Rising Gulf tensions shake SL’s fragile economic recovery
Sri Lanka’s fragile economic recovery is facing a new external shock as escalating tensions between the US-Israeli coalition and Iran spreads across the Gulf region, disrupting critical economic lifelines for the island nation.
Direct strikes on infrastructure in Kuwait, Qatar, Bahrain, Saudi Arabia and the UAE have raised fears of a wider regional conflict one that economists warn could destabilise Sri Lanka’s recovery just four years after the devastating economic crisis.
Economists say the confrontation represents a major “system shock” because Sri Lanka remains heavily dependent on West Asia for energy imports, workers’ remittances and export markets.
Prof. Priyanga Dunusinghe of Colombo University told Sunday Times Business that any prolonged Gulf conflict would immediately affect Sri Lanka through higher oil prices, foreign remittances and disruptions to trade flows.
“Disruptions in West Asia reduce oil supply and push prices upward. For a country that imports nearly all its fuel requirements, this would rapidly widen the trade deficit and add inflationary pressure,” he said.
As a matter of fact, global markets are already feeling the impact of this situation. The price of Brent crude oil has already gone up by around 15 per cent as a result of these disruptions in a strategic shipping route, and it is now close to reaching a range of US$ 90-$ 100 a barrel.
According to analysts, if oil prices remain above this range, a new balance of payments crisis could emerge for Sri Lanka.
Management Prof. Aminda Methsila Perera warned that Sri Lanka’s current recovery remains structurally fragile.
“The country’s apparent stability rests largely on tourism and remittances from migrant workers. With public debt still exceeding 100 per cent of GDP and exports stagnating, Sri Lanka lacks the internal resilience to absorb a major geopolitical shock such as a Gulf war,” he said.
Even the export sectors are facing a crisis in the early stages. Iran, Iraq, and the UAE, which are among the major export destinations for Ceylon Tea, are said to have slowed down their orders because of the disruption in the banking systems.
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!