Economic reforms vital for growth, says WB Economist | Sunday Observer

Economic reforms vital for growth, says WB Economist

Sri Lanka needs reforms to seek new opportunities and a new growth model, to increase and sustain growth. It is also necessary to have a mechanism to create jobs and reduce poverty in the middle term, World Banks’ Senior Country Economist for Sri Lanka and the Maldives, Ralph van Doorn said,

“It is important to monitor the macro economy by providing technical assistance and advice to the government on topics related to macroeconomics, fiscal policy and public debt management. The best time for reforms is now,” he said at a forum in Colombo last week.

The World Bank is committed to pushing beyond established frontiers of development knowledge to bring policy-relevant strategies to client countries to support broad-based growth, jobs, and poverty reduction.

South Asia remains the world’s fastest-growing region although capital inflows have declined, inflation has been on the rise, and remittances from oil-exporting countries have started to weaken. Economic growth will accelerate to 6.8 percent in 2017 and 7.1 percent in 2018, he said.

Growth was especially strong in India, which continues to lead in performance among large emerging market economies. Strong growth has translated into declining poverty and impressive improvements in human development.

“It is necessary to improve the fiscal sustainability, competitiveness, governance and reduce risk and vulnerability. Despite growth slow down due to natural disasters, the fiscal consolidation path is on track,” Doorn said.

While public debt growth slowed down, risks are increasing as the external position is weak due to a slow exports and FDIs. “Sri Lanka’s growth outlook is improving. Growth is expected to reach 4.7 percent in 2017 and grow marginally over 5 percent and beyond driven by private consumption and investment. In this regard, the impact of the 2017 floods has been taken in to account, he said.

“Growth and inflation will increase this year, due to one off impact of VAT reforms.

While it is necessary to be mindful of the external risks, the disapprobation growth performance is the key concern in the region. It need new source of growth to sustain growth beyond medium term,” he said.

Sri Lanka needs to move to new source of growth in its export led growth. There is a window of opportunity thanks to improved global outlook.

The policy priorities will be to reduce macroeconomic risk, manage cost and risks and reduce risks from disasters. High and increasing economic, fiscal and human cost disasters offset the impact of reforms on poor and those who lose out, he said.

“Improving macro-fiscal stability and competitiveness requires reforms. There should be a structure and a time frame as reforms take time and need to have implement reforms to improve investor climate,” he said.