Alternative hubs are being considered due to the pandemic and if Sri Lanka (SL) could position itself right it could be a transitional hub and have good regional distribution warehouses as the country is much closer to Europe than other Asian countries and India next to us, recommended speakers at the Sri Lanka Economic Summit 2021 last week.
The biggest opportunity Sri Lanka has is its ports. The demand for deep ports is increasing which could be a major opportunity for the country to harness, said Hemas Holdings Group CEO, Kasturi Wilson.
Broadening the tax base, improving tax administration, providing autonomy to the Central Bank to conduct data driven, proactive monetary policy were key recommendations of the Summit.
Speakers proposed that State Owned Enterprises have a pricing policy that enables full cost recovery and social protection to be through well designed income transfers.
It was noted that there would be major opportunities in the services sector as the 4IR (Fourth Industrial Revolution) is poised to leapfrog and also opportunities from post COP26 to mitigate climate impact (green financing).
Industry experts said Sri Lanka should make good use of its proximity to India and China’s Belt and Road Initiative.
The informal sector could leverage on the growth in productivity in the services sector.
“Every crisis has a silver lining, never waste a crisis to build back better. We are now on the path to debt sustainability. We are changing our debt profile,” said Governor, Central Bank, Ajith Nivard Cabraal.
It was highlighted that Sri Lanka in the context of South Asia is one of the four hardest hit economies by the pandemic. But the silver lining is that the economic impact from the second and subsequent waves is much more muted.
Central Banks are expected to tighten policy in 2022. The Federal Reserve is to raise rates by 50 BPS in the second half of 2022 and the CBSL is likely to raise rates by 100-150 BP
]]However, it was noted that most economies in 2022 are expected to grow beyond the growth average of the 2015-2019 period.
Inflation is likely to be enduring than transitory and higher than the 2015-2019 period; China and USA CPIs are at two decade highs.
We need to revive the economy by introducing a substantial growth element that will take us to 6%+ growth momentum, Cabraal said, stressing the need to gradually adjust the debt profile, revive and replenish the external sector and improve the doing business framework.
He said the country should be reset in a way that lockdowns would not be needed and added that it is vital to get macro fundamentals in shape to improve investor confidence.
“We are at a crucial point in our economic development trajectory. The steps taken now by the Government and private sector will determine how we emerge from our current challenges and signal the direction for the nation’s economy and the prosperity of its people,” said Deputy Vice Chairman, Ceylon Chamber of Commerce, Duminda Hulangamuwa.