Video: Business Ethics in the 21 st Century ethics-21st-century/ ethics-21st-century
Asia in the 21st Century: The Potential for Sri Lanka ... 2 I. Asia in the 21st Century III. Sri...
Transcript of Asia in the 21st Century: The Potential for Sri Lanka ... 2 I. Asia in the 21st Century III. Sri...
Outline
2
I. Asia in the 21st Century
III. Sri Lanka’s Potential
i. Macroeconomic and Financial StabilityII. Ingredients for Sustaining Rapid Growth
ii. Outward Orientation iii. Enhancing Productivity Growth iv. Investment in Physical Capital v. Robust Labour Contribution vi. Strong Institutions and Good Governance vii. Inclusive Economic Growth
I. Asia in the 21st Century
•Asia’s role in the global economy is rising•Increasing share of global GDP, trade and finance•Supported by sustained robust growth and productivity
4
29%71%
Asia Non-Asia
Share of world GDP, 2000
Share of world trade, 2000
Share of world finance, 2000
Asia: Rising role in the global economy
27%
73%38%
62%
Asia
29%
Asia Non-Asia
5
Share of world GDP, 2012
Share of world trade, 2012
Share of world finance, 2012
37% 32%
68% 64%36%
63%
Asia
Asia: Rising role in the global economy
6
Share of world GDP, 2023
Share of world trade, 2023
Share of world finance, 2023
Asia Non-Asia
53%47%
55%45%
54%46%
Asia
Asia: Rising role in the global economy
Asia’s growth and productivity: Robust and sustained
7
0
2
4
6
7
9
11
Thai
land
Mal
aysi
a
Philip
pine
s
Viet
nam
Indo
nesi
a
Indi
a
Chi
na
1994-1997 2003-2007 2008-2010 2011-2012
Trend Growth(In percent)
-2
-1
0
1
2
3
4
5
Thai
land
Mal
aysi
a
Philip
pine
s
Viet
nam
Indo
nesi
a
Indi
a
Chi
na
Growth of Total Factor Productivity(In percent)
Source: World Economic Outlook; WDI; CEIC Data Co. Ltd; Haver Analytics; and IMF staff estimates
Asia
Country flag =
Outline
8
I. Asia in the 21st Century
III. Sri Lanka’s Potential
i. Macroeconomic and Financial StabilityII. Ingredients for Sustaining Rapid Growth
ii. Outward Orientation iii. Enhancing Productivity Growth iv. Investment in Physical Capital v. Robust Labour Contribution vi. Strong Institutions and Good Governance vii. Inclusive Economic Growth
• Significant body of research on growth successes
• Common ingredients identified
II. Ingredients for Sustaining Rapid Growth
Research on growth successes
• The Commission on Growth and Development, Spence et al. 2008
• “What Makes Growth Sustained”, Berg et al., Journal of Development Economics, 2012
•!“The Quest for Prosperity: How Developing Economies Can Take Off”, Lin, Princeton University Press, 2012
•!“Growth Strategies”, Rodrik, NBER 2003
• Breaking Through The Frontier: Can Today’s Dynamic Low Income Countries Make It?”, World Economic Outlook, IMF 2013
10
Sustaining growth
Common ingredients
11
Growth
Investment in physical capital
Robust labour contribution
Technology & productivity
growth
Strong institutions &
good governance
Macroeconomic & financial
stability
Outward orientation
Inclusiveness
Sustaining growth
Outline
12
I. Asia in the 21st Century
III. Sri Lanka’s Potential
i. Macroeconomic and Financial StabilityII. Ingredients for Sustaining Rapid Growth
ii. Outward Orientation iii. Enhancing Productivity Growth iv. Investment in Physical Capital v. Robust Labour Contribution vi. Strong Institutions and Good Governance vii. Inclusive Economic Growth
• A prerequisite for growth success
• Progress achieved on a number of fronts
• Further fiscal and external strengthening needed
II. Ingredients for Sustaining Rapid Growth i. Macroeconomic and Financial Stability
14
-5
0
5
10
15
GDP Growth(In percent)
Inflation(In percent)
Current account(In percent of GDP)
Gross Reserves(In months of imports)
Sri Lanka’s strides toward macroeconomic stability
2000-2008 2009-2012 ASEAN-4
Sources: World Economic Outlook; and IMF staff calculations.Note: ASEAN includes Indonesia, Malaysia, the Philippines, and Thailand.
Macro-financial stability
-5
0
5
10
15
GDP Growth(In percent)
Inflation(In percent)
Current account(In percent of GDP)
Gross Reserves(In months of imports)
15
Sri Lanka’s strides toward macroeconomic stability
2000-2008 2009-2012 ASEAN-4
Macro-financial stability
Sources: World Economic Outlook; and IMF staff calculations.Note: ASEAN includes Indonesia, Malaysia, the Philippines, and Thailand.
Fiscal policy: Consolidation and debt sustainability
16
-10
-5
0
5
10
15
20
25
-40
-20
0
20
40
60
80
100
Fiscal deficit(In percent of GDP)
Revenues excl. grants(In percent of GDP)
Government Debt (In percent of GDP)
2000-2008 2009-2012 ASEAN-4
Sources: World Economic Outlook; and IMF staff calculations.Note: ASEAN includes Indonesia, Malaysia, the Philippines, and Thailand.
Macro-financial stability
(Right scale)
0
5
10
15
20
Financial stability: A critical underpinning
17
2000-2008 2009-2012 ASEAN-4
Tier 1 Capital(average)
Non-PerformingLoans (average)
Sources: Bankscope; World Economic Outlook; and IMF staff calculations.Note: ASEAN includes Indonesia, Malaysia, the Philippines, and Thailand.
Macro-financial stability
Lasting macro stability: Key policy priorities
• Stabilize inflation in mid-single digits
• Growth-friendly fiscal consolidation, though greater revenue effort, for debt sustainability
• Strengthen the external sector
• Continue safeguarding financial-sector soundness
18
Macro-financial stability
Outline
19
I. Asia in the 21st Century
III. Sri Lanka’s Potential
i. Macroeconomic and Financial StabilityII. Ingredients for Sustaining Rapid Growth
ii. Outward Orientation iii. Enhancing Productivity Growth iv. Investment in Physical Capital v. Robust Labour Contribution vi. Strong Institutions and Good Governance vii. Inclusive Economic Growth
• Openness supports growth and productivity
• Sri Lanka needs to turn decisively outward
•Fast-growing Asian neighbours, and upgrading exports represent significant potential
II. Ingredients for Sustaining Rapid Growth ii. Outward Orientation
Sri Lanka: The need to turn decisively outwards
21
0
23
45
68
90
2 4 7 9 11
JPN
PHLTWN
MYS
HKG
IDN
OMN
THA
LKA
KOR
BRA
VNM
LATAM (ex BRA)
10
15
20
25
30
35
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
0
0.02
0.04
0.06
0.08
0.10
0.12
0.14
Exports/GDP Exports/World Exports (RHS)
INDCHN
BWA
Expo
rts
to G
DP
rati
o (%
; ann
ual a
vg. d
urin
g su
stai
ned
grow
th e
piso
de)
Real GDP Growth (%, annual avg. during sustained growth episode)
Exports and GDP growth
Sources: Penn World Tables; World Economic Outlook; and IMF staff estimates.Note: Sustained growth episode defined as a period of 25 years after attaining $2500 constant PPP GDP/capita.
Outward orientation
Exports (In percent)
Sri Lanka: The need to turn decisively outwards
22
0
23
45
68
90
2 4 7 9 11
JPN
PHLTWN
MYS
HKG
IDN
OMN
THA
LKA
KOR
BRA
VNM
LATAM (ex BRA)
10
15
20
25
30
35
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
0
0.02
0.04
0.06
0.08
0.10
0.12
0.14
Exports/GDP Exports/World Exports (RHS)
INDCHN
BWA
Expo
rts
to G
DP
rati
o (%
; ann
ual a
vg. d
urin
g su
stai
ned
grow
th e
piso
de)
Exports (In percent)
Real GDP Growth (%, annual avg. during sustained growth episode)
Exports and GDP growth
Sources: Penn World Tables; World Economic Outlook; and IMF staff estimates.Note: Sustained growth episode defined as a period of 25 years after attaining $2500 constant PPP GDP/capita.
Outward orientation
Fast-growing Asian neighbors: Clearly offer potential markets
23
Others34%
India6%
China1%
Other advanced economies9%
EU29%
US20%
Sri L
anka
Philip
pine
s
Viet
nam
Indi
a
Indo
nesi
a
Thai
land
Mal
aysi
a
Sing
apor
e
Hon
g Ko
ng S
AR
Japa
n
Kore
a
Chi
na
Sri Lanka’s Export Destinations, 2012 Intra-Asian Trade, 2011(Exports plus imports, in percent of total intra-asian trade)
Sources: Direction of Trade Statistics; World Economic Outlook; and IMF staff calculations.Note: Intra-Asia sample includes developing Asia, East Asia, Australia, Japan, New Zealand, and Singapore.
Outward orientation
0
5
10
15
20
25
Sri Lanka’s service exports:Modern services required
24
0
10
20
30
40
2000
2012
2000
2012
2000
2012
2000
2012
2000
2012
2000
2012
2000
2012
2000
2012
25
26
27
28
29
30
2000 2012
Share of Modern Services Exports(In percent of total services exports)
Share of Services Exports(In percent of total exports)
Sri L
anka
Chi
na
Indo
nesi
a
Indi
a
Kore
a
Mal
aysi
a
Philip
pine
s
Thai
land
Sources: World Bank, WITS; UN comtrade Database; and IMF staff calculations.
Outward orientation
Sri Lanka’s goods exports: Diversify and upgrade
25
Chemicals, rubber and related products
5%
Garments46%
Tea14%
Machinery and manufactured articles
22%
Food and agriculture12%
0
25
50
75
100
2000
2011
2000
2011
2000
2011
2000
2011
2000
2011
2000
2011
2000
2011
2000
2011
High-Tech Medium-Tech
Share of High-tech Manufacturing Exports(In percent of total manufacturing exports)
Sri L
anka
Indi
a
Kore
a
Mal
aysi
a
Philip
pine
s
Thai
land
Chi
na
Indo
nesi
a
Goods Export Shares, Latest(In percent of total exports)
Outward orientation
Sources: World Bank, WITS; UN, Comtrade; World Economic Outlook; and IMF staff calculations
Tariff and para-tariff structures require reforms
26
0
10
20
30
40
Mal
aysi
a
Philip
pine
s
Chi
na
Thai
land
Indo
nesi
a
Sri L
anka
Kore
a
Indi
a
1995-2000 2000-2005 2005-2010
Weighted Average Tariff (In percent; 5 year average)
Source: World Bank, WITS
0
5
10
15
20
2004 2009 2013
Sri Lanka: Para Tariff Rates (In percent)
Outward orientation
Outline
27
I. Asia in the 21st Century
III. Sri Lanka’s Potential
i. Macroeconomic and Financial StabilityII. Ingredients for Sustaining Rapid Growth
ii. Outward Orientation iii. Enhancing Productivity Growth iv. Investment in Physical Capital v. Robust Labour Contribution vi. Strong Institutions and Good Governance vii. Inclusive Economic Growth
• Sri Lankan industries not at the productivity frontier
• More FDI, R&D, high-tech education required
II. Ingredients for Sustaining Rapid Growth iii. Enhancing Productivity Growth
Sri Lanka’s productivity: Room for improvement and FDI
29
0
5
10
15
20
25
30
Sri Lanka: Industry Productivity Dispersion(Output per worker 90th/10th percentile ratio)
0
5
10
15
20
25
30
Japa
nKo
rea
Philip
pine
sSr
i Lan
kaIn
dia
Indo
nesi
aTh
aila
ndC
hina
Mal
aysi
aVi
etna
mSi
ngap
ore
Hon
g Ko
ng S
AR
Latin
Am
eric
aSp
ence
13
Foreign Direct Investment(In percent of GDP)
Taiw
an P
rovi
nce
of C
hina
Woo
d Fu
rnitu
re
Pape
r pro
duct
s
Mac
hine
ry &
equ
ipm
ent
Che
mic
als,
Rub
ber
Text
iles
Basi
c M
etal
s
Non
-met
allic
pro
duct
s
Food
& b
ever
ages
Sources: World Economic Outlook; WDI; and IMF staff calculations.
Productivity growth
More R&D clearly helps
30
2
3
4
5
7
8
9
10
11
0 0.8 1.5 2.3 3.0
Research and Development Expenditure(In percent of GDP)
Research and Development Expenditure and Growth
Real
GD
P G
row
th R
ate
(%, a
nnua
l avg
. dur
ing
sust
aine
d gr
owth
epi
sode
)
Research and Development Expenditure (% of GDP; when $2500 constant PPP GDP per capita was reached)
0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Indo
nesi
aPh
ilippi
nes
Sri L
anka
Viet
nam
Thai
land
Mal
aysi
aIn
dia
Hon
g Ko
ng S
ARC
hina
Sing
apor
eKo
rea
Japa
n
Latin
Am
eric
aSp
ence
13
CHN
PHL
LATAM (ex. BRA)
BRA
MYS
BWA
HKG
IND
JPN
KOR
TWN
LKA
SGP
IDN
VNMTHA
Taiw
an P
rovi
nce
of C
hina
Sources: Penn World Tables; World Economic Outlook; and IMF staff estimates.Note: Sustained growth episode defined as a period of 25 years after attaining $2500 constant PPP GDP/capita.
Productivity growth
Education: Falling share in science and engineering
31
25
30
35
40
2002 2003 2004 2005 2006 2007 2008 2009
Prop
ortio
n of
Tot
al E
nrol
lmen
ts (
%)
Arts Science / Engineering Other
Sri Lanka: Trends in Tertiary Education, 2002-2009
Sources: Chelleraj 2012; and IMF staff calculations.Note: Other includes management, law, agriculture, and others.
Productivity growth
Outline
32
I. Asia in the 21st Century
III. Sri Lanka’s Potential
i. Macroeconomic and Financial StabilityII. Ingredients for Sustaining Rapid Growth
ii. Outward Orientation iii. Enhancing Productivity Growth iv. Investment in Physical Capital v. Robust Labour Contribution vi. Strong Institutions and Good Governance vii. Inclusive Economic Growth
• Investment is key to sustained robust growth
•Sri Lanka’s public investment can be increased, but savings must also rise
• Financial deepening will facilitate private savings/investment
II. Ingredients for Sustaining Rapid Growth iv. Investment in Physical Capital
Investment in physical capital and infrastructure spurs growth
34
012346789
1011
15 20 25 30 35 40 45
Investment and Growth
Rea
l GD
P G
row
th R
ate
(In p
erce
nt; y
early
ave
rage
200
0-20
12)
Investment to GDP ratio (In percent; 2000-2012)
CHN
LATAM (ex. BRA)
SGP
IND
VNM
KOR
MYS
MLT
LKA
PHL
BRA
HKG
JPN
TWN
IDN
OMNTHA
BWA
Sources: World Economic Outlook; and IMF staff estimates.
Physical capital
0
5
10
15
20
25
30
Phili
ppin
esIn
done
sia
Sing
apor
e
Kore
aH
ong
Kong
SAR
Japa
nTh
aila
ndSr
i Lan
kaIn
dia
Viet
nam
Mal
aysi
aCh
ina
Latin
Am
eric
aSp
ence
13
The government’s role in raising investment
35
Taiw
an P
rovi
nce
of C
hina
Public Investment Ratio(In percent of GDP; latest)
Average
0
1
2
3
4
Indo
nesi
aJa
pan
Philip
pine
sTh
aila
ndM
alay
sia
Chi
naVi
etna
mSr
i Lan
kaIn
dia
Kore
aSi
ngap
ore
Latin
Am
eric
a Sp
ence
13
Military Expenditure1
(In percent of GDP, 2012)
Source: SIPRI1 Based on NATO definition - includes all current & capital expenditures on armed forces, including peacekeeping forces; defense ministries & other defense related government agencies
Sources: World Economic Outlook; and IMF staff calculations.
Physical capital
Higher national savings needed
36
10
15
20
25
30
35
40
45
10 20 30 40 50
Investment and Savings
0
15
30
45
60
Chi
naIn
dia
Mal
aysi
aIn
done
sia
Philip
pine
sKo
rea
Viet
nam
Thai
land
Sri L
anka
Spen
ce 1
3La
tin A
mer
ica
Taiw
an P
rovi
nce
of C
hina
Total External Debt Ratio(In percent of GDP; 2012)
Gross National Savings to GDP ratio (In percent; 2000-2012)
Inve
stm
ent t
o G
DP
ratio
(In
per
cent
; 200
0-20
12)
IND
CHN
LKA
HKG
VNM
SGP
MLT
BRA
TWN
BWA
PHL
LATAM (ex. BRA)JPN
IDNTHA
MYS
KOR
OMN
Sources: World Economic Outlook; and IMF staff calculations.
Physical capital
-4
0
4
8
12
Sri L
anka
Philip
pine
s
Indi
aJa
pan
Hon
g Ko
ng S
ARC
hina
Indo
nesi
aTh
aila
ndVi
etna
mKo
rea
Sing
apor
eM
alay
sia
Latin
Am
eric
aSp
ence
13
Public savings must rise
37
Public Savings Ratio(In percent of GDP; average 2000-2012)
0
0.4
0.8
1.2
1.6
2.0
2006
2007
2008
2009
2010
2011
2012
CEB/CPC Losses(In percent of GDP)
Taiw
an P
rovin
ce
of C
hina
Sources: World Economic Outlook; and IMF staff calculations.
Physical capital
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
Sri Lanka’s demographics: A challenge for savings
38
30
40
50
60
70
80
90
100
1970
1975
1980
1985
1990
1995
2000
Range of comparator countries
Sources: UN Database; and IMF staff calculations.1 Dependency ratio projected using the U.N. medium fertility scenario. Comparator countries include China, India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam.
Sri Lanka’s Overall Dependency Ratio1
(Ratio of population aged 0-14 and 65+ to aged 15-64; in percent)
Sri Lanka
Physical capital
Sri LankaRange of comparator countries
0
20
40
60
80
Indi
aSr
i Lan
kaIn
done
sia
Viet
nam
Thai
land
Hon
g Ko
ng S
ARC
hina
Mal
aysi
aPh
ilippi
nes
Sing
apor
e
Latin
Am
eric
aSp
ence
13
Financial deepening: To boost savings and investment
39
0
50
100
150
200
0 50 100 150 200
Sources: Bankscope; and IMF staff calculations.
Dep
osits
/GD
P (In
per
cent
)
Bank Branches per 1000 persons.
Loans greater than 5 years(In percent of total loans)
Taiw
an P
rovi
nce
of C
hina
Physical capital
MLT
JPN
KOR
MYS
SGP
CHN
LKA
THABRA
PHL
IDN
BWAIND
OMN
LATAM(ex. BRA)
VNM
Deposits and Bank Branches
Outline
40
I. Asia in the 21st Century
III. Sri Lanka’s Potential
i. Macroeconomic and Financial StabilityII. Ingredients for Sustaining Rapid Growth
ii. Outward Orientation iii. Enhancing Productivity Growth iv. Investment in Physical Capital v. Robust Labour Contribution vi. Strong Institutions and Good Governance vii. Inclusive Economic Growth
•Higher labour force participation, particularly for women, is needed
• A healthy and educated labour force boosts productivity
II. Ingredients for Sustaining Rapid Growth v. Robust Labour Contribution
0
15
30
45
60
75
90
Sri L
anka
Indi
aM
alay
sia
Kore
aPh
ilippi
nes
Hon
g Ko
ng S
ARIn
done
sia
Sing
apor
eJa
pan
Thai
land
Chi
naVi
etna
m
Latin
Am
eric
aSp
ence
13
Labour force participation key, especially for women
42
Taiw
an P
rovi
nce
of C
hina
Overall Labour Force Participation Rates(In percent; average 2000-2012)
30
40
50
60
70
80
50 60 70 80 90
Overall and Female Labour Participation Rates(Latest)
Fem
ale
Labo
ur F
orce
Par
ticip
atio
n R
ates
(in
per
cent
of f
emal
e po
pula
tion
aged
15-
64)
Overall Labour Force Participation Rates (in percent of population aged 15-64)
TWN
MLT
LKA
IND
PHL
KOR
MYS
LATAM (ex. BRA)IDN
CHN
VNM
BWA
THA
BRA
JPN
SGP
Sources: WDI; CEIC; and IMF staff calculations.
Labour contribution
0
1
2
3
4
5
6
7
Chi
naSr
i Lan
kaPh
ilippi
nes
Indo
nesi
aSi
ngap
ore
Indi
aH
ong
Kong
SAR
Thai
land
Japa
nKo
rea
Mal
aysi
aVi
etna
m
Spen
ce 1
3La
tin A
mer
ica
Labour quality:Education raises productivity
43
Public Spending on Education (In percent of GDP; latest)
0
20
40
60
80
1.0 2.3 3.5 4.8 6.0Education Spending (% of GDP)
Education and Productivity
JPN
HKG
LKA
SGP
IDN
IND
MYS
THA
Sources: WDI; Ark & McGuckin.
Labour contribution
Prod
uctiv
ity
(GDP
per
hou
r wor
ked,
rela
tive
to U
S)
A healthy labour force is equally important
44
0
2
4
6
8
10
Indo
nesi
aSr
i Lan
kaM
alay
sia
Indi
aTh
aila
ndPh
ilippi
nes
Sing
apor
eC
hina
Viet
nam
Japa
n
Spen
ce 1
3La
tin A
mer
ica
Public Spending on Health(In percent of GDP; latest)
Sources: WDI; Ark & McGuckin.
0
20
40
60
80
2 4 6 8 10Health Expenditure (% of GDP)
Health and Productivity
JPN
LKA
SGP
IDN
IND
THA
PHL
MYSKOR
Labour contribution
Prod
uctiv
ity
(GDP
per
hou
r wor
ked,
rela
tive
to U
S)
Outline
45
I. Asia in the 21st Century
III. Sri Lanka’s Potential
i. Macroeconomic and Financial StabilityII. Ingredients for Sustaining Rapid Growth
ii. Outward Orientation iii. Enhancing Productivity Growth iv. Investment in Physical Capital v. Robust Labour Contribution vi. Strong Institutions and Good Governance vii. Inclusive Economic Growth
•A sound business environment requires strong institutions and governance
• Room for improvement in a number of areas
II. Ingredients for Sustaining Rapid Growth vi. Strong Institutions and Good Governance
0
20
40
60
80
100
120
140
Sing
apor
eH
ong
Kong
SAR
Kore
aM
alay
sia
Thai
land
Japa
nSr
i Lan
kaC
hina
Viet
nam
Indo
nesi
aIn
dia
Latin
Am
eric
aSp
ence
13
Sri Lanka!
Business environment: Strong institutions are key
47
Ease of Doing Business Indicator(Rank, 2012)
World Governance Indicator(Score, 2012)
Sources: WDI; and IMF staff calculations.
Institutions/ Governance
Voice & Accountability!
Political Stability!
Government Effectiveness!
Regulatory Quality!
Rule of Law!
Control of Corruption!
Spence 13! Latin America!
Policy initiatives
48
• Strong rule of law
• Restrained government involvement
• Focused and concise regulatory environment
• Basic social protection
•Political and economic inclusiveness
Institutions/ Governance
Outline
49
I. Asia in the 21st Century
III. Sri Lanka’s Potential
i. Macroeconomic and Financial StabilityII. Ingredients for Sustaining Rapid Growth
ii. Outward Orientation iii. Enhancing Productivity Growth iv. Investment in Physical Capital v. Robust Labour Contribution vi. Strong Institutions and Good Governance vii. Inclusive Economic Growth
• Sri Lanka’s poverty reduction is commendable
• Inclusiveness will reinforce sustained growth
II. Ingredients for Sustaining Rapid Growth vii. Inclusive Economic Growth
Growth must lift all boats
51
0
1
2
3
4
Indi
a
Philip
pine
s
Chi
na
Indo
nesi
a
Viet
nam
Sri L
anka
Thai
land
Poverty Headcount Ratio(In percent of population)
Source: WDI; World Economic Outlook; and IMF staff estimates
Inclusive growth
0
5
10
15
20
25
30
Chi
na 2
004
Mal
aysi
a 20
09Th
aila
nd 2
009
Indo
nesi
a 20
11Vi
etna
m 2
008
Philip
pine
s 20
09In
dia
2010
Sri L
anka
200
2Sr
i Lan
ka 2
007
Sri L
anka
201
0
Growth Elasticity of Poverty Reduction(Average, 2000-2010)
JPN
KOR
TWN
HKG SGP
LKA
PHL
IND MYS
THA VNM
CHN
IDN
BRA
LATAM (ex. BRA)
2
4
6
8
10
12
25 30 35 40 45 50 55
Inclusiveness: A virtuous growth cycle
52
Gini coefficient (In percent; when $2500 PPP GDP per capita was reached)
Inequality and Growth
Sources: Penn World Tables; UN Wider Database; World Economic Outlook; and IMF staff estimates.Note: Sustained growth episode defined as a period of 25 years after attaining $2500 constant PPP GDP/capita.
Rea
l GD
P gr
owth
rate
(In p
erce
nt, y
early
avg
. dur
ing
sust
aine
d gr
owth
epi
sode
)Inclusive growth
Outline
53
I. Asia in the 21st Century
III. Sri Lanka’s Potential
i. Macroeconomic and Financial StabilityII. Ingredients for Sustaining Rapid Growth
ii. Outward Orientation iii. Enhancing Productivity Growth iv. Investment in Physical Capital v. Robust Labour Contribution vi. Strong Institutions and Good Governance vii. Inclusive Economic Growth
• Sustained rapid growth over prolonged periods is achievable
• If Sri Lanka follows the key ingredients for growth success, it can narrow the gap with Asian emerging market economies
III. Sri Lanka’s Potential
Sustaining rapid growth:Challenging, but achievable
55
100
120
140
160
180
200
220
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43
Note: GDP per capita is in 2005 PPP adjusted terms. The slope of each series reflects the growth rate. Period = 1 defined as the year when GDP per capita for the country considered reached US$ 2500. Sri Lanka reached this level in 1998 ; Thailand - 1981; Malaysia - 1972; India - 2006; China - 1995; Japan - 1950; Singapore -1960; Korea -1969.
Past Growth Trajectories
Spence 13
Source: Penn World Tables; World Economic Outlook; and IMF staff estimates
Sri Lanka’s potential
Korea
JapanSingapore
Malaysia
Thailand
India
China
100
120
140
160
180
200
220
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43
Sri Lanka
t
Log
GDP
per
cap
ita (p
erio
d =
100)
Sri Lanka’s convergence with EMEs:Possible with sustained growth
56
5000
10000
15000
20000
25000
30000
35000
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
Labour and Human Capital Capital Deepening TFP
EMEs
GDP per Capita(In constant 2005 international dollars)
Source: Penn World Tables; World Economic Outlook; and IMF staff estimatesNote: Emerging Market Economy, with real per capita GDP 3 times Sri Lanka’s in 2011, growing at 4.5 percent per year.
Sri Lanka’s potential
2
Sri Lanka: Potential Growth: Last Decade and Future Target
2003-2012 Possible Range Future
Potential Growth (percent) 4½ – 6½ 8
Contribution of: TFP 2 – 3 3½ Capital deepening 1½ – 2 3 Labor and human capital 1 – 1½ 1½
Source: IMF staff estimates.
Sri Lanka
57