This is supporting the monetary policy formulation process in a more proactive and forward-looking manner. The Central Bank will  10  continue to improve model-based projections through building sound technical infrastructure for inflation forecasting and macroeconomic analyses. Moreover, the monetary policy formulation process is also being upgraded by introducing a forecast calendar, which outlines schedules for projections and revisions of forecasts linked to the availability of important economic data and events. Accordingly, during each monetary policy round, two technical staff level meetings are conducted to obtain inputs and feedback for forecasting followed by a pre-Monetary Policy Committee (MPC) meeting attended by the members of the MPC and technical staff to discuss projections and sectoral developments. The formal MPC meeting takes place subsequently to make recommendations to the Monetary Board. The number of MPC meetings during a year were also reduced to 8, allowing sufficient time for technical staff to undertake more sophisticated macroeconomic analysis. In the new forward-looking framework, it is of utmost importance to monitor developments in both current and future economic conditions. In this regard, we will strengthen the existing surveys of expectations and economic conditions to gain forward-looking insights to improve accuracy of forecasts. With regard to monetary operations, the domestic money market is being actively managed through OMO to steer the Average Weighted Call Money Rate (AWCMR) in line with the monetary policy stance of the Central Bank.

Hence, effective and sustainable longterm policy measures have to be implemented for accessing foreign markets through exploiting trade and investment opportunities. We also observe that frequent natural calamities hamper economic activity resulting in a moderation of economic expansion. This highlights the need for diversification of growth drivers in the economy as well as putting the necessary measures in place to strengthen the economy’s resilience through mainstreaming sustainability into the planning and budgeting processes and improving disaster preparedness. In the global context, after having a series of economic distortions and negative shocks after the Global Financial Crisis, now the global economy is gradually recovering. Investment conditions have improved and global trade also rebounded in 2017. So, we need to exploit opportunities created by the revival of global growth supported by synchronized economic expansion in Europe, Japan and the US for the first time since the Global Financial Crisis. Better prospects in Europe and the US, which are our two largest markets, are clearly tailwinds. This is growth positive for Sri Lanka. However, we should also be mindful that gradual normalisation of monetary policies in the advanced countries could pose some challenges to the economy on both external and fiscal fronts. Sri Lanka is gradually transforming to upper middle income economy status. Sustained progress will inevitably involve greater integration with the world economy. While creating opportunities, this will also expose the economy to greater uncertainties and risks.