Ajith Nivard Cabraal: Overview of financial and economic developments in Sri Lanka Keynote address by Mr Ajith Nivard Cabraal, Governor of the Central Bank of Sri Lanka, at the Opening of the Financial Services Academy at the Centre for Banking Studies, Rajagiriya, 5 March 2007. *  *  *  Ladies and Gentlemen: Today we all have gathered here to witness an important step towards the development of the financial landscape and knowledge pool of the country, the establishment of the Financial Services Academy, a landmark organization that we hope, would shape the future of our financial services industry. As we know, the Sri Lankan economy recorded a growth of 7.8 per cent in the first three quarters of 2006 and according to current available data, it is very likely that the economic growth in 2006 would be well over 7 per cent. This will be the highest since 1978. Towards such growth, the contribution of the services sector was easily the highest and of such high growth sector, the growth in financial services was highly significant. It is therefore widely acknowledged that the contribution of the financial sector for the achievement of growth of the country is enormous, and whatever we do in that connection, would be of overall immense value. The developments in the financial sector also helps the economic growth through several other channels as well: It improves the efficiency of business processes, attracts investment, reduces unemployment and enhances access to finance, to name a few.
2/4  BIS - Central bankers' speeches  There is also uncertainty surrounding geopolitical developments and the impact on the supply side if events on the ground worsen and they create further energy and commodity price shocks and disruptions. In such case, inflation and output would be worse than projected in 2023 and 2024. On the other hand, if there is an improvement in geopolitics, energy prices may fall as rapidly as they rose. Therefore monetary policy has to act in the middle of a lot of uncertainty in a number of areas, hence monitoring and pacing is still very important. Domestic economic developments Let me now turn to domestic economic developments. The Cyprus economy, continued to record noteworthy GDP growth, despite the outbreak of the war. Real GDP growth in Cyprus expanded by about 6 percent during the first half of 2022, mainly driven by a faster than expected recovery in tourism-related activities and, to a lesser extent, by growth in information and communication activities and in professional services. At the same time, weakness in the Cyprus GDP performance could be expected to become visible towards the end of 2022 and the first half of 2023, primarily owing to the anticipated worsening in the international economic outlook, which also has an impact on the domestic developments. For 2023, GDP growth is expected to reach 2.5 per cent. In terms of inflation, the Harmonised Index of Consumer Prices (HICP) reached 9 percent in September 2022 compared with 3.6 percent in September 2021.