The one defining feature of the shifts in economics, geopolitics and society taking place today, is the rise of Asia. What are the factors influencing this rise? And what lessons do they hold for Sri Lanka’s growth journey?
February 2014 marked five consecutive years of single-digit rates of inflation in Sri Lanka – supposedly the longest spell in the country’s post-independence history. Quite rightly, the Central Bank of Sri Lanka (CBSL) can take its share of credit for this success, especially in view of historic high and volatile inflation rates of the past. Indeed, the scale of monetary stability becomes clear when considering the fact that inflation rates hit a peak of 22.6 per cent in only 2008 before settling to single digit levels from February 2009. Despite five years of a moderate inflationary environment and higher average economic growth during that period, private investment trends have been modest. The monetary authorities are struggling to revive credit appetite in spite of signaling the end of a tight monetary policy stance way back in December 2012. Credit growth to the private sector was extremely sluggish at 7.5 per cent in 2013. It has continued in the same vein so far in 2014, recording a growth of only 4.4 per cent year-on-year in February.
Last week, a team of Korean experts, who had been tasked with making recommendations on five policy areas for Sri Lanka (including SME development), submitted their final report to the authorities. I was particularly interested when I heard of this visit as I just completed a Visiting Fellowship at the KDI where my key research area was industrial policy in Korea, with a focus on SMEs. In the final research paper, I put forward some aspects of Korea’s SME development that may hold lessons for Sri Lanka. This article highlights some of those ideas for further debate.
The Talking Economics Editorial Team met with Dr. Saman Kelegama, Executive Director of the IPS, to get his views on the outlook for 2014 for the global economy and for Sri Lanka. We reproduce the interview here…
Can a country bring about economic reforms in just four years after a war? This article looks at post-war Georgia where the progress was transformative. She argues that while circumstances differ between countries, the Georgian case demonstrates that coherent and focused efforts can bring about significant transformation in just four years. Yet, sustaining the positive trajectory requires a focus beyond aggressive reform to also include important elements of economic governance and institutional strengthening.