How Sri Lanka’s economic meltdown is ringing alarm bells for other emerging markets

During the 2010s, Sri Lanka had one of the fastest growing economies in Asia. Things took a 180 degree turn at the end of the decade as the country’s economy stumbled. In May 2022, the government defaulted on its debt for the first time in history. As inflation continued to spiral out of control, with a massive shortage of food, fuel and medicine for the country’s 22 million people, Sri Lankans took to the streets, forcing President Gotabaya Rajapaksa to resign and resign. flee the country. Even though Sri Lanka has a new president, Ranil Wickremesinghe, the protests continue. Inflation has exceeded 50% – and could reach 70% – making it harder for people to survive. Many experts believe Sri Lanka’s story is a wake-up call for emerging markets. “Sri Lanka is facing the worst economic collapse in modern history,” said Sumudu W. Watugala, assistant professor of finance at Indiana University’s Kelley School of Business. “This is due to long-standing structural weaknesses exacerbated by a series of idiosyncratic shocks. Sri Lanka’s crisis may be a wake-up call for other developing countries as it is in many ways a classic emerging market crisis.” So what does Sri Lanka’s economic crisis signal about similar economies and emerging markets? Watch the video to learn more about emerging market risks, the collapse of the Sri Lankan economy and the country’s path forward.

Sat 13 Aug 2022 14:00:33 GMT