FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.
FINANCIAL CHRONICLE™

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

LISTED COMPANIES

Submit Post



Poll

Can there be another Covid-19 wave in Sri Lanka?

Four risks to global economy for Sri Lanka to watch in 2018 Vote_lcap68%Four risks to global economy for Sri Lanka to watch in 2018 Vote_rcap 68% [ 178 ]
Four risks to global economy for Sri Lanka to watch in 2018 Vote_lcap18%Four risks to global economy for Sri Lanka to watch in 2018 Vote_rcap 18% [ 47 ]
Four risks to global economy for Sri Lanka to watch in 2018 Vote_lcap13%Four risks to global economy for Sri Lanka to watch in 2018 Vote_rcap 13% [ 35 ]

Total Votes : 260

STOCK MARKET TRAINING
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


CONATCT US


Send your suggestions and comments

* - required fields

Read FINANCIAL CHRONICLE™ Disclaimer



Latest topics

» NAMU/WATA super gain
by Kaptivajkss Today at 12:43 am

» LOFC Direction
by RAVI1980 Yesterday at 9:47 pm

» BAIRAHA FARMS PLC (BFL.N0000)
by Pbv Yesterday at 9:33 pm

» Bloodbath is Coming ? Correction is Coming ? අලුත් ගෲප් හදාගෙන අපි genuine කියලා එන පරණ මහත්(හොරුන්) වරුන් ගෙන් බේරෙන්න
by stockchaser Yesterday at 9:32 pm

» LANKA REALTY INVESTMENTS PLC -ASCO
by Pbv Yesterday at 9:16 pm

» LOLC waiting for LOFC 100+ and CLC 100+
by Sapudev Yesterday at 9:15 pm

» Key Plantation Company Fair Values - KOTA, TPL and KVAL with very High Upside
by Kaptivajkss Yesterday at 8:31 pm

» LLUB comparison between 2016- 2021 Same EPS Trading at Huge discount
by Kaptivajkss Yesterday at 8:11 pm

» TILE / LWL / RCL
by Thushara Ayya Yesterday at 5:16 pm

» HSenid IPO
by rukshan1234 Yesterday at 5:14 pm

» Month end impact on LOFC and CLC
by Swissinvest Yesterday at 3:05 pm

» Water For All - CIND
by ErangaDS Yesterday at 2:20 pm

» U.S. inflation is one of the highest in the world
by ResearchMan Yesterday at 2:09 pm

» Oil Plummets
by ResearchMan Yesterday at 2:07 pm

» ASPI Trend
by hotstock Yesterday at 12:45 pm

» GEMS at LOW price TYRE. RICH.
by Chathur Yesterday at 11:30 am

» KOTAGALA PLANTATION PLC (KOTA.N0000)
by jehan008 Fri Nov 26, 2021 11:36 pm

» HEMAS HOLDINGS PLC (HHL.N0000)
by LAMDA Fri Nov 26, 2021 11:35 pm

» CFLB hidden gem
by LAMDA Fri Nov 26, 2021 11:34 pm

» Hidden Gem - GLAS - 40/- Soon
by LAMDA Fri Nov 26, 2021 11:29 pm

EXPERT CHRONICLE™

MARKET CHAT


CHRONICLE™ ANALYTICS


ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)


CHRONICLE™ YouTube

LATEST TWEETS

You are not connected. Please login or register

FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Four risks to global economy for Sri Lanka to watch in 2018

Four risks to global economy for Sri Lanka to watch in 2018

Go down  Message [Page 1 of 1]

Sstar

Sstar
Vice President - Equity Analytics
Vice President - Equity Analytics

The world economy appears to be booming – in its latest World Economic Outlook Update, published on January 22, the International Monetary Fund (IMF) estimated that global gross domestic product (GDP) grew by 3.7 percent last year, up from 3.2 percent in 2016, which is the fastest rate of expansion since 2011.

What’s more, this pick up in the global economy has been unusually broad-based. GDP growth has strengthened across the developed world, driven by stronger export and investment growth, while the major emerging economies have also performed well.

This suggests that the world economy is finally shaking off the effects of the global financial crisis a decade ago. Indeed, the early signs indicate that last year’s strong momentum has carried over into 2018, with most forecasters expecting another solid year for global growth.

While this period of greater economic dynamism is to be welcomed, there are significant risks that should not be ignored, particularly in the case of a small open economy like Sri Lanka with significant external vulnerabilities. Four major risks to the global economy that are worth watching are:

(i) The spectre of greater trade protectionism
While the world trading system made it through the first year of the Trump presidency relatively unscathed, the risk of a lurch towards protectionism has not disappeared. In fact, if anything, this risk looks more likely to come to a head this year than last. In the specific case of the US, the outcome of the talks to renegotiate the North American Free Trade Agreement (NAFTA) is a key thing to watch, to get a sense of whether fears of greater protectionism are well founded
or not.

While Sri Lanka is not part of the NAFTA, the US withdrawing from the trilateral trade agreement would bode ill for the future of the World Trade Organisation (WTO) and suggest that a trade war between the US and China is quite likely. This would benefit neither economy and have a knock-on impact on the rest of the world, including Sri Lanka.

Brexit is less of a risk to the global trading system but negotiations between the UK and EU are also worth monitoring, particularly given that the UK is Sri Lanka’s second largest
export market.

(ii) A sharp slowdown in China
While the official GDP data imply that the Chinese economy continues to do very well, with the economy expanding by 6.9 percent last year, most analysts agree that this data may not reflect what is happening on the ground.

Indeed, while it seems clear that the Chinese economy picked up in 2017, there are some signs that it started to slow in the final months of last year as the government tightened credit conditions. If this is right, we may see the resurgence of worries that the Chinese economy is heading for a so-called ‘hard-landing’, which rocked financial markets in late 2015 and early 2016. At the very least, this would lead to a tightening of global financial conditions that would weigh on demand in Sri Lanka’s key exports markets in Europe and the US.

(iii) A tightening of monetary policy in major developed economies
The pickup in global growth has not yet triggered a substantial rise in inflation and there are a few signs of upward pressure on wages. But as their economies strengthen, central banks in Europe, Japan and the US are increasingly turning their attention to tighter monetary policy.
The risk is that a sudden surge in inflation leads to policy interest rates being hiked much more quickly than financial markets currently expect, sparking a selloff in these markets and setting the stage for the next global economic downturn. This prospect appears most likely in the US, where President Trump has just delivered a fiscal stimulus to an economy that, by most measures, is already running at close to full capacity and so could trigger a sharp rise in inflation. The main risk for Sri Lanka here too is from tighter global financial conditions and weaker demand in its key markets.

(iv) A significant rise in global energy prices
This is perhaps, the risk least likely to crystallise in 2018 – as things stand, the demand and supply fundamentals are more consistent with a slight fall in global oil prices from around US $ 70 per barrel now to US $ 50-60 per barrel. But a war in the Middle East, perhaps an open conflict between Iran and Saudi Arabia, unlikely as it is, would send oil prices skyrocketing.

This would significantly increase the cost of Sri Lanka’s energy imports and put serious pressure on the country’s already strained balance of payments position, not to mention its limited foreign exchange reserves.

Admittedly, there are upside risks to the outlook for the world economy too and it is possible that we could be in the early stages of a prolonged upturn in global growth. But the lesson of the global financial crisis is that good times don’t last.

Sri Lanka must use the current benign conditions in the world economy to ensure that it is ready to withstand the next global downturn when (not if) it comes. To this end, rather than using the current strength of the world economy as an argument to slow the current reform efforts, Sri Lankan policymakers should leverage it as a compelling reason to
push ahead.

At the same time and within bounds of the country’s current IMF programme, fiscal and monetary policy should be set in a manner that takes account of the risks lurking in the global economy. If we achieve all this, there is every chance Sri Lanka will have a prosperous 2018.

http://www.dailymirror.lk/article/Four-risks-to-global-economy-for-Sri-Lanka-to-watch-in--145092.html

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum