Gross Domestic Product grew 5.5 per cent in the first three months this year compared with a modest increase of 0.5 per cent in the corresponding period of 2002, Choksy said.

He said the ceasefire between government forces and the rebel Liberation Tigers of Tamil Eelam (LTTE) contributed to better economic activity which saw tourism earnings rise by 28 per cent.

Industrial production was up 4.6 per cent while foreign remittances from Sri Lankans employed abroad rose by 11 per cent, strengthening the island's external reserves position to cover 5.1 months of imports, he said.

"Continuation of the ceasefire has led to enhanced service sector activities particularly in the telecommunications, transport, hotel and related services," Choksy said.

The growth follows a recovery in 2002. Sri Lanka recorded its first recession in 2001 when GDP growth was a negative 1.5 per cent.

The LTTE and the government have been observing a ceasefire since February 2002, although the peace process has been deadlocked since this April when the Tigers suspended participation in talks.