EIU - JULY 2018
Government launches National Export Strategy and Trade Information Portal; two important tools in trade facilitation and growth of export earnings
Despite global financial market uncertainty, local and sovereign bond yields decline in July
Trade Tensions could derail positive global trade growth momentum; risks of currency wars and further volatility in global financial markets
Sri Lankan Economy
Export Growth Outpaced Import Growth in May: During May 2018, exports increased by 9.8% (driven by apparel and seafood exports) meanwhile imports increased by 7.7% (led by fuel and vehicle imports). The trade deficit continued to expand albeit at a comparatively slower rate (5%).
Policy Rates Remain Unchanged: The Monetary Board of the Central Bank decided to maintain policy interest rates at their current levels. (SDFR at 7.25% and SLFR at 8.50%)
Government Launched 5 Year National Export Strategy (NES): As the latest government effort to boost foreign exchange earnings and employment, the NES was launched last week. The government’s goal is to achieve USD 28 Bn export revenue by 2022. 6 focus sectors have been identified while 4 support function will help improve the business environment for exports. You can access the NES (2018-2022) following this link http://www.srilankabusiness.com/national-export-strategy/
New Trade Information Portal Launched: As the first step towards implementing the National Export Strategy and complying with the WTO Trade Facilitation Agreement, the Government launched the Sri Lanka Trade Information Portal (SLTIP), a one-stop point for information with regards to trading in Sri Lanka. Access SLTIP using this link https://srilankatradeportal.com
Sri Lanka Expected to Grow at 4.8% in 2018: As per UNESCAP growth projections, Sri Lanka is expected to grow at 4.8% in 2018 and 4.9% in 2019. Sri Lanka will lag behind developing Asia Pacific economies that are projected grow at 5.5% in both 2018 and 2019. Sri Lanka is the third slowest growing economy in the South Asia only ahead of Afghanistan and Nepal.
Local and Dollar Yields Fall: Since the last Treasury bond auction on 12 July, local government securities market yields have declined (0.3% and 0.22% decline in the 12-month Treasury bill and 10-year Treasury bond respectively.) Over the last two weeks, Sri Lanka’s sovereign bond yields have declined over 0.6% despite uncertainty in global markets.
India was the Top Investor in Q1 2018: According to the BOI, Sri Lanka attracted USD 546.7 Mn as FDIs during Q1 of 2018 with India investing USD 196.34 Mn followed by China and Hong Kong. Government’s target is to attract USD 2.5 Bn by the end of 2018.
Global Growth to Reach 3.9% in 2018 and 2019: As per the World Economic Outlook (WEO) Update-July 2018, of the IMF, global growth is expected to reach 3.9% in 2018 and 2019. Advanced economies are projected to grow at 2.4%, meanwhile Emerging and Developing Economies are expected to grow at 4.9% in 2018. Emerging and Developing Asia is expected to maintain its robust performance by growing at 6.5% in 2018.
Trade Tensions Threaten Global Upswing: The global outlook is clouded by ongoing trade tensions and warning support for global economic integration in some advanced economies, as per the WEO Update-July 2018. The report says that, an escalating of trade tensions could undermine business and financial market sentiments, denting investment and trade. Considering this situation, the IMF revised its projections downward for growth in world trade volumes in 2018 from 5.1% (WEO Update- April 2018) to 4.8% (WEO Update-July 2018).
Global Oil Prices Eases in recent months: The OPEC Reference Basket eased by 1.2% on a month-on-month basis in June 2018 to average USD 73.22 per barrel. In the first three weeks of July, Brent has declined 8% over supply concerns and US-China trade tensions.
Asia-Pacific Region to Grow at 5.5%: According to the UNESCAP, the developing Asia-Pacific economies are expected to grow by 5.5% in 2018 and 2019 with a slight moderation in China offset by the recovery in India and steady performance in the rest of the region.
DISCLAIMER: All information collected and analyzed is derived from sources, which we consider reliable and a sincere effort is made to report accurate information. The EIU does not warrant the completeness or accuracy of information derived from secondary sources. Details published herein are intended for information purposes only.