Sri Lanka has become one of the fastest growing economies of the world following their 26-year civil war ending in May 2009. During the final year of their civil war, Sri Lanka’s GDP decreased from 6% to 3.5% as exports were hit due the global economic crisis according to the World Bank. Following the post-war reconstruction, the International Monetary Fund (IMF) recorded the economy growing at higher rate of 8.2% of GDP growth in 2010. The Colombo Stock Exchange (CSE) was Asia’s best performing stock market between 2009 and 2010 almost tripling in value during that time.

World Bank Endorsement

According to the World Bank, poverty rates decreased by 50% from 15% between 2006 and 2007 to 9% between 2009 and 2010. The World Bank approved a $57.4 million credit to strengthening Sri Lankan SMEs in 2010. The Sri Lanka government has a clear strategic vision called the Mahinda Chintana document of 2010. The strategy outlines three major goals including doubling per capita income through sustained high investment, shifting the structure of the economy, and improving living standards and social inclusion.

In 2012 the World Bank is committed to improve Sri Lanka as it will begin to renew its Country Partnership Strategy (CPS) for Sri Lanka for the next four years till 2016. This CPS program aims to support Sri Lanka as it moves to a middle income country. The support of the World Bank is a positive step towards the recovery of Sri Lanka during its post-war reconstruction.

Tourism Industry

The Sri Lanka has become a tourist attraction due to the attractiveness of its famous beaches, ancient heritage sites, as well as resorts located within its mountainous regions. In 2010, The New York Times placed Sri Lanka at number 1 out of 31 places to visit. Sri Lanka’s national newspaper since 1918 The Daily News recently reported in March that the Department of Economics of Colombo University has called for applications in its diploma course in Tourism, Economics, and Hotel Management. The initiative is to prepare the human resources of Sri Lanka’s tourism industry to attract 2.5 million tourists by 2016. However the hotel room supply needs to be more than doubled to meet these tourism targets according to HVS India.

Tourism grew 39.8% in 2010 compared to 2009 due to political and economic stability. The country declared 2011 as Visit Sri Lanka as it co-hosted the Cricket World Cup between February and April 2011. According to the Sri Lanka Tourism Development Authority 85,874 tourists arrived during January 2012 compared to 74,197 in January 2011 leading to a 15.7% increase. In February 2012 the tourist arrivals were 83,549 compared to 65,797 during the same time period one year before ending up with a 27% increase. The total tourist arrivals reached 855,975 in 2011. Popular destinations include Bentota, Colombo, Galle, Kandy and Sigiriya which offer their beaches, casinos, shopping, and heritage destinations.

Hotel Shortages

Sri Lanka has become a hit with the Middle East and Arab countries. According to HVS the Sri Lankan hotel industry needs an additional 41,000 rooms to meet the 2.5 million target set for 2016. The Sri Lanka Tourism Development Authority (SLTDA) indicates the county has only 13 registered 5-star hotels, 10 registered 4-star hotels, 11 registered 3-star hotels, 59 registered below 3-star hotels, and a little over 100 unregistered hotels. The unregistered and non-graded hotels are guest houses, bungalows, youth hostels, and plantations which were converted into hotels with cheaper rates and less luxurious. Most tourists would feel comfortable with registered and graded hotels which would be more accountable to their tourists.

Registered hotels accounted for 20,609 rooms in 2010. In 2011 the Ministry of Economic Development announced plans to double the hotel room capacity to 45,000 by 2016. Current capacity is 22,745 rooms according to the Lanka Gazette during the first quarter of 2012. Expect the hotel construction and renovation industry to boom as Sri Lanka reaches their targets of 2.5 million tourists by 2016. In 2011 855,975 tourist arrivals were recorded compared to 654,476 in 2010. Currently Sri Lanka is expected to exceed 1 million tourists by the end of 2012.

Sri Lanka Tomorrow

The future of the tourism industry rests in developing enough supply to support the demand. The international support from both the World Bank and the IMF shows Sri Lanka is set for continued prosperity. Sri Lanka is taking the initiative to rebuild its infrastructure following their long civil war. The second international airport will be completed by 2018 while the first Phase of the construction will be completed by October 2012 to handle 1 million passengers.

References

International Monetary Fund http://www.imf.org

World Bank http://www.worldbank.org/

Sri Lanka Central Bank http://www.cbsl.gov.lk/

Department of Census and Statistics http://www.statistics.gov.lk/

Sri Lanka Economic Association http://www.slea.co.nr/

Sri Lanka Tourism Development Authority http://www.sltda.gov.lk/

The Economist http://www.economist.com

Daily News http://www.dailynews.lk

Market Watch http://articles.marketwatch.com