Sri Lanka’s debt repayment remains a major problem in the future
The road to recovery and the re-opening of the economy following the pandemic will not apply to all economies. But there is optimism that the Indian economy will get back to pre-COVID-19 levels where a growth of 10 per cent is anticipated during 2021, said Aayushi Chaudhary, Economist India and Sri Lanka, HSBC Securities and Capital Markets (India) at a webinar held in Colombo. The event was organised by the Ceylon Chamber of Commerce last week.
She said two opposite forces are at play at present where COVID-19 cases are concerned, where cases have been rising in many parts of the world along with the roll out of the vaccine procedure. Although the tunnel is dark, there is light at the end of it. European countries will be the worst affected before it gets better followed by the US. Many rich countries have brought the vaccines depriving poor countries with a rising number of Covid-19 cases.
But some countries in Europe will not get back their economies back to pre- COVID-19 pandemic levels. With the roll out of the vaccines economies will get better with a loosening of lockdown restrictions. However unemployment is likely to remain high during the first quarter of 2021 affecting the labour market. The other factor where the road to recovery is concerned is that consumers will be able to utilise their savings during the pandemic lockdown period flooding the market with cash. Figures show that the aggregate saving of people during the first few months of the pandemic in the US was US$1.9 trillion and 480 billion Euros in Europe.
Referring to Sri Lanka, she said the most important challenge is the rollout of the vaccines during the 2021 fourth quarter to curb the virus to resuscitate tourism, investment etc. “However we are worried about the growth potential during this period. Sri Lanka’s debt repayment remains a major problem and a long term solution has to be found in the future.”
Chief Economist of the Ceylon Chamber of Commerce Shiran Fernando said the global perspective has shown positive signs. The growth was driven mostly by China during the pre-COVID-19.period. As geo-politics has seeped into the region many are not optimistic and are taking a cautious approach to it. The Sri Lankan economy is seen with muted growth where household consumption during the past nine months have seen a 5 per cent decline. From a regional perspective it is important that Sri Lanka focuses on its growth potential.
Director of Economic Research-Central Bank Dr. Chandranath Amarasekera said due to COVID-9 the economy contracted by 16.3 per cent in 2020 but there was a quick pick up in the third quarter by 1.5 per cent. However in 2021 the growth projection for Sri Lanka has been forecast as 6 per cent in 2021.The private sector credit growth has been seen as Rs.350 million in 2020 and is expected to grow up to Rs.850 million in 2021. But due to the volatility of external sector exports declined by $2 billion in 2020.
Chairman and non-executive director Amal Cabraal said it is likely that the impact of the COVID-19 pandemic will continue for the next few years slowing down global growth. At global level the pandemic has increased debt risks and will affect emerging markets like Sri Lanka. Managing the pandemic in Sri Lanka has led to increased mobility that will have a beneficial effect on the whole economy. Deficits in the GDP will inevitably lead to borrowings. Vice President Research Asia Securities Lakshini Fernando said 2021 will see consumption driven growth. Agriculture and the industrial sector are expected to recover more than the services sector.