Domesticating Economic Growth: Can The Puny Middle Class Make It Sustainable?
June 18, 2012
By W.A. Wijewardena -
Dr. W.A. Wijewardena
An ominous decline in Sri Lanka’s exports to GDP ratio
An unexpected development, seemingly ominous, that has taken place in Sri Lanka’s recent economic developments has gone unnoticed by the country’s policy authorities, economic analysts and researchers.
That development has been the continuous decline inSri Lanka’s exports as a ratio of its Gross Domestic Product or GDP from around 2005 though exports in US dollar and rupee terms had recorded increases during this period. While the export ratios were falling, the country’s situation was made more complicated by an import ratio which has stubbornly refused to record a similar decline; it has in fact remained unchanged almost at the high rate which it had in 2005 raising Sri Lanka’s trade deficit to critical levels.
Throughout the post-independence history, exports as a ratio ofGDPhad remained above 25 per cent except in early 1970s when it fell below 20 per cent. It stood at 28 per cent in 1950, just two years after the country gained independence. Since then, the country managed to increase its exports almost at the same rate as theGDPgrowth. In 2000, the ratio went up to 33 per cent and even in 2005, it remained at comfortable 26 per cent. However, since 2005, the ratio started to fall gradually recording 24 per cent in 2007, 20 per cent in 2008, 17 per cent in 2009 and finally settling at slightly above 17 per cent in 2010 and at 18 per cent in 2011. Meanwhile, imports as a ratio ofGDPwere 36 per cent in 2005 and remained almost closer to that level throughout since then. In 2011, that ratio was at 34 per cent.
However, since 2005, economic growth has accelerated to above 6 per cent from a low growth of below 5 per cent whichSri Lankahad throughout its post-independence period. In the last two years, according to official reports, the growth rate has even surpassed 8 per cent mark.
