy on growth is energy consumption. I have been looking at the units of electricity sold over the last few years and this shows a few surprises, see table below.


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Year	2006	2007	2008	2009	2010
Electricity sales	7,832	8,276	8,417	8,441	9,268
Growth in electricity		5.67%	1.70%	0.29%	9.80%
Electricity generated	9,389	9,814	9,901	9,882	10,714
Electricity lost	1,557	1,538	1,484	1,441	1,446
Loss as a % of sales	19.88%	18.58%	17.63%	17.07%	15.60%

Historically, I believe Sri Lanka's economy has grown at around 1.5 times the growth in electricity usage. Looking at the table above, 2008 and 2009 were rather lean years, while 2010 was a bumper one, which corresponds more or less to my own experience. Unfortunately the data for 2011 was not available. The data was taken from the Central Bank's Socio-economic data 2011.

What is also interesting is the wide gap between electricity generation and electricity sales. Does this represent losses in transmission and piracy? If so it is pretty serious, some 15% of electricity generated has been lost in 2010, although it is an improvement from the 19.88% in 2006.

Coming back to my own problems, growth to me means improvement in my lifestyle, which in turn is dependent on two things; my income and my expenditure. My income depends on the availability of jobs, the more jobs there are in relation to workers, the greater the price paid. What determines job creation? In a word, investment. Investment that creates jobs.

The second factor is the cost of living - the further my hard earned rupee can go, the better off I will be.

Some sectors have undoubtedly recorded good growth, tourism and its allied industries, motor vehicle sales, construction, banks and leasing companies. People working for these sectors of the economy should have seen growth in their incomes although some of this would have been offset by increases in prices.

Perhaps I'm just in the wrong sort of job. Most of the investment has come from existing companies expanding their operations so while there has been an increase in direct customer service type jobs, from salesmen to waiters, to drivers to maids,to cashiers and cooks, there has been little demand for back office work of that would suit an 'Office Wallah' like me. These usually come when new companies are set up which usually means new investors, either locally or from overseas. This has been lacking, people who are already in business are willing to expand a bit here and there, put up a new hotel or a block of flats, especially when interest rates are low. The big new investments have been in basic infrastructure and seemed to be manned by the Chinese.

If I wait patiently and growth continues at this rate, perhaps the benefits will trickle down to me. With interest rates and taxes on the rise that is beginning to look a little unlikely.


Update 16.4.2012

Electricity consumption grew 8.2% in 2011 to 10,024Gwh, slower than in 2010, but still healthy. Losses between generation and sales dropped to 13%. More info here.