External and Internal Shocks Serious Setbacks to Economic Growth
External and internal shocks serious setbacks to economic growth
July 2012
IMPERATIVES FOR ECONOMIC DEVELOPMENT
Economic growth is likely to fall to below 2 per cent this year as external and internal shocks are serious setbacks to the country's economic growth.
The Central Bank has not revised its economic growth forecast for the year, but current conditions suggest that economic growth would slip from 1.7 to 1.3 per cent that it estimated earlier this year to even below 1.5 per cent, if global demand for exports continues to be unfavorable and the prevailing drought conditions persist. The falling international oil prices are the one favorable development that could mitigate the economic slide.
Global conditions
The international economic downturn is widespread. Even China's state capitalism has been unable to weather the global storm and the Chinese economy is expected to slow down this year. China's shaky recovery is losing steam, adding to pressure on its new leaders to shore up growth after a surprise first-quarter decline and launch new reforms. The Indian economy may experience a precipitous decline in its growth. India's economic progress that had been impressive in the last decade has been halted and its first quarter economic growth dipped to just 5.3 per cent. India's slower growth could affect the Sri Lankan economy in several ways. India is an important trading partner. About 5 per cent of our exports are to India. Furthermore, foreign investors tend to view investment prospects regionally. India's troubles could intensify foreign investor concerns on Sri Lanka as a destination for FDI. Moreover our long term economic expectations are linked to the fortunes of India.
The most pertinent global developments for Sri Lanka in the short run is the instability of European economies that have slowed down and reduced their purchasing power of commodities exported by us. European countries and the US that accounted for 54 per cent of our exports
July 2012
IMPERATIVES FOR ECONOMIC DEVELOPMENT
Economic growth is likely to fall to below 2 per cent this year as external and internal shocks are serious setbacks to the country's economic growth.
The Central Bank has not revised its economic growth forecast for the year, but current conditions suggest that economic growth would slip from 1.7 to 1.3 per cent that it estimated earlier this year to even below 1.5 per cent, if global demand for exports continues to be unfavorable and the prevailing drought conditions persist. The falling international oil prices are the one favorable development that could mitigate the economic slide.
Global conditions
The international economic downturn is widespread. Even China's state capitalism has been unable to weather the global storm and the Chinese economy is expected to slow down this year. China's shaky recovery is losing steam, adding to pressure on its new leaders to shore up growth after a surprise first-quarter decline and launch new reforms. The Indian economy may experience a precipitous decline in its growth. India's economic progress that had been impressive in the last decade has been halted and its first quarter economic growth dipped to just 5.3 per cent. India's slower growth could affect the Sri Lankan economy in several ways. India is an important trading partner. About 5 per cent of our exports are to India. Furthermore, foreign investors tend to view investment prospects regionally. India's troubles could intensify foreign investor concerns on Sri Lanka as a destination for FDI. Moreover our long term economic expectations are linked to the fortunes of India.
The most pertinent global developments for Sri Lanka in the short run is the instability of European economies that have slowed down and reduced their purchasing power of commodities exported by us. European countries and the US that accounted for 54 per cent of our exports