Simultaneous economic crisis, financial melt down:

No country will show higher growth in 2009 - NDB CEO

Ramani Kangaraarachchi

The world is facing an unprecedented economic and financial crisis and there won’t to be a single country which will show growth rates in 2009 higher than 2008, said CEO, National Development Bank Eran Wickramaratne making a presentation on the Global Crisis and its effects on Sri Lanka for the Association of Retired Flag Rank Officers at Narahenpita.

He said that no other crisis has been so global before, because this time there is an economic crisis and a financial melt down at the same time. Therefore, this crisis is different to any other crisis.

Earlier when there was a crisis in the financial market it was related to a particular market such as “Equity Market Crisis,” ‘Real Estate Crisis or Derivative Market Crisis.” The difference this time is that all Global Markets are in a crisis at the same time.

Earlier the crisis would have been confined only to a particular geographical location such as Asian crisis, US crisis and Latin American crisis unlike this time, he said.

Wickramaratne said that there is a tendency to underestimate the Global crisis, particularly in Sri Lanka but there is a financial and economic crisis and the implications of this crisis will be many. The consumer demand around the world is contracting and it has also dropped drastically.

Corporate profits are severely under pressure, capital expenditure and investments have been curtailed and equity markets all over the world with the exception of Sri Lanka have dropped drastically, he said.

The world is far more economically integrated than it was ten year’s ago. Therefore, the crisis is leaving every possible market untouched. Hence, there are implications in the Indian Sub Continent.

The growth rates in China, India and Sri Lanka two years ago had been 12.10 and 08 percent and all those have come down by two percent. In 2009 the Sri Lankan economy should be growing closer to 5 percent according to the Central Bank, but other forecasts from international sources put Sri Lanka’s economy at 3-4 percent growth in the year 2009,” he said.

However, the various economic arguments with regard to devaluation, job losses, market drops and foreign reserves need to be taken in balance and they need to be weighted out. It is also important for our exports to grow strongly if the country is to avert a crisis in the future, he said.