During the 2010s, Sri Lanka had one of many fastest-growing economies in Asia.
Things took a 180-degree flip on the finish of the last decade because the nation’s economic system stumbled. In May 2022, the federal government defaulted on its debt for the primary time in historical past.
As inflation continued to spiral uncontrolled, with a large scarcity of meals, gasoline and drugs for the nation’s 22 million individuals, Sri Lankans took to the road, forcing the president, Gotabaya Rajapaksa, to resign and flee the nation.
Even although Sri Lanka has a brand new president, Ranil Wickremesinghe, protests proceed. Inflation has risen previous 50% — and may hit 70% — making it tougher for individuals to outlive.
Many consultants consider that Sri Lanka’s story is a warning signal for rising markets.
“Sri Lanka is going through its worst financial collapse in its trendy historical past,” mentioned Sumudu W. Watugala, assistant professor of finance on the Kelley School of Business at Indiana University. “This is because of long-standing structural weaknesses exacerbated by a sequence of idiosyncratic shocks. Sri Lanka’s disaster is usually a warning signal to different growing nations as a result of it is a basic rising market disaster in some ways.”
So what does Sri Lanka’s financial disaster sign about comparable economies and rising markets? Watch the video to find out about extra dangers concerned in rising markets, how Sri Lanka’s economic system collapsed and the nation’s path ahead.