The Silver Lining, in the Emerging ‘Silver Economy’ 0 313

By: Dr. Kenneth De Zilwa

It has become a fad to argue that political and corporate leaders ought to be younger, the world around us has undergone extensive change over the past few decades. In the context of population ageing experienced in many parts of the world, it is argued in political and business realms that leaders require to be more age appropriate and not aged. The old guard, it is contended, is not in keeping with the winds of rapid technological transformation that is taking place.

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The 21st century business leadership belongs to the youth who are keeping abreast with technological innovations, robotics, and artificial intelligence in the corporate world. The global economic system seems to be sending out signals suggesting a need for change in the age composition of political and corporate leadership.

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Yet there are tendencies in the world today to embark upon a new strategy of capturing the potential of the silver economy which is estimated to be USD 15 trillion per year by 2020. The silver economy is thus becoming a significant mega trend that is shaping the world. In contrast to the past, we are living in an unprecedented era of the global longevity cycle. The age composition of world leaders and policy makers shaping this thought process is indicative of the fact that as the world population is ageing, & more and more business and political leaders will invariably be those with silver hair tips, representing the silver economic ethos. The data indicates that by 2050 the population segment of silver tips, i.e. those above the age of 60 years, will double from its current 890 million to reach 2 billion people, thereby accounting for 22percent of the global population. The UNDP projections also indicate that between 2018 and  2040, China’s 65+  population  would  jump  by  almost  150  percent,  from  135 to 340  million.  Thus by 2040, China will be a “super aged society” with 25 percent of its people being 62 years of age or older, while the Asia-Pacific region would be home to approximately 1.2 billion older people out of a total of 2.1 billion worldwide in that category by the year 2050. It’s not only the sheer numbers of individuals, but the sheer spending power of the silver hair tips that plays an even more important part in shaping global mega trends. According to Merrill Lynch, the investment bankers, the silver economy will grow from its current USD 7 trillion to a population segment with the spending power of USD 15 trillion per year by 2020. This would amount to approximately 16.4 percent of World GDP.  Such will be the scale and influence of this market segment.

Cont..

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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

Property and Construction Industry 0 413

By : Kenneth De Zilwa

The country key drive has been the construction industry which accounts for 7pct of GDP. The housing sector also absorbs circa 23pct of the banking sector credit. The quarterly data indicates that the sector contracted by 5pct. A proxy for the industry is the core raw material, namely cement, during the period under review the total cement supply has decreased by 3.55 pct. during the first quarter of 2018. The total imports of cement and the domestic supply of cement has dropped by 3.16 pct. and 4.22 pct. respectively in the first quarter of 2018.

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The overall segment of property seems to be depressed with many property developers and engineering, construction companies grappling with fiscal policy squeeze  as result of the increase in corporate tax, turnover tax and other taxes (WHT, NBT) which has resulted in an effective tax rate of 67pct vs 21pct in 2014. The situation is further compounded with higher balance sheet debt and the rising cost of production due to the YTD rupee depreciation of 5.9pct

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The depressed undertone in the construction industry is reflected the published Central Bank business survey together with the Greater Colombo Housing and Apartment Index. 2019 too does not seem to offer much sparkle to the sector with higher real interest rates and contraction in credit.