W-shaped economic recovery seems correct - Former Central Bank Deputy Governor | Sunday Observer

W-shaped economic recovery seems correct - Former Central Bank Deputy Governor

11 October, 2020

The prediction by economic analysts that Sri Lanka will have a ‘W’ shaped economic recovery appears to be correct with the emergence of the second wave of the global pandemic that will have a heavy toll on the economy, said former Central Bank Deputy Governor, Dr. W.A. Wijewardena.

He said earlier many analysts had predicted Sri Lanka as other countries will have a ‘W’ shaped economic recovery. But, to give confidence to the people, politicians predicted a ‘V’ shaped quick recovery. Now with the latest community based second wave of the global pandemic, it appears that the analysts are correct.

The World Bank in its twice-a-year regional update predicts Sri Lanka’s GDP growth to be - 6.7 percent this year down from 2.3 percent last year “Peru which was way behind as a “Sri Lanka and the rest of the world is going through the most difficult period in economic history. With no effective vaccine in sight the world has to learn to work under constrained conditions,” Dr. Wijewardena said, adding that the current crisis will prevent people from working at their best irrespective of whether they live in a rich country or in an emerging economy.

He said the sum total is that they will have to postpone the realisation of their avowed goals for property.

“The entire country should be ready to accept and make the most painful sacrifice to return to long term growth objectives. Blaming each other will simply hinder the recovery process,” the former Deputy Governor said.

“We will need to adjust ourselves to the new normal that is emerging,” Dr. Wijewardena said.

However, State Minister of Finance, Capital Markets and State Enterprise Reforms, Ajith Nivard Cabral told Parliament recently that the government is confident of a rapid or V-shaped economic recovery from the global pandemic adding that steps have been taken to accelerate economic recovery with new instruments to attract money into the Treasury Bond and Treasury Bill markets.

He said the government will create the environment to bring in the much needed foreign exchange to the country to spur economic growth.

“We plan to enable a V-shaped economic revival which is becoming a reality. The Government stabilised the economy before 2015 despite the battle against terrorism in the country. We will succeed in achieving that feat again,” Cabraal said.

Growth during the first quarter this year was i.6 percent the lowest in recent years and predictions are that economic growth in the second quarter would be minus owing to the impact of the pandemic.

However, Central Bank officials were optimistic the economy would bounce back to a satisfactory level in the fourth quarter this year due to the recovery in exports and foreign remittances since June.