How Sri Lanka’s financial collapse raises alarm bells for other emerging markets

How Sri Lanka's economic collapse raises alarm bells for other emerging markets

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During the 2010 s, Sri Lanka had among the fastest-growing economies inAsia

Things took a 180- degree turn at the end of the years as the nation’s economy stumbled. In May 2022, the federal government defaulted on its financial obligation for the very first time in history.

As inflation continued to spiral out of control, with a huge lack of food, fuel and medication for the nation’s 22 million individuals, Sri Lankans required to the street, requiring the president, Gotabaya Rajapaksa, to resign and get away the nation.

Even though Sri Lanka has a brand-new president, Ranil Wickremesinghe, demonstrations continue. Inflation has actually increased past 50%– and might strike 70%– making it harder for individuals to endure.

Many specialists think that Sri Lanka’s story is an indication for emerging markets.

“Sri Lanka is facing its worst economic collapse in its modern history,” stated Sumudu W. Watugala, assistant teacher of financing at the Kelley School of Business at IndianaUniversity “This is due to long-standing structural weaknesses exacerbated by a series of idiosyncratic shocks. Sri Lanka’s crisis can be a warning sign to other developing nations because it’s a classic emerging market crisis in many ways.”

So what does Sri Lanka’s recession signal about comparable economies and emerging markets? Watch the video to learn more about more dangers associated with emerging markets, how Sri Lanka’s economy collapsed and the nation’s course forward.

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