Companies and Markets
Market Research A to Z | Company Profiles A to Z | Register | Contact Us
+44 (0) 203 086 8600 Call us on

Sri Lanka Business Forecast Report Q1 2013

710.78

Select License Type

Electronic License

Electronic License

An electronic version (mostly PDF, but can be Excel or PPT), which is either available for immediate download or will be sent via email by the Publisher of the report. The licencing for an electronic version is for use by the purchaser ONLY.

£710.78

Change Currency

GBP EURO USD

Market

All Sectors

Report Type

Country Guide

Country

Sri Lanka

Published

13 December 2012

Number of Pages

43

Report Delivery

Download

Delivery Lead Time

Immediate

Publisher

Business Monitor International

File Format

PDF

Heading into 2013, we are less convinced that Sri Lankan economic growth is headed towards any sort of material recovery from the ongoing slowdown. Therefore, we have downgraded our full-year real GDP growth projection for 2013 to 5.4%, implying that the ongoing slowdown will likely intensify in H113 before growth starts to pick up in H213.

The islands economy is still feeling the pinch on multiply fronts – rising credit costs, the weak Sri Lankan rupee, and the fragile state of the global economy.

Crucially, leading indicators continue to paint a bleak outlook for the economy.

Furthermore, more than two and a half years after the EU decided to withdraw preferential tariff benefits to Sri Lanka, it appears that the countrys exporters are now beginning to feel the economic squeeze. The ruling governments inadequate progress on the human rights front suggests to us that these privileges are unlikely to be reinstated any time soon.

With price concerns gradually coming off the table, we believe the primary focus of the Central Bank of Sri Lankas policies over the next 12 months will be fixed on economic growth. We are projecting 125 basis points (bps) worth of easing in 2013, taking the reverse repo rate to 8.50% by end-2013.

Much of Sri Lankas macroeconomic imbalances are being ironed out.

Taking into account our view for monetary easing going forward, we believe that these dynamics favour an outright bullish stance towards the countrys local debt. We reiterate that the countrys public debt profile has markedly improved over the years.

While the countrys overall business environment remains mediocre from a pan-Asian perspective, we cannot ignore the rapid and dynamic changes taking place in its regulatory framework, which indicate that its business environment is making significant strides. This in turn should help to sustain the countrys foreign direct investment boom.

Major Forecast Changes

We have decided to downgrade our full-year real GDP growth forecast for 2013 to 5.4% (from 5.9% previously), implying that growth will remain flat heading into the next calendar year.

On the back of our 2013 growth downgrade, we have adjusted our forecasts for consumer price inflation (CPI) and the CBSLs policy rate. We are now pencilling in more aggressive disinflation and more dovish moves by the CBSL. For 2013, we have downgraded our average CPI forecast to 7.0% (from 8.0% previously), and we have downgraded end-2013 policy rate projection to 8.50% (from 9.00 previously).

Key Risks To Outlook

Risks To Completion Of Sri Lanka-India CEPA: Potential political stumbling blocks remain, which could stall the completion of CEPA.

These include the recurring conflict between Indian fishermen and the Sri Lankan Navy, the governments (perceived) lack of political reconciliation with the countrys Tamil minority, and the likelihood of rising domestic protectionist sentiment at home.

Upside Risks To Current Account Deficit: Even though the countrys concerted efforts at external rebalancing are starting to take hold, we highlight that the overall process still faces a number of challenges.

Risks include the potential for adverse global commodity price movements (especially that of oil prices), deeper weakness in the countrys main export markets (the EU and the US), and political instability in its key sources of remittance inflows (the Middle East).

Upside Risks To Inflation And Policy Rate Outlook: Although headline CPI has passed its peak, we note that core inflation has gradually risen over the past few months. This may limit the ongoing period of disinflation currently taking place, and the likelihood for aggressive monetary policy easing in 2013.

Speak to an Advisor

Call us on
+44 (0) 203 086 8600

Select License Type

Electronic License

Electronic License

An electronic version (mostly PDF, but can be Excel or PPT), which is either available for immediate download or will be sent via email by the Publisher of the report. The licencing for an electronic version is for use by the purchaser ONLY.

£710.78

Change Currency

GBP EURO USD

Visitor Comments

All posts are pre-moderated and must obey the house rules.

Change Currency

GBP
USD

Use our research skills: Get free support

Free Research Support: Let us do the work for you and find information from public and private sources of information. Contact us now and we can save you time and money.......Free Research Support

eBrandPromote: Get your brands ranked highly online

eBrandPromote: Let us promote your brand online through article writing, press release distribution, social media and search engine marketing services. Click here to download our eBrandPromote brochure.

Accessibility
Close

Contrast settings

Text size settings