ECONOMYNEXT – Sri Lanka is projected to grow 4.4 percent in 2024 as the country emerges from an economic crisis but the recovery hinges on maintaining macroeconomic stability and continuing reforms, the World Bank said.
“Sri Lanka’s recent economic stabilization, market by four quarters of growth and a current account surplus in 2023 is a significant milestone,” David Sislen World Bank Regional Country Director said in a statement.
“There is an opening for Sri Lanka to deepen its participation in global value chains and take advantage of its geography and an evolving global landscape to generate jobs and sustain growth.”
The export potential included services like tourism and Sri Lanka had to reduce red tape and allow local and foreign investments to tap the potential, Country Manager Gevorg Sargsyan said.
The World Bank said Sri Lanka has a potential to increase exports by an extra 10 billion US dollars a year (exports are now around a billion dollars a month), a year.
Sri Lanka should target more export oriented foreign direct investment, he said. No investments were coming despite tax incentives he said. Tax breaks are not helping he claimed.
There was red tape, as well as inward orientation, he said.
Sri Lanka was hit by the worst currency crisis in the history of its central bank in 2022 after aggressive macro-economic policy involving rate and tax cuts to boost growth and what macroeconomists said was potential output.
In the stabilization crisis that usually follow currency crises in Sri Lanka, output shrank by 7.3 percent in 2022 and 2.3 percent in 2023.
The World Bank said Sri Lanka’s poverty as measured among lower middle class, nations rose to 25.9 percent in 2023 from 13.1 percent from before the currency collapse.
Poverty on the same measure is projected to fall to 23.4 percent in 2024 and 21.3 percent in 2025.
There is an uptick in Sri Lanka’s infant mortality rate which is bad for the future, Shruti Lakhthaki said.
Sargsyan claimed that Sri Lanka’s should have more direct taxes.
In South Asia in general women are under-employed due a variety of reasons including cultural factors, keeping down economic potential, official said. The region also had higher trade taxes.
Sri Lanka had not only import duties but also para tariffs going beyond them.
(Colombo/Oct10/2024)