Unprecedented declines in merchandise trade, foreign direct investment (FDI) flows, tourism and cross-border migration have all been hallmarks of the economic fallout of COVID-19. As a result, growth expectations for countries worldwide dimmed. Nonetheless, thanks in part to substantial expansionary monetary and fiscal policies being rolled out to achieve pre-COVID economic recovery levels and the development of vaccines, the contraction in global trade and economic output are less than what was anticipated. The Sri Lankan economy too has been impacted by these external developments, witnessing fluctuating fortunes in its external sector performance. This blog discusses the impacts of global economic developments on Sri Lanka’s external sector and suggests ways to cushion them.
Many countries, including Sri Lanka, started practicing mobility restrictions from March 2020. As a result, in parallel to the slowdown of global merchandise production, trade volume also contracted from the second quarter of 2020. However, the World Trade Organization (WTO) estimates that the realised trade contraction in 2020 was just 5.3% contrary to the April 2020 forecast of a sharp contraction by between 13% and 32%. Meanwhile, countries used trade policy to ensure that essential food, drugs, and medical equipment are available domestically. In addition, countries like Sri Lanka used trade policy tools to contain imports to allay pressures on the domestic currency. This article discusses global and Sri Lankan trade during this pandemic, the impact of the pandemic and trade policy on Sri Lanka’s trade and food imports, and policy options for sustained growth in trade and domestic food security.
The government is giving renewed emphasis to increasing agriculture exports to manage the trade deficit and foreign debt burden. Most recently, a draft national agricultural policy has been prepared, with comments being sought from relevant stakeholders. This blog highlights gaps in the international market which the agriculture sector can target, identifies factors impeding export-sector growth in agriculture, and suggests solutions for unlocking the untapped potential in this vital sector.
The formation of the world’s largest regional trade bloc – the Regional Comprehensive Economic Partnership (RCEP) in November 2020 – on Sri Lanka’s doorstep raises fresh questions about how the country will navigate its most recent Asia-centric re-positioning.
The World Health Organisation (WHO) has declared the outbreak of the novel coronavirus (2019-nCoV) as a global emergency. Amid geopolitical tensions, prospects for the Chinese economy and global economic growth have weakened further with the outbreak of the coronavirus. According to a recent paper by the Overseas Development Institute (ODI) that measured which countries are susceptible to the impact of the coronavirus and the resulting slowdown in China’s economy, Sri Lanka was among the low and middle income countries which are most vulnerable to the situation.