Sri Lanka: State of the Economy 2017



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Summary:  The IPS’ annual flagship report Sri Lanka: State of the Economy provides a critical assessment of the country’s economic performance and near term outlook for growth and macroeconomic stability. Each year, the report also examines crucial medium term policy priorities to achieve sustained growth and strengthen socio-economic development outcomes for the country.

Against a background of sluggish global economic growth and trade performance, and growing populist sentiment against globalization across the US and Europe, Sri Lanka is positioning itself to raise domestic economic competitiveness and integrate more closely with the rest of the world. With a limited consumer market of 20 million, reviving and sustaining growth to address its troubling debt overhang will clearly depend on generating demand for Sri Lanka’s goods and services abroad.

Despite lackluster GDP growth in 2016, the policy setting suggests that investors can look forward to progressive improvements in the macroeconomic environment as fiscal reforms in particular pay-off. However, a complimentary set of broad-based reforms that address structural constraints on growth need to be implemented alongside. Access to cost-effective and reliable infrastructure services, finance, and land; an efficient institutional and regulatory environment; and a good human resource pool of professional and technical skills, to name a few.

Against this backdrop the Sri Lanka: State of the Economy 2017 report draws attention to ‘Demographics, Labour Markets and Growth’ as its main thematic focus. Two of the biggest constraints holding back labour market efficiency in Sri Lanka are its stringent employment protection laws and its low female labour force participation rates. Another main constraint dampening labour market efficiency in Sri Lanka is the availability of skilled workers and the related large number of Sri Lankan workers annually exiting the labour market in search of employment overseas. At a broader level, other institutional and regulatory reforms that impinge on the competitiveness and productivity of economic activities discussed in some details in the report under ‘Policy Debates: Special Issues’ are:

  • Fuelling Tourism to Move Forward
  • Revisiting Land Policy: Reforms to Match Evolving Economic Needs
  • Managing Natural Disaster Risks: A Need of the Hour
  • Exploring Sustainable Development Goals: What is Ahead for Sri Lanka?
  • Confronting Food Security in Sri Lanka: A Formidable Challenge
  • Battling NCDs for a Healthier Population