global ecoomic condition.doc

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global ecoomic condition

Global economic conditions will determine to a large extent Sri Lankas economic performance in 2012. Although global economic developments are beyond the countrys control, appropriate responses could mitigate their adverse impacts. However, more important than the countrys short-term economic performance is the longer view of the countrys development policies to ensure healthy economic development. A longer-term perspective rather than immediate concerns is vital. The long-term perspective should put in place policies that would ensure sustained economic development. These include good fiscal, monetary and exchange-rate policies, certainty and predictability of economic policies, political stability, good governance, the rule of law, guarantee of property rights and, most importantly, a permanent political solution to the grievances of the people in the North and East. Nonetheless current decisions on economic policies have an important influence on the course of economic development. First, we review current economic prospects and then discuss the needed policy directions for sustained economic development. Current prospects Prospects for economic growth this year are not bright, as global economic developments pose serious threats to the countrys economic performance. The most significant factor is the slowdown of economic development in the West. The United States is still unable to recover sufficiently from recessionary conditions and likely to grow at a slow pace of around 1 per cent and unemployment remains high. Most European Union countries are in a state of economic confusion and a currency crisis. Early resolution of these problems is improbable. The sluggish economic conditions in the United States and Europe will have serious repercussions on the countrys exports, as it is these Western countries that import a large proportion of the countrys exports, especially manufactured goods. In 2010 Europe and North America accounted for 56 per c

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