Sri Lanka: State of the Economy 2018




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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.

Sri Lanka’s most significant economic milestone in 2017 was the gradual reclaiming of macroeconomic stability with prudent fiscal, monetary and exchange rate policy management. Stronger economic fundamentals, and the expected boost to investor sentiment, offer a transformative promise of sustained and lasting growth. The question is whether despite the positive progress on the macroeconomic front, private investors will hold-off, uneasy at the prospect of what promises to be testing electoral times ahead for the country.

Within a narrow growth corridor, the Sri Lankan economy remains exposed to both domestic and external shocks as never before. The immediate worries on the external front are the threat of rising oil prices and a shift to a more decisive phase of interest rate tightening in advanced economies. On the domestic front, Sri Lanka’s economic vulnerability to climatic-related shocks is on the rise.  Massive losses due to disasters within a relatively short time period have seen the country climb up the ranks to fourth place in the Global Climate Risk Index for 2018. Against this backdrop, the Sri Lanka: State of the Economy 2018 report draws attention to ‘Climate Change, Food Security and Disaster Risk Management’ as its main thematic focus to examine the many interrelated socio-economic impacts that need policy consideration.

Climate change impacts exacerbate prevailing conditions of inequality. Disasters have a disproportionate impact on those with low incomes; they face higher risks from poorer living conditions, and are more reliant on vulnerable sectors like agriculture for livelihoods.

The report addresses key topics on:
• Transitioning Sri Lanka towards a Climate Resilient Low Carbon Economy
• Climate Change, Food Security and Rural Livelihoods in Sri Lanka
• Climate Change and Disasters: Managing the Risks in Sri Lanka
• China’s Belt and Road Initiative (BRI): A Sustainable Partnership for Sri Lanka?
• Linkages in Climate Change, Migration and Remittances in Sri Lanka
• Building Resilience: Public Investments to Improve Sri Lanka’s Rural Economy
• Managing Risks through Sri Lanka’s Microinsurance System
• Addressing Nutritional Risks: A Persistent Problem in Sri Lanka