Political uncertainty of presidential poll retards economic growth

The uncertainties, confusion, and distractions of the presidential polls will retard economic growth. The adverse impacts could go beyond the presidential election timeframe to a post- election period of political confusion and even a constitutional crisis. Furthermore, once the presidential polls are over, the runup to the parliamentary elections would be another period of uncertainty for the economy.

This political uncertainty is not conducive for economic growth and resolving the massive financial problems the country is facing. They are likely to aggravate for quite some time till there is political stability.

Economic slowdown

Economic growth fell to 1.6 percent in the second quarter from 3.7 percent in the first quarter. It could fall further in the third and fourth quarters owing to political uncertainties. Consequently, the economy is expected to grow by less than 3 percent this year, The IMF estimates the economy to grow by only 2.7 percent in 2019: A substantial downward revision from the prediction made at the beginning of the year.

Second quarter

This low growth in the second quarter of this year was due to a significant slowdown in services owing to the setback to tourism due to the Easter Sunday attacks. Though there has been a slight improvement in tourism recently, its recovery too has been hampered by the elections. Agriculture and industry slowed down during the second quarter of 2019, compared to the previous quarter. Consequently the, economy is likely to grow slowly in 2019.

An economic recovery is unlikely in 2020 owing to the political confusion that may be created in the coming months and the run up to the parliamentary elections in 2020. The election will further slowdown the tardy economic growth this year. The presidential poll has slowed down the economy in diverse ways and may continue into 2020, as political stability and a certainty in economic policies cannot be achieved till a stable government is established following the parliamentary elections of 2020.

Three scenarios

The next four weeks till the results of the presidential poll are announced will be a period of economic neglect, political uncertainty and confusion. If that be all and a stable political situation is assured then the economy could revive. However, such political stability is possible only if the newly elected President is able to work with the Prime Minister and elected government that controls a parliamentary majority. The election rhetoric does not indicate such an understanding of the constitutional position of the new President.

Second scenario

A second scenario is that of no candidate obtaining more than the requisite 50 percent of the votes cast, even with the second preference. Such an eventuality would lead to political chaos with the main candidates claiming they have won or that their opposing candidates have not won. Such confusion and possible violence would certainly harm the economy. The Elections Commissioner should clarify the constitutional process in the event this happens.

Third scenario

The third scenario is that of the elected President not being able to work with the Prime Minister and government controlled by a majority in parliament. This third scenario would create a constitutional crisis like that of October 2018 and bring the government into a standstill. This would be a severe blow to the economy, especially the balance of payments and external finances.

Confusion

The presidential election has put the country into much confusion. It is not only the uncertainty of the nation’s choice of the President, but whether the polls would elect a President. The second crucial confusion is as to what the function of the newly elected President would be under the 19th amendment to the constitution.

The presidential candidates are acting as if they would have the same powers as the current President. Some of the election rhetoric even suggests that the President will act with immunity to do whatever he wants. This confusion is a further factor for economic uncertainty. It would be salutary if the constitutional position is clarified and the candidates and people are made aware of the constitutional position and powers of the next President.

Mature democracies

Today even mature democracies and developed economies are in political tur moil. However, they have strong institutions and their economies are not much dependent on state policy or political stability. In contrast, the Sri Lankan economic performance is very much dependent on the role of the state for macroeconomic stability and a conducive environment for investment and growth.

Conclusion

All things considered, the presidential poll has created a great deal of political uncertainty. This uncertainty is not merely the outcome of who would win the election, but doubts that any candidate would get the requisite more than 50 percent of the votes cast. In addition, there is the critical issue whether the elected President would be able to work with the Prime Minister and government controlled by parliament. Will there be another constitutional crisis like in October 2018 that would be a serious blow to the economy.

Will the presidential election elect a President who would work in harmony with the current government, as provided by the constitution?

Political stability is a prerequisite for economic development. Will the presidential and parliamentary elections ensure it?