The Bottom line Economy
The emerging gloom about the prospects for economic growth in the US and European Union countries has resulted in a downward revision of global economic growth rates. More important in so as far as Sri Lanka is concerned is the fact that the economies of the West are in crisis and their growth prospect is bleak. Several European economies are in severe financial difficulties and their slow economic growth and high unemployment levels in the US do not augur well for Sri Lankan exports. Furthermore, the growing confrontations of the US with countries in the Middle East and a likely embargo on Iranian oil exports have serious economic consequences.
From time to time, the prospect of a booming tourist industry has been struck down by violence in the country. We are once again in a situation when violence may arrest the healthy growth in tourism witnessed in the last two years after the end of the war. In 2011, about US$ 1 billion were earned from 850,000 tourists.
On January 3, the Governor of the Central Bank unveiled the Road Map for Monetary and Financial Policies of the Bank for 2012. This is a practice inaugurated by Nivard Cabraal when he assumed duties as the Governor six years ago. It discusses the strengths and weaknesses, the challenges and threats facing the economy in 2012. It is a particularly useful document since the global economy is expected to be weak with low growth in the leading economies.
International developments will determine to a large extent the performance of the Sri Lankan economy in the New Year. Unfortunately the global economy is not expected to perform well due to slow economic growth in western economies that are significant markets for Sri Lankan exports. The slow economic growth in the US and European countries will affect the country’s exports, especially industrial exports and slow the country’s economic growth. In such an inauspicious international climate it is important to pursue economic policies that provide incentive to investors and strengthen the capacity and efficiency of the economy to develop in the longer run.