The market report, "Sri Lanka Business Forecast Report Q1 2015" from Business Monitor International has therefore maintained the short-term political risk rating for the country at 77.1 out of 100.

The agency has upgraded their 2014 real GDP forecast of 7.1%, from their previous estimate of 6.8%, as they expect the country's manufacturing and services sectors to maintain their strong performances in 2014.

It maintains that the Central Bank of Sri Lanka (CBSL) will keep its standing lending facility rate and standing deposit facility rate unchanged at 8.00% and 6.50% respectively over the course of 2014, as inflation will remain relatively subdued and the strong economic growth momentum seen in 2013 will likely continue this year.

The ranking agency continues to expect the Sri Lankan rupee to remain fairly stable against the US dollar over the course of 2014, as the improvement seen in the external accounts for 2013 will likely continue this year, while the central bank continues to build up reserves.

"We are forecasting the currency to trade within LKR130.00-131.50/US$, and the current account deficit to narrow to 3.5% of GDP in 2014."

"We believe that the pace of fiscal consolidation in Sri Lanka will remain slow, as we expect the impact of ongoing tax reforms to remain marginal, and see a substantial reduction in government expenditures as unlikely," the agency says.

The Sri Lanka Business Forecast Report by Business Monitor International (BMI) includes three major sections: Economic Outlook, Political Outlook and Business Environment. (PRIU)