Sri Lanka needs to develop macro-economic stability, build up consumer confidence and promote private sector dynamism to take advantage of the current post conflict favourable conditions, according to Dr Yeah Kim Leng, Chief Group Economist of Ram Holdings Berhard Malaysia,
A panel discussion at the forum |
Addressing a CEO/CFO forum organized by the Institute of Chartered Accountants Sri Lanka in Colombo this week, the visiting economist also warned that countries must be in prepared for oil price hikes and the resultant spiral of price hikes.
Contrary to the accepted belief, Dr Kim didn’t think that corruption and governance are critical issues.
Explaining the initiatives taken by Malaysia, he detailed how they used long term bonds as a key source of finance in promoting long term development and asserted that Malaysia targeted to achieve developed status by 2020. He was of the view that Sri Lanka too should be promoting this model.
Addressing the global economy he said that most advanced countries are yet in recession with the US carrying a staggering 9% unemployment rate with over five million unemployed. He feels real recovery could be expected only in around five years time while countries like India, China and Brazil will lead the growth with further expectations of a commodity boom.
Dr Kim said that Sri Lanka’s exposure to the global financial markets was less significant and the country did not experience a recession while recent trends have been promising with booming tea prices, lower cost of imported commodities and the vastly narrowed trade deficit strengthening the external finances. Dr Kim expects the Sri Lanka’s economy to grow at an average 5.5 % in the next five years while India is expected to move up to 7% with China likely to achieve 8% in the next decade. He expects Sri Lanka to make a concerted effort to reduce the fiscal deficit and curb the imbalances in the inflation, interest rate and the exchange rate vital elements of the economic process.
Senior Banker Rajendra Theagarajah speaking on a banking perspective, said he was of the opinion that the banking sector needs a consolidation to form a strong sector and at the present moment the sector capital shortfall is around Rs 25 billion while the yields are far too low with negative equity with high dependence on interest income. “Our banking model needs to be re-examined to meet the challenges of the Sri Lanka’s post war development thrust,” he said.
Indrajith Aponso, Senior lecturer of Economics of the Colombo University explaining the present low inflation regime questioned the validity of this scenario in the background of mounting wage pressures.
Similarly he felt that the market mechanism seem to be failing as demonstrated in the paddy sector where even with supply improvements the prices tend to move up. Commenting on the recent interest rate cut the economist was of the opinion that it was sudden and drastic. |
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