As their mainstay export markets in the rich world shrink due to the Euro zone debt crisis and the economic woes of the USA, developing countries in the Asia-Pacific region including Sri Lanka are realizing the importance of trade with the fast growing markets of Africa and, Latin America and the Caribbean. The 'Economic and Social Survey of Asia and the Pacific 2012 (ESCAP) highlights that greater South- South linkages can lead to win-win situations as the economic woes in developed countries will further weaken import demand and negatively affect investment flows.
Addressing the launch of the ESCAP report at the Institute for Policy Studies in Colombo on Thursday, Senior Minister for International Monetary Cooperation Dr. Sarath Amunugama said "the country's export sector should take advantage of the economic crises in Europe and the US, and think out of the box to cater to the needs of niche markets". He added that Sri Lanka can make use of the crisis by implementing pragmatic policies to attract the manufacturers.
One of the main aspects of the global economy is the euro zone crisis. Several countries in the EU including Greece, Spain, Ireland, Portugal and Italy were threatened with financial collapse. They have to borrow from banks and neighbouring countries to offset the budget deficit, he revealed.
When there is no growth in the euro zone which is one of the biggest markets in the world there will be less demand for Sri Lankan exports. "The advantage to our economy has been largely through agriculture and service sector. So we will probably be less affected than the big export countries," Dr. Amunugama said.
ESCAP Economic Affairs Officer Vatcharin Sirimaneetham said that the challenges in the region include managing growth and inflation balance, coping with volatile capital flows, addressing job recovery, rising social and income inequalities, dealing with disaster risks and rebalancing towards better quality growth. Sri Lanka has to increase the inflow foreign direct investments from the projected US$ 2 billion this year to US$ 6-8 billion in the coming years to sustain 8 % GDP growth. Executive Director IPS Dr. Saman Kelegama said the Euro crisis, commodity price fluctuations (including oil), behaviour of the weakening dollar, Iranian embargo, political developments (Geneva resolution), are the perceived risks for the Sri Lankan economy in 2012. He noted that exports should have differentiation and capture new markets and reduce overwhelming dependence on the US and EU markets. He noted that Sri Lanka should make maximum use of existing regional arrangements that are focused on the Asian region such as SAFTA, APTA, India-Sri Lanka FTA and Sri Lanka-Pakistan FTA.
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