Mixed views have been expressed by economists and industry experts on the impact of Trump administration on global economy, particularly, on the emerging markets in Asia.
In his first days in office, President Donald Trump pulled out USA from the Trans Pacific Partnership trade deal that involved 12 countries, the Pacific Ocean signing the TPP in February 2016.
The Sunday Observer spoke to economists and sector experts for their views.
Ceylon Chamber of Commerce
Chief Economist Anushka
Wijesinha said:
“Sri Lanka must focus on getting its domestic house in good shape this year to weather any turbulence. For instance, would Trump’s policies, such as, the tax cuts cause the Fed to raise rates on a faster cycle? Would Trump’s policies spark any trade wars? Will it weigh heavily on external markets during 2017?. We should be geared to weather this issue focusing on policies and regulatory elements that will promote competitiveness, as well as, having sound macroeconomic policies to drive economic growth.
“Growth in the economy is likely to be constrained by tighter fiscal policy where there will be no big increase in government spending on salaries or welfare, and increased VAT. Monetary policy will be on a tightening cycle, and most importantly the drought will have an adverse impact on agricultural output and consumer demand in affected areas.
“Exports to the US appear to be recovering, while it’s still rather tepid in Europe. All signs from the US show that growth is edging up, consumer confidence and spending has picked up, unemployment is down. This will translate into better export demand for SL in the US. Meanwhile, in Europe, uncertainty about Brexit’s progress, looming elections in key EU states (and the rise of right wing parties) and what this would mean for the Union, etc., are dampening investor sentiments. But, GSP Plus will give a short-term boost to our exports to Europe, especially, in a constrained price environment”.
Professor of Economics,
Department of Economics
University of Colombo
Sirimal Abeyratne says:
“There will be challenges and global uncertainties this year as well. An anticipated drastic shift in economic policy focus in USA will result in challenges for the rest of the world.
“However, Sri Lanka, with very few issues to deal with, is relatively in a better position. If we can “think big” and are able to “look far” then we can act now.
It is necessary to establish a conducive policy and political atmosphere and ensure its sustainability through reforms. Although there are minor issues, these problems are crucial as delays have cost more and further delays will cost even more.
“However, Sri Lanka’s growth prospects have not yet faded. Despite global economic uncertainties, growth prospects for Sri Lanka still remain high. The main problem for the country is not external, but internal.
We have not yet taken a comprehensive bold step forward in addressing the main bottlenecks of economic growth, through reforms. We have been beating around the bush during the past two years, not addressing issues at its source”.
Asian Alliance CEO Ramal
Jasinghe said:
“World trade has seen a gradual decline with the exchange of goods between nations seeing a drop from 1985 to 2015 as a result of globalization, outsourcing of manufacturing facilities, and advancement of technology.
It is a looming challenge for smaller countries like us, vying for a space in the international market. In my opinion, Sri Lanka is small enough to promote its products and services through quality, efficiency, and uniqueness. Manufacturing scale could be an issue in certain areas of export, where we need capacity building and infra structure development to meet changing global demands, and global lifestyle changes.
“The Trump administration could be a reflection of an emerging global trend towards Nationalization as against Globalization which we have seen in the recent past or more so during the latter part of the 20th Century.
The Brexit vote and the Trump election victory are events that endorse this view.
This phenomenon would be the setting up of a new world order where the concept of a super power could change into a multipolar power situation, where countries like China and India could lead the world in terms of influence, and markets,” Jasinghe said.
“There are many views on this new world order and it would be interesting and important for Sri Lanka to take into account the impact of this changing scenario, which would be more dynamic and continuously changing as opposed to a situation where things were more static and predictable, in the past, particularly, as we embark on the various Trade Agreements with the nations we sign up to.
“Although the USA is a main export market to Sri Lanka, in terms of the US consumer, I feel our contribution in terms of exports is relatively small in comparison to goods and services provided to the United States by other countries, such as, India, Bangladesh and Vietnam.
There will certainly be an impact, but as the scale of our products and services are small, we may not feel an immediate impact on our exports to the US.
“I feel that the Trump victory is an opportunity for us, the export community and the Chambers to rethink our export strategies and give due cognizance to the changing world order, when crafting our Trade and Export policies. We are on the brink of signing various Free Trade Agreements. We need to look at these Agreements and arrangements in the light of our capacity building, human resources and scale, so that the advantages are brought to our producers and exporters, strengthening our manufacturing, agricultural , and SMEs who will in turn drive the Non Traditional export sector to achieve sustainability to the goods and services that we provide.
“What we need to see are the opportunities that these changes, or more specifically, the Trump victory will bring to the Sri Lankan export community,” he said.
Shippers’ Academy Colombo
CEO Rohan Masakorala said
“President Donald Trump’s intention is to have more jobs and wealth for America. Markets will watch to what extent he would re negotiate global trade deals to suit America and create more jobs.
He started by signing an executive order on NAFTA. He will also increase spending on infrastructure and give tax cuts to big businesses which may result in higher inflation and increasing interest rates.
“Our exports will not be affected as we are in the low end/low volume of products in the US import basket. However, exports of IT will be affected if Trump decides to inshore such activity.
“The worry is, if US interest rates start moving upwards, investors may move from Asian markets and this will have a negative impact and put pressure on central banks of the region, including Sri Lanka.
“FDI too could be affected but it is too early to comment to what extent and what sectors. On the other hand, if the world’s biggest economy with around 23 trillion dollars begins to grow fast, it would open new doors to countries like Sri Lanka.
The consequences of forceful inshoring by Trump will certainly be disruptive, but, disruption is the norm today. We have to wait and watch how other economic blocs, and China will react.
President Trump’s ascendance is seen as a millennial game-changer and the fallout threatens Asian interests over the rest of the world. His inward looking policies while hailed by experts to focus more on the country, would lessen its positive influence on the global economy”.
In his inauguration speech Trump said: ‘From this moment on, it’s going to be America First, America First’.