World Bank: Sri Lanka's economic growth expected to grow by 3.3% in 2020

The World Bank has reportedly predicted that Sri Lanka's economic growth for 2020 is expected to grow by 3.3 per cent compared to a projected 2.7 per cent in 2019. According to an international media outlet, the bank said, in its latest report of World bank's January 2020 Global Economic Prospects, that for the year 2021 and 2022, it maintains the same forecast of 3.7 per cent of economic growth in Sri Lanka. 

According to the reports released by World Bank, “Afterwards, acceleration will be supported by recovering investment and exports as long as the security challenges and political uncertainty of 2019 dissipate. Growth is expected to stabilize around 3.7 percent over the rest of the forecast horizon, in line with potential growth”.

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It further added, “The lack of progress in reforms to boost tax collection could result in more severe revenue shortfalls and bring more pressure on high fiscal deficits. This could have negative consequences for investment in infrastructure, and hence for projected growth, as well as for the fiscal room available to respond to potential cyclical declines”.  

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'Global Waves of Debt'

The World Bank earlier, however, warned that the growing wave of debt in developing nations could not end with another financial crisis and major output loss. The 'Global Waves of Debt' report said that the current global wave of debt, which started in 2010, has seen the “largest, fastest and most broad-based increase” in debt in emerging market and developing economies (EMDEs) in the past 50 years.

The report analysed the past three waves of debt accumulation, 1970-89, 1990-2001, and 2002-09, did not follow a linear path. The first wave of debt was primarily due to borrowing by governments in Latin American countries and low-income countries, especially the low-income countries in sub-Saharan Africa. “The combination of low real interest rates in much of the 1970s and a rapidly growing syndicated loan market encouraged EMDE governments to borrow heavily,” the report read. 

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