During 2010, 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 faltered. In May 2022, the government defaulted on its debts for the first time in history.
With inflation continuing to spiral out of control, with massive shortages of food, fuel and medicine for the country’s population of 22 million, Sri Lankans have taken to the streets, forcing the president, Gotabaya Rajapaksa.And the to resign and flee the country.
Although Sri Lanka has a new president, Ranil Wickremesinghe, protests continue. Inflation has soared to well over 50% – and can be as high as 70% – making it difficult for people to survive.
Many experts believe the Sri Lanka story is a warning sign for emerging markets.
“Sri Lanka is facing its worst economic meltdown in its recent history,” said Somodu Watugala, associate professor of finance at Indiana University’s Kelly School of Business. “This is due to long-term structural weaknesses exacerbated by a series of special shocks. The Sri Lanka crisis can be a warning sign for other developing countries because it is in many ways the classic emerging market crisis.”
So, what does the economic crisis in Sri Lanka indicate about similar economies and emerging markets? Watch the video to learn more about the risks involved in emerging markets, how Sri Lanka’s economy has collapsed and the country’s path forward.