How the Economic Meltdown in Sri Lanka should concern other Emerging Markets

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Sri Lanka’s economy grew among the quickest in Asia in the 2010s.

At the conclusion of the decade, the situation completely changed as the economy of the nation sputtered. For the first time in history, the government went into default on its debt in May 2022.

People in Sri Lanka came to the streets as inflation continued to out of control and there was a severe scarcity of food, fuel, and medicine for the nation’s 22 million residents. This led to the president, Gotabaya Rajapaksa, to resign and leave the country.

Protests continue in Sri Lanka despite the election of Ranil Wickremesinghe as president. It is now more difficult for individuals to subsist due to inflation, which has risen over 50% and may reach 70%.

Many experts think Sri Lanka’s experience should serve as a cautionary tale for developing economies.

According to Sumudu W. Watugala, an assistant professor of finance at the Kelley School of Business at Indiana University, Sri Lanka is currently experiencing its greatest economic collapse in recent times. “This is caused by a number of unique shocks that have exacerbated long-standing structural problems. Because Sri Lanka’s crisis is in many ways a classic emerging market crisis, it can serve as a warning to other developing countries.

What does Sri Lanka’s economic crisis tell us about other emerging markets and similar economies? Watch the video to find out more about the dangers of investing in emerging economies, how Sri Lanka’s economy crashed, and the future of the island nation.

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