Macroeconomic Analysis of Sri Lanka

Topics: Gross domestic product, Sri Lanka, Economics Pages: 15 (4436 words) Published: September 14, 2014
SRI LANKA
Macroeconomics analysis

Section C
Group 4
Akhil Jain – 2C
Anuj Agarwal – 6C
Pranav Arora – 30C
Shraddha Jha – 45C
Vaibhav Srivastava -53C
Vinit Patil – 55C

INDEX
1.

Overview

2.

Macroeconomic Performance Indicators

3.

Macroeconomic Challenge 1

4.

Recommended solution to Macroeconomic challenge 1

5.

Macroeconomic Challenge 2

6.

Recommended solution to Macroeconomic challenge 2

7.

Macroeconomic Challenge 3

8.

Recommended solution to Macroeconomic challenge 3

9.

References

1. Overview
The following analysis presents an overview of Sri Lanka based on the political, economic and social perspectives. A. Political
Structure
Sri Lanka is a democratic socialist republic country that is governed by a system which is a mixture of both presidential system and parliamentary system. The president of Sri Lanka is the head of the state, head of the government and head of the multi-party system. It has the following system: Executive Power – It is exercised by the government

Legislative Power – It is vested in both the government and the parliament. Judicial Power – It is independent of the government and the parliament. Historical Perspective
Politically, Sri Lanka has been dominated by two parties – Sri Lanka Freedom Party (SLFP) and the United National Party (UNP). The SLFP is a socialist party whereas the UNP is conservative in its outlook and philosophy. Sri Lankan polity has been historically chequered by the friction between two ethnic groups – Sinhals and Tamils. These two parties reflect the struggles between the two ethnicities. Present Situation

Presently, Mahindra Rajapaksa, the President, of the SLFP is more than halfway through his six year term. He is credited with defeating the rebels, Liberation Tigers of Tamil Eelam (LTTE) in 2009 to end a civil war that lasted for 26 years.

Forecast for the short term future
The current government was elected in 2010 and it enjoys a large majority in the parliament. The government is not expected to face any major challenges and is expected to last its full term of six years. The next elections are scheduled for 2016 and Mahindra Rajapaksa is widely expected to retain power capitalising on the popularity of his SLFP government.

Challenges ahead
The Tamil National Alliance, which represents Tamils and has control over the Northern Province (one of the nine provinces), is demanding a greater devolution of powers to the provinces. This is seen by many as a step towards a demand for secession. This could lead to a prolonged political battle between the Sri Lankan Government and the Tamil National Alliance.

B. Economic
Relative size of economy
With a nominal GDP of USD 60 billion, Sri Lanka accounts for less than 0.10 percent of the entire world’s economy represented by the Gross World Product. As per GDP, it is the fourth biggest economy in the South Asian region after India, Pakistan and Bangladesh in that order. Although its per capita GDP of $2923 is better than all South Asian countries except Maldives. It shows the relative strength of the Sri Lankan economy within the region. Sectoral Contribution

The contribution of various sectors to the Sri Lankan GDP is as mentioned below: Agriculture – 11.1%
Industry – 30.4%
Services – 58.5%
The major sectors of the Sri Lankan economy are tourism, tea export, apparel, textile, rice and other agricultural products.
Performance
Despite the protracted civil war, Sri Lanka has managed to grow at an appreciable pace of 4%-8% per annum during most years since 1990. The growth rate has dipped in some periods due to the civil war and tsunami in 2004 but has bounced back due to strong domestic demand and buoyant private sector activity. Although high levels of budget deficit continue to be a cause of concern.

Historical perspective and major event (2001 currency crisis) Sri Lanka began the process of liberalization and economic reform in 1977. The process...

References: Historical perspective and major event (2001 currency crisis)
Sri Lanka began the process of liberalization and economic reform in 1977
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