Spotlight: Econ Op-eds in Summary (Week ended 04th November'20)
1. Fiscal policy responses to COVID-19 What can we learn from the international context
By: Chamini Thilanka
· The COVID-19 pandemic had disrupted economic activity around the world. A pickup or a maintenance of economic activity in such an instance is greatly dependent on the income flows of economic agents being uninterrupted. This is where fiscal measures taken by each country play a major role.
· Globally, governments of COVID-19 affected countries have adopted various fiscal policy measures in line with the IMF/WB recommendations. However, each country’s policy responses vary depending on the income levels and its financial position, with developed countries having more ability than developing countries.
· In Sri Lanka while many actions had been taken to strengthen the health sector preparedness and to minimize the economic fallout, the limited fiscal space has impacted the adequacy of such measures. As such while the government should continue to provide assistance, such programs need to be well-focused and followed up with pre- and post-implementation evaluation to ensure an optimum impact on the economy.
2. Prospects and uncertainties in the balance of payments
By: Nimal Sanderatne
· Global uncertainty with COVID-19 alongside the recent COVID-19 wave in Sri Lanka make economic projections difficult to make. The consensus on the containment of the global pandemic would be in late 2021. In line with this, global growth is expected to pick up in the latter half of 2021, with emerging markets seeing a stronger recovery than developed economies.
· The second wave of Covid in Sri Lanka places significant risks to production and export capacity. This in turn, places difficulty increasing exports as demand for various exported products in western markets have reduced as well. Since import controls have already been imposed, cutting imports further from current levels is quite a difficult task.
· An improvement in the BOP is very much dependent on a recovery in the global economy. This can be strengthened by obtaining loans or swaps from multilateral agencies in the coming months. If greater foreign funding is secured however, the BOP can record a surplus for 2020 and 2021.
(Compiled by: Chayu Damsinghe, Promodhya Abeysekara & Malitha Gooneratne)
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