A further defeat for the Present Government may worsen the prevailing Political Uncertainty – Report

July, 11, 2018

First Capital Research the research arm of the country’s one of the leading investment banks in their latest Mid-Year Economic outlook points out that “A further defeat for the present Government may worsen the prevailing political uncertainty” adding that however, an improvement in the voter base may provide some respite. Report highlights that the political uncertainty may continue affecting the investor confidence.

Report also adds that following the local government elections, all eyes are on Provincial Councils which are in the process of expiring.

“Sabaragamuwa, North Central and Eastern PCs expired in 2017. Central, North Western and Northern PCs terms will expire in Oct 2018. Southern, Western and Uva PCs terms will expire on Apr.10, 21 and Oct.8 in 2019. With the new electoral system to be finalized for PCs, Elections Commissioner has not called for nominations as yet” the report notes.

The report also points out that that ‘Another major factor that is creating uncertainty is the upcoming Presidential Election in late 2019’ and that none of the 3 major political parties have announced a clear candidate who would be contesting for the upcoming elections.

“It is a major deterrent for any investor. It is an important step in forecasting possible policy direction for the future in order to assess the risk for long term investments” the report stresses out.

The First Capital research says in the report that they expected the yield curve to be upward trending in the first quarter to 3rd quarter of 2018 with an acceleration in the uptrend towards third quarter of 2018 amidst bunching of debt maturities during third quarter of 2018.

The report adds that the unexpected local polls victory by the opposition resulted in an early surge in yields across the yield curve in March 2018 with low level of investor confidence.

“Following the US $ 2.5 billin sovereign bond some stability was seen during Apr 2018. However, business confidence dropped to a 70-month low in Apr 2018” the report notes in its review.

The full report is attached below;