Macroeconomic Forecast Sri Lanka

Headline consumer price inflation ended 2011 at 4.9% y-o-y, up slightly from the 4.7% rate recorded in November. The average inflation rate through the year was 6.7%, marking a small increase from the 6.2% average in 2010. This was due mainly to higher average inflation through the first half of the year. Going forward, we expect this current spate of disinflation (which began in May) to continue. Indeed, core inflation hit a multi-year low in December, at 4.7% y-o-y. At the moment, we are pencilling inflation to end 2012 at 4.1%. Inflation through H112 is expected to be much lower than in the latter half of the year.

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