Sri Lanka’s economy shrinks 11.8pc
Sri Lanka’s economy shrank 11.8 percent in the July-September quarter from a year ago, the second worst for the country, government data showed on Thursday, as it struggled with deep unrest sparked by its most severe financial crisis in decades.
An acute dollar shortage, caused by economic mismanagement and the impact of the COVID-19 pandemic, left Sri Lanka short of dollars for essential imports including food, fuel, fertiliser and medicine.
The state-run Census and Statistics Department said that agriculture shrank 8.7 percent in the third quarter and industries 21.2 percent, while services dropped 2.6 percent, from a year earlier.
“This is the second worst contraction Sri Lanka has experienced in a quarter after a 16.4 percent contraction in the second quarter of 2020,” said Dimantha Mathew, head of research at First Capital.
“Our projection was that it would be much worse – possibly a contraction of about 20 percent but now overall contraction for the year could be about 9 percent.”
Sri Lanka’s central bank estimates the economy will contract by about 8 percent in 2022.
A multitude of factors including high inflation, power cuts, high interest rates, import shortages and fuel and fertiliser shortages impacted growth in the last quarter, the government said.
A “decrease in the demand of essential and non-essential goods and services due to the reduction of the real income of the people have directed the economy towards this decline,” it said.
Widespread protests triggered by economic hardship spiralled in July with former President Gotabaya Rajapaksa fleeing the country and then resigning after thousands of protesters occupied his office and official residence.
Indonesia recession: Asian giant bucking global trend
There is not expected to be an Indonesia recession in 2023 – even as the global economy looks to be heading for a period of sluggishness that threatens to weigh on growth in southeast Asia. The country’s central bank, Bank Indonesia (BI), estimates that Indonesia’s gross domestic product (GDP) could grow by 4.37 percent in 2023, down from 5.2 percent in 2022.
The global economy is projected to grow at just 1.6 percent in 2023 on tightening financial conditions, the ongoing impact of the Covid-19 pandemic on economic activity in China, and the impact of the Russia-Ukraine conflict on European energy supply, according to analysis by JP Morgan (JPM).
However, Indonesia’s Financial Services Authority (OJK) sees the potential for the global economy to slide into recession – defined as two consecutive quarters of negative GDP growth.
India’s economic renaissance
Will India’s economy slow in 2023? The consensus: 2022 was an outlier with GDP growth nudging 7 percent, the highest among major economies. Even the normally conservative World Bank upgraded its forecast for Indian economic growth in 2022 from 6.5 percent to 6.9 percent. But according to most projections, Indian GDP growth in 2023 will sag to 6 percent or lower. There are three reasons advanced for this pessimistic outlook.
One, the Russia-Ukraine war will grind on relentlessly, exacerbating trade disruptions. India’s merchandise exports, which account for around 12 percent of GDP, could be severely affected.
Two, recession in the West will trigger cuts in information technology budgets among large US and European firms, causing a slowdown in India’s bellwether infotech sector.
Three, the fall in rural demand across domestic sectors, especially FMCG, allied with inflation will dampen consumption and lower overall economic growth.
Some of these concerns are valid though overstated. As Sanjeev Sanyal, a member of the Prime Minister’s Economic Advisory Council (PMEAC), notes, India’s economy can plausibly grow at 9 percent a year. He said at a recent G20 conclave: “We can sustain a growth rate of 9 percent for many years.”
Japan to revise accord with boj to make price target flexible
The Japanese government is set to revise a decade-old accord with the Bank of Japan that states the central bank will aim to achieve its 2 percent inflation target “at the earliest possible time,” government sources said Saturday.
In the first review since the joint agreement was made in 2013, the government will consider making the price goal more flexible, the sources said. Prime Minister Fumio Kishida is expected to work out details with the next BOJ governor, who will succeed Haruhiko Kuroda in April.
The envisaged revision could lead the BOJ to tweak its bold monetary easing as the side effects of its ultralow interest rate policy, most notably the yen’s sharp depreciation against other major currencies, have become more evident and pose a challenge for the Kishida administration.
Under Kuroda, the BOJ remains committed to keeping borrowing costs at rock-bottom levels for households and businesses to support the economy, swimming against the global tide of monetary tightening. The joint statement, which mentions the roles of the government and BOJ to support economic growth, is widely seen as forcing the bank to stick to its inflation goal. The revision is aimed at widening policy options for the BOJ, according to the sources.
Malaysia needs to shift to an economy based on technology, digital, innovation
The Malaysian economy needs to be shifted to a 21st-century economy based on digital, technology, added value, creativity, and innovation from an economy based on commodities and low-value manufacturing, Economy Minister Rafizi Ramli has said.
“I hope that within these five years, we can shift the government’s dependence from only a few financial sources to a combination of stronger, sustainable, diverse, and progressive sources of income,” he said at the debate on the motion for a vote of confidence for Prime Minister Datuk Seri Anwar Ibrahim at Parliament on Monday.
Rafizi said Malaysia also needs to build an economic ecosystem that is fair to workers and offers wages that commensurate with qualifications and experiences so that the country has mobility and marketability opportunities up to the international level.
Therefore, he said the government or the grouping of those who have the ability to make decisions to implement difficult strategic shifts in this five-year period is important amid the difficult and challenging global and domestic economic conditions.
“We need political stability because we have to make some very difficult decisions in this global economic situation,” he said.
Warning bells in the Maldivian economy
In November, this year, the Maldives saw the approval of ‘2023 State Budget’ which stood at MVR 42.8 billion (US$2.7 billion approx.), and a sanction of MVR 5.8 billion (US$376 million approx.) as a supplementary budget for the remaining of 2022. Additionally, the implementation of a new tax hike of 4 percent in Tourism Goods and Services Tax (TGST) and 2 percent in Goods and Services Tax (GST) will be effective from next year. Since the country’s economy is grappling with decreasing forex reserves along with large public and external debts, revenue of MVR 3.14 billion (US$204 million approx.) is expected from the tax hike and the approved ‘State Budget’ aims to generate total revenue of MVR 32.1 Bn (US$ 2 billion approx.) next year. However, as a country that largely depends on tourism, a sudden hike in the TGST will likely backfire. As historically evident, on average, the tourism tax rate is negatively correlated with the volume of tourist arrival in a country. Besides, the economy’s heavy dependence on tourism opens the door to fiscal vulnerabilities linked to its current economic structure.
Migrant departures turn into exodus as Nepal’s economy stalls
In the last three years, even as the coronavirus strangled the economy and rendered tens of thousands jobless, more than 1 million Nepalis left the country to find work in faraway lands.
Analysts say departures may reach that level in just this fiscal year 2022-23 as political instability stalls economic growth.
Official statistics show that 347,340 Nepalis had left the country by the first five-month period ended mid-December; and if the momentum keeps up, the 1-million figure isn’t far away, they say.
The exodus of young people from Madhesh and Province 1, in particular, has raised concerns as the two provinces in the Tarai flatlands are known as the country’s food basket. According to the Nepal Labour Migration Report 2022 unveiled on Sunday, they had the highest departures among the seven provinces, sparking fears of possible labour shortages in the farm belt.
Experts say that Nepal’s proliferating imports show it has already turned into a remittance-driven economy from a farm economy.
“We are now totally dependent on imports. That’s the repercussion,” said Chiranjivi Nepal, former governor of Nepal Rastra Bank.
World bank slashes China’s growth outlook to 2.7 pc in 2022
The World Bank has slashed its growth outlook for China’s economy, as nearly three years of “zero-COVID” curbs and a real estate slump weigh on the world’s second largest economy.
In its latest forecast on Tuesday, the Washington, DC-based institution cut China’s expected growth for 2022 to 2.7 percent, down from 4.3 percent in June.
China’s projected growth for next year was slashed from 8.1 percent to 4.3 percent.
“Economic activity in China continues to track the ups and downs of the pandemic – outbreaks and growth slowdowns have been followed by uneven recoveries,” the World Bank said in a statement.
“Real GDP growth is projected to reach 2.7 percent this year, before recovering to 4.3 percent in 2023, amid a reopening of the economy.”
China has begun to unwind its tough “zero-COVID” policy after nearly three years of disruptive restrictions, but remaining curbs and a surge in infections continue to heap pain on struggling businesses.
ADB hikes Philippines’ 2022 gdp forecast to 7.4 pct
The Philippine economy is forecast to grow faster in 2022, supported by stronger-than-expected domestic demand and a recovery in tourism, according to an updated Asian Development Bank (ADB) report released on Wednesday.
The latest supplement to the Asian Development Outlook 2022 says the Philippine economy will grow 7.4 percent in 2022, up from its September forecast at 6.5 percent, while the growth for 2023 is expected to slow down to 6.0 percent from 6.3 percent.
The Philippine economy has shown strong underlying growth momentum and resilience in 2022, ADB Philippines Country Director Kelly Bird said.
However, there are downside risks to growth in 2023, including inflation stickiness, further increases in interest rates, and a sharper-than-expected slowdown in GDP growth in advanced countries, Bird added.
The Manila-based bank said growth in the Philippines will be at the high end of the range compared to its Southeast Asian neighbors.
The ADB also upgraded the 2022 growth forecast for Southeast Asia to 5.5 percent from 5.1 percent despite the overall dimmed outlook for Asia and the Pacific. GDP growth in Southeast Asia is expected to slow to 4.7 percent in 2023.
In the Philippines, the inflation is expected to quicken to 5.7 percent this year before slowing down at 4.3 percent in 2023, ADB added.