The post war growth bump has hit the ceiling

Abstract

This article explores the question of whether Sri Lanka could expect higher sustained GDP growth post-war and concludes that the post-war bump-up is over for the time being. It suggests that the high growth is unsustainable as it had been driven by imports and construction. The former driver of growth resulted in a ballooning of the trade deficit while the latter was mainly government-financed expenditure on infrastructure. Both these drivers of growth are unlikely to continue in light of the pressure on the trade deficit and the fiscal deficit. The article also submits that increasing GDP growth in a sustainable manner requires serious administrative and policy reforms involving the public sector—in education, in regulation, through technology improvements, and by solving efficiency blocks in economic interactions.