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Sri Lanka’s Growth to Recover Gradually But Commitment to Reforms Remains Essential

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Sri Lanka’s economic growth is projected to pick up to 3.6% in 2019 and further to 3.8% in 2020 from 3.2% in 2018, a new Asian Development Bank (ADB) report says.

ADB’s flagship annual economic publication, Asian Development Outlook (ADO) 2019, forecasts a gradual recovery supported by a turnaround in the construction sector and continued growth in services. The agriculture sector, which picked up pace in 2018 after two years of weak performance, is expected to continue growing at the same pace assuming weather conditions remain normal.

“While the economy is projected to recover over the next two years, for Sri Lanka to sustain and accelerate growth, fiscal and structural reforms remain essential,” said the Senior Country Economist at ADB’s Sri Lanka Resident Mission Mr. Utsav Kumar. “Addressing policy constraints will be critical to avoiding repeated macroeconomic pressures and to generating sustained sources of foreign exchange earnings.”

Proposals announced in the 2019 budget will support private expenditure and thus growth. The public investment to gross domestic product (GDP) ratio is expected to pick up and will be an impetus to investment and the construction sector. Overall, the budget aims to keep the primary balance in surplus in 2019 and 2020 and reduce the fiscal deficit further, thereby maintaining the path of fiscal consolidation.

Headline inflation, as measured by the national consumer price index, is expected to inch up to 3.5% in 2019 and further to 4.0% in 2020 stemming from a pickup in economic activity, base effect for inflation, and a strengthening in nonfood and core inflation observed since late 2018 and early 2019.

The current account deficit will drop to 2.5% of GDP in 2019 and increase marginally in 2020. A recovery in agriculture exports, continued increase in tourist earnings, and a slowdown in vehicle imports will contribute to a decline in current account deficit. Though the impact of Brexit on the overall Sri Lankan economy is estimated to be marginal, a downside risk to the garment sector emanates from a no-deal Brexit scenario involving a possible tariff escalation between Sri Lanka and the United Kingdom. The large repayments on account of external debt servicing and political uncertainties may affect market sentiment and exert pressure on the Sri Lankan rupee.

A key policy challenge for the Sri Lankan economy is recurrent weather-related disasters in 2016 and 2017 that have had multiple impacts as evidenced by slow economic growth, high domestic food prices, a high oil import bill, high government spending, and high number of food-insecure households limiting daily minimum calorie intake. With a large proportion of the population close to the poverty line, gains made in poverty reduction over the past two decades may be at risk from exposure to disasters. Sri Lanka needs to focus on areas prone to disasters and to move toward a more disaster-resilient economy by preventing and mitigating consequences of weather-related hazards. Efforts also need to be made toward mobilizing funds for risk reduction and adaptation, establishing the right policy framework, and building institutional capacity.

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Asia and Pacific on course to miss all Sustainable Development Goals

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Unless progress is accelerated, Asia and the Pacific are on course to miss all of the 17 Goals of the UN’s 2030 Agenda for Sustainable Development, the Executive Secretary of the UN regional commission for Asia and the Pacific (ESCAP), told UN News at the Organization’s Headquarters on Wednesday.

Under-Secretary-General Armida Salsiah Alisjahbana was in New York to take part in the High-Level Political Forum on Sustainable Development, the main UN platform for monitoring the progress that countries are making towards the Agenda, which is the UN’s blueprint for ending poverty and preserving the planet.

ESCAP’s latest Sustainable Development Goals Progress Report shows that, when it comes to some of the Goals, the region is actually going backwards. These are the goals related to access to clean water and sanitation (Goal 6), decent work and economic growth (Goal 8), and responsible consumption and production (Goal 11).

There are, said Ms. Alisjahbana, several reasons for this: “There is water scarcity, because of the pressure of urbanization, and the management of natural resources and the environment are making the situation worse. As for moving towards sustainable consumption, that has to do with behaviour and lifestyle. With increasing wealth you consume more, but what you consume is something that is actually not sustainable.

Governments, said the head of ESCAP, must ultimately be responsible for investments in sustainable development. Investing in basic infrastructure costs money, but there is a considerable multiplier effect, that has a positive effect on the economy. Countries with smaller financial resources should look at raising money through fiscal reforms rather than looking for aid, and risking becoming dependent, she added.

The Progress Report complains about a lack of data, an important point because, says Ms. Alisjahbana, without the correct data you can’t track progress, or evaluate the best actions to take going forward. Improved data must go hand in hand with improved capacity for analysing data, which means national statistical offices, and SDG monitoring.

Despite the many challenges facing the region’s efforts to achieve the Goals, Ms. Alisjahbana remains optimistic. The situation, she believes, can be turned around, through better cooperation, as well as the abundant talent and expertise found in the region.

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Asia and Pacific Growth Steady Amid Global Trade Tensions

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Developing Asia will maintain strong but moderating growth over 2019 and 2020, as supportive domestic demand counteracts an environment of global trade tensions, according to a new Asian Development Bank (ADB) report released today.

In a supplement to its Asian Development Outlook (ADO), ADB maintains growth forecasts for developing Asia at 5.7% in 2019 and 5.6% in 2020—unchanged from its April forecast. These growth rates are slightly down from developing Asia’s 5.9% growth in 2018. Excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, the regional growth outlook has been revised down from 6.2% to 6.1% in 2019 and maintained at that rate in 2020.

Deepening trade tension between the People’s Republic of China (PRC) and the United States (US) remains the largest downside risk to this outlook, despite an apparent truce in late June that could allow trade negotiations between the two countries to resume.

“Even as the trade conflict continues, the region is set to maintain strong but moderating growth,” said ADB Chief Economist Mr. Yasuyuki Sawada. “However, until the world’s two largest economies reach agreement, uncertainty will continue to weigh on the regional outlook.”

The growth outlook for East Asia in 2019 has been revised down to 5.6% because of slower than expected activity in the Republic of Korea. The subregion’s growth outlook of 5.5% for 2020 is unchanged from April. Growth for the subregion’s largest economy, the PRC, is also unchanged, with forecasts of 6.3% in 2019 and 6.1% in 2020, as policy support offsets softening growth in domestic and external demand.

In South Asia, the economic outlook is robust, with growth projected at 6.6% in 2019 and 6.7% in 2020, albeit lower than forecast in April. The growth outlook for India has been cut to 7.0% in 2019 and 7.2% in 2020 because the fiscal 2018 outturn fell short.

The outlook for Southeast Asia has been downgraded slightly to 4.8% in 2019 and 4.9% in 2020 due to the trade impasse and a slowdown in the electronics cycle. In Central Asia, the growth outlook for 2019 has been revised up to 4.3% on account of an improved outlook for Kazakhstan. Central Asia’s growth outlook of 4.2% for 2020 is unchanged from April. The growth outlook in the Pacific—3.5% in 2019 and 3.2% in 2020—is unchanged, as the subregion continues to rebound from the effects of Cyclone Gita and an earthquake in Papua New Guinea, the subregion’s largest economy.

The major industrial economies have had slight revisions to their growth forecasts, with the US revised up to 2.6% for 2019 and the Euro area revised down to 1.3%. The growth outlook for Japan is unchanged at 0.8% in 2019 and 0.6% in 2020.

Developing Asia’s inflation projections were revised up from 2.5% to 2.6% for both 2019 and 2020, reflecting higher oil prices and various domestic factors, such as the continuing outbreak of African swine fever in several Asian economies, which is expected to drive up pork prices in the PRC.

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How to measure blockchain’s value in four steps

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To help organizations identify the value of blockchain technology and build a corresponding business case, the World Economic Forum, the International Organization for Public-Private Cooperation, has released the Blockchain Value Framework as part of the white paper, Building Value with Blockchain Technology: How to Evaluate Blockchain’s Benefits.

Co-designed with Accenture, the Blockchain Value Framework is the second in a series of white papers for organizations to better understand that blockchain technology is a tool deployed to achieve a specific purpose, not a goal in itself. This new framework provides organizations with the tools to begin measuring blockchain’s value, including key questions to consider. It is the first visual roadmap of its kind and is based on a global survey of 550 individuals across 13 industries, including automotive, banking and retail, public-sector leaders, chief executive officers and an analysis of 79 blockchain projects.

“In our last paper, we stressed that blockchain deployment is not the end goal,” said Sheila Warren, Head of Blockchain at the World Economic Forum. “We wanted to get beyond the hype. This new framework is for those business leaders that have figured out blockchain is the right solution for a specific problem, but don’t know what to do next.”

“Organizations need to make business decisions and investments with confidence and that requires proof of the value-add and an analysis of why, or why not, they should consider something new,” said David Treat, Managing Director and Global Blockchain Lead at Accenture. “Through this new framework, we aim to educate businesses and challenge them to rethink their current business models, relationships between ecosystem partners, customers and their investments in technology. The path to blockchain adoption starts here with evaluating the technical and strategic priorities and aligning them with investments in innovation.”

The framework starts with questions on blockchain’s role and desired impact. Assessing potential pain points and areas for opportunity without thinking about the technology is essential. Next is to examine the three key dimensions of blockchain’s role alongside its capabilities. The roadmap can assist organizations in moving from current-state assessment to future blockchain opportunity, and to identify where the value will be created and delivered. Cost savings, increased revenue and improved customer experience are all possible business case results.

According to the global survey conducted in conjunction with the new framework, 51% of survey respondents identified “missing out on developing new products/services” as the number one expectation if they do not invest in blockchain technology in the near future. The other two most common answers were missing out on speed/efficiency gains (23%) and missing out on cost savings (15%). The interviews highlighted the potential of the technology to simplify and optimize complete value chains through the sharing of simplified real-time data with increased efficiency. However, the paper also cautions businesses to carefully consider whether blockchain is the best solution, relative to other technologies or other digitization strategies. As noted in the Blockchain Beyond the Hype white paper, blockchain may not be a viable solution or it may not be the correct time to pursue this avenue.

In nine of the industries surveyed, the full traceability and integrity of the data were the top two potential advantages of using blockchain technology. Most of the industries surveyed could benefit from smart contracts and automation provided by blockchain. Surprisingly, few organizations selected “new business products or services” as one of the benefits. This suggests the current focus for organizations is on improving existing products and services before considering investing in new opportunities.

“We may be moving beyond the hype, but blockchain isn’t going away. Central banks are experimenting with digital currencies and supply chain networks are piloting blockchain policies. We are also seeing companies like Facebook and Starbucks entering the blockchain and cryptocurrency space. This means practical use cases of the technology will become more widespread,” Warren said. “A draft of the framework was further validated at a multilateral session of global leaders at the World Economic Forum Annual Meeting 2019 in Davos-Klosters.”

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