Sri Lanka will have to swim upstream amid global troubles: George Soros

ECONOMYNEXT – Sri Lanka will have to ‘swim upstream’ as the external global environment becomes more hostile and funds flow out of developing countries and China’s economy becomes unstable, investor George Soros said.

He said the world was now in a deflationary situation and developing countries that benefitted from a commodity boom was no longer doing so.

With interest rates in the US going to positive territory the trends may get stronger he said.

There was instability in China and its currency was falling he said. The falling Chinese currency will export deflation, he said.

He said the money was no longer coming to developing countries and harsh choices will have to be made instead of waiting for things to get better.

In addition to people connected to his Open Society Foundation, his investment person was also in Sri Lanka to look for opportunities, he said.

He saw opportunities in Sri Lanka’s tourism.

The US Fed and the Bank of England had managed to prevent a return to a great depression, Sorso said.

However falling oil prices was increasing disposable income which people were not using to consume but to repay debt, he said.

This was bad for financial markets as people will put off consumption in the expectation that prices will fall next year, he said.

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The deflationist mantra, which is used by many economists to promote positive inflation however has not happened in Sri Lanka.

As oil prices were cut in 2015, people not only stepped up consumption, and even borrowed to buy durable goods, helped by central bank credit (money printing), creating an unsustainable boom.

 

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