Spotlight: Econ Op-eds in Summary (Week ended 08th July '20)

Snapshots

1. SL’s descent to lower middle income: Strategize to move up to high-income level

By: W.A. Wijewardena

· Sri Lanka was downgraded to a lower-middle income country just a year after being promoted to an upper-middle income country. This was a result of the fall in per capita GNI in the country due to the constitutional crisis in 2018 and the Easter Sunday bombing – both man-made shocks which could have been avoided.

· Despite these changes in GNI, the income disparity among citizens as well as across provinces had remained even when the country previously moved to the upper-middle income category, making the sustainability of the status questionable.

· However, reducing these disparities and sustainably moving towards being a high-income country is not impossible. For this, the economy should redirect resources towards investments, improve private participation in development and promote micro and meso enterprises, infuse them with technology and then manage them appropriately so that they would grow into SMEs and later into large corporates.

For the full article – Refer the Daily FT

2. Economic transformation of the COVID-19 battered MSME sector

By: Dr. Nimal A. Fernando

· The MSME sector makes up the backbone of many economies and in Sri Lanka, accounts for over 50% of GDP, and 45% of employment and a significant share of export earnings. They are also key for rural development and reduce dependence on welfare. Dismal growth projections for the global economy also has severe implications for the sector.

· The pandemic has affected the sector through 4 channels - falling demand; reduced input supplies; tightening of credit conditions and liquidity crunch; and rising uncertainty. However, the economic impact within the subsectors is uneven, and so, a substantial number of MSME’s may recover in the next 6-9 months

· This uneven trend can also be seen in the finance gap within the sector. Nevertheless, it remains an issue, evidenced by the low productivity in the sector. The lack of detailed data on credit constraints remains a barrier to formulate reliable-evidence-based policies that can transform the sector so that it can contribute to economic growth and development.

For the full article – Refer the Daily FT

(Compiled by: Chayu Damsinghe, Promodhya Abeysekara, & Eshan de Mel)