Spotlight: Econ Op-eds in Summary (Week ended 28th August '19)
Spotlight: Econ Op-eds in Summary
Week ended 28th August '19
1. Political compulsions are destabilising the economy
By: Nimal Sanderatne
· Politically driven economic policies targeting the upcoming elections can lead to a fiscal slippage. This could result in higher public debt that would create adverse impacts on Sri Lanka’s macro-economic fundamentals. The resulting debt-servicing costs could eat up government revenue, limiting funds that would be available for other essential expenditures.
· Increases in foreign debt have already exceeded expected thresholds. Therefore, this can lead to a debt trap, particularly if those burrowed funds aren’t utilized to increase export earnings. Further, the dominance of political narratives would distort economic issues in the run up to the elections.
· Regardless of the outcome of the election, the next government would have to deal with the above adverse impacts. The economy is likely to get worse, as the adoption of sound economic policies will be put aside until a new parliament is elected. Hence restoring the economy will be a massive challenge.
2. Time that Govt. sees reality – CCI drops to 36
By: Rohantha N.A. Athukorala
· The economic vision for Sri Lanka set in 2015 has yet to fully materialize, with key initiatives to drive tourism being dead in their tracks. This results in an expectation that the country’s second quarter growth could be negative, resulting in year end growth of only 2.9% - one of the lowest in the region.
· The low growth is mainly driven by a fall in consumer and business confidence. This sentiment was emulated in both the consumer and business confidence indices released by Nielsen, with the Consumer confidence index hitting an all-time low of 36 and the Business confidence index hitting a low of 81.
· Prior to the Easter Sunday attacks, overall volume of household consumption had dropped through 2017 and in 2018 up to the third quarter. This trend was reversed through tax breaks rather than an increase in household income. However, in the last three to four months things have once again become very challenging for the Sri Lankan household with even consumption of milk powder contracting.
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(Compiled by: Chayu Damsinghe, Promodhya Abeysekara & Asel Hettiarachchi)