Spotlight: Econ Op-eds in Summary (Week ended 26th February'20)
1. Sri Lanka battered by unceasing ‘regime uncertainty’
· A country that lacks certainty in policies makes it difficult for businesses to operate within it, leading them to lag behind countries with policy certainty. This is often the case with Sri Lanka. Taxes and duties are often changed, along with mandated wage hikes and price controls which ends up affecting business confidence.
· Policy instability is closely connected to monetary instability. Higher budget deficits resulting from these policy changes often create more uncertainty over interest and exchange rates and weaken economic stability. Sometimes, such policy changes made to stimulate the economy often end up delaying economic recovery.
· Even with a change in regime, Sri Lanka has not been able to avoid this uncertainty. In fact, continuous change in regimes causes even more uncertainty. Especially where there are midnight gazettes, sudden import bans, and price controls, this kind of effect is increased. Hence, the country remains under a state of overall economic uncertainty.
2. Guarded optimism of economic recovery in 2020
By: Nimal Sanderatne
· Despite Sri Lanka recording one of the lowest growth rates in 2019, the IMF expects a revival in 2020. This revival, however, depends on an improvement in tourism as well as a pick up in the manufacturing sector, both of which are strongly linked to international developments.
· However, it is unlikely that tourist earnings will reach the level achieved in 2018, and the impact of the coronavirus could even weaken this. The growth in the manufacturing sector would also depend on global trading prospects related to the virus. Thus, the country’s economic growth would depend on the capacity to attract foreign direct investment in to export manufactures.
· Any cautious optimism also depends on policy measures. Thus, the government should focus on policy measures which could stop the country from another fiscal slippage and reduce the external vulnerability through accelerated export growth. Reforms in State owned enterprises would also play a vital role in achieving better economic conditions.
(Compiled by: Chayu Damsinghe, Promodhya Abeysekara & Asel Hettiarachchi)