The Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Finance and Planning

¶ 01 Hon. Speaker, on behalf of the Minister of Finance, Planning and Economic Development, I provide the following answers.

¶ 02 Question No. 1715/2025 – National Account Ratio, Annual Inflation and National Economic Growth Rate from 2004-2014: Details

¶ 03 (a)

¶ 04 (i) As there is no clear definition provided for “ratio of the national account,” the Hon. R.G. Wijerathna contacted the Department of Census and Statistics by telephone for clarification. Accordingly, what was required were quarterly statistics on economic growth rates for the specified years. The quarterly economic growth rates from 2004 to 2014 are presented below. These show variability, with quarterly values such as 16 per cent, 4.8 per cent, and 2.28 per cent cited in certain quarters, reflecting fluctuations.

¶ 05 Quarterly economic growth rate (%)

¶ 06 - 2004: Q1 6.0 | Q2 6.0 | Q3 4.9 | Q4 4.9 - 2005: Q1 5.2 | Q2 6.4 | Q3 6.9 | Q4 6.4 - 2006: Q1 7.8 | Q2 7.7 | Q3 7.7 | Q4 7.4 - 2010: Q1 7.1 | Q2 8.5 | Q3 8.0 | Q4 8.6 - 2011: Q1 7.2 | Q2 9.2 | Q3 7.6 | Q4 9.7 - 2012: Q1 5.2 | Q2 6.8 | Q3 5.9 | Q4 4.0 - 2013: Q1 0.5 | Q2 1.3 | Q3 2.2 | Q4 5.1 - 2014: Q1 10.6 (note sequence reflects reported quarterly variability)

¶ 07 Note: - Data for 2004, 2005, 2006 and 2010 are based on base year 2002. - Data for 2011 to 2014 are based on base year 2010.

¶ 08 (ii) Annual inflation and annual economic growth for those years varied, with inflation ranging from 3.3 per cent to a maximum of 11 per cent, alongside the growth rates above. Summary:

¶ 09 - 2004: Inflation 9.0% | Growth 5.4% - 2005: Inflation 11.0% | Growth 6.2% - 2006: Inflation 10.0% | Growth 7.7% - 2010: Inflation 6.9% | Growth 8.0% (representative; annualized from quarterly) - 2011–2014 (illustrative): Inflation moved down to 3.3% by 2014, while growth around 5.0% in 2014.

¶ 10 Inflation is measured using the Colombo Consumer Price Index (CCPI) historically, and from 2015 the National Consumer Price Index (NCPI) became the official price index for inflation. GDP growth is estimated using GDP at constant prices. There is no reconciliation enforced between these series at publication.

¶ 11 (iii) and (iv) GDP is compiled at current and constant prices, from which a GDP implicit price deflator can be derived. While the deflator indicates overall price changes relevant to GDP compilation, it is not expected to equal consumer inflation (CCPI/NCPI) because: - Consumer inflation is based on a consumer basket, while the GDP deflator reflects prices of all goods and services produced domestically, including investment and government services, and excludes imports. - Therefore, exact reconciliation is not expected.

¶ 12 Further, in monetary terms, nominal expenditure over a period equals the product of the money stock (commonly M2b) and velocity, which in equilibrium equals real GDP times the general price level. Hence, the product of real growth and inflation should align with growth in money supply times changes in velocity. Often, velocity is not constant. Accordingly, a strict reconciliation in annual data is not applicable.

¶ 13 (b) Not applicable.