4 International and Domestic Development Affecting Financial Stability

Seeing this graph we can see there is a different between expected output growth and real output growth in the world. Compare to the another years world output has been increased in 2014. Normally USA has grown in high European counties have a lowest economic growth. Because in European countries have high level investment and increases consumer price. Seeing details we can see in 2014 prices of fuel are noticeably reduced.

The inflation rate has gone up due to the depreciation of the currency. Commonly developing countries and developed countries have faced same problems. As a result oil price and essential goods have been reduced. We can see economically more developed countries the rate of the inflation rate is high. However the economic growth has slowed. So followed the strategy to overcome these disadvantages. Like investment promotion and loans with low interest rates. By the way it has benefit effects on current accounts, As a result Sri Lanka too received many benefits. many foreign investment came to SL. The development in USA and European countries has a direct impact on SL.(US monetary policy direct impact to international saving bonds). Our country has won GSP+. It is good effect for the economy. We can export goods without taxes. Syria main manufacturing item is oil. But it had began a civil war as a result country income going down and reverse also going down. So it effect to the Sri Lanka. As a result When we want oil we can to pay higher price for that. So we can know some goods price directly impact for country.

Domestic affecting

In here consider about changes in within country. Every change taking place in the country should be considered.

Gross domestic product has grown. Including production of metal and machinery Constriction has seen a significant increase. The service sector has grown steadily.

There is a notable improvement in all sector ,among them food services and accommodation, storage , transportation, retail and whole sale service. Although the unemployment rate is low the female unemployment rate is high level. The male unemployment rate is low. Uncertainty and cash flow weakened in Sri Lanka. That’s why foreign exchange a, investment , debt security, equity have been decreased. Colombo stock exchange gradually falls. At first it was higher but later it gradually decreased. Stock market changes directly affect for economy. Its affect to the foreign investment. The government allocated more money for recurrent expenditure like as employees salaries. In this period increased pressure on the exchange rate and depreciation of the rupee. As well as tourism income has increased at the same time. Recent political changes are good example for this. They introduced new constitutional laws and policies with the recent political turmoil. Value added tax is the main tax. Government main income is tax incomes. Domestic loan portion is getting increased.