China and India – the second and seventh largest economies in the world (two largest economies in Asia) – are slowing down in 2019. The GDP growth rate in China is expected to be 6.2 percent, down from 6.7 percent in 2018 – the weakest in 3 decades. The GDP growth rate of India is projected at 6.7 percent, down from 7.0 percent in 2018. Chinese policy makers are saddled with trade talks with the US government to remove the recently imposed two way high tariff while Indian policy reforms take a backseat in the backdrop of impending National Elections in June 2019.
British Prime Minister Theresa May suffered a setback as parliament voted against her BREXIT proposal. The loss throws more uncertainty on UK’s plan to leave the EU on March 29. The European Central Bank down grading its economic forecast for the Euro Zone for 2019 and 2020 due to persistent uncertainties and risks in the region, expect inflationary pressures to rise slowly as capacity diminishes.
The World Bank sees darkening prospects for global growth that will slow to 2.9 percent in 2019 in the backdrop of moderating international trade and investment, elevated trade tensions and tightening financial conditions. The World Bank observed that debt vulnerability in low income countries are rising. Debt to GDP ratio for low income countries have climbed and the composition of debt has shifted toward more expensive market based financing. The Bank suggests that these economies should focus on mobilizing domestic resources, strengthening debt and investment management practices, and building resilient macro fiscal frameworks.
Sri Lanka’s official reserves declined to USD 6,142 million by end of January 2019 from USD 6,919 million reported at the end of December 2018. Short term (within 01 year) liabilities on foreign currency assets remain at USD 6,547 million placing net reserve on a negative terrain. Selling rates of major currencies remained under pressure with import demand picking up in mid-February. The selling rate of the US dollar declined from Rs.180.28 on 15th February 2019 to Rs.177.59 a week ago.
US – China trade talks aimed at ending the use of new two way tariff continue in Washington following a no deal in the talks in Beijing during the second week of February. The US President has indicated that the March 01st deadline could be extended for an agreement to be reached. China and US have imposed duties on more than USD 360 million in the two way trade which has shaken the global economy.
The Asian Development Bank (ADB) revealed that the GDP for South East Asia’s 5 major economies – Indonesia, Malaysia, Philippines, Singapore and Thailand – has declined from 5.1 percent in 2017 to 4.8 percent in 2018. The ADB highlights that South East Asia with 650 million people and one of the world’s fastest growing regions, faces several headwinds such as escalating US – China trade tensions and weakening local currencies.
By: Econsult