The barometer loses ground as uncertainty makes for a cautious corporate mindset

Extreme weather dominated headlines across the globe with much of Europe battling an unprecedented heatwave amid the developing effects of El Niño. Here at home, Sri Lanka faced the other end of the spectrum, as heavy rains and flash floods disrupted daily life in many parts of the island.

The domestic news cycle was also marked by more high profile arrests and court rulings – and notably, charges relating to the April 2019 Easter Sunday attacks.

Law and order remains a concern on other fronts too with authorities intensifying their crackdown against narcotics in the face of a spike in drug related shootings. Violence at a number of prisons has also led to a renewed focus on security and conditions within correctional facilities.

And on the political front, the gazetted 22^nd Amendment to the Constitution proposes raising the retirement age of supreme court justices from 65 to 67 and court of appeal judges from 63 to 65, which has been the subject of much controversy.

There was more encouraging news on the economic front with Sri Lanka’s official foreign reserves rising marginally to US$ 6.591 billion at the end of July. Energy consumers also received some respite when the Public Utilities Commission of Sri Lanka (PUCSL) decided not to impose an electricity tariff revision for the third quarter of this year.

However, public health remains a concern with dengue infections heading towards the 100,000 mark, reinforcing the urgent need for preventive measures amid continuing wet weather.

THE INDEX Against this largely sobering backdrop, the LMD-PEPPERCUBE Business Confidence Index (BCI) edged down by two points to register 149 in August – from 151 in the preceding month.

From a broader perspective, the barometer stands 23 basis points above its historic median of 126 but remains 18 points below the 12 month average (167) – and more notably, trails the August 2025 reading of 192.

According to PepperCube Consultants, the BCI reflects a broadly stable business sentiment despite the dip in the index. Looking ahead, it cautions that business confidence will continue to be shaped by prevailing economic conditions and developments in the global sphere.

Adding to the uncertainty is a warning from the World Bank that risks to the world economy remain firmly tilted towards the downside. The bank cautions that an escalation of the Middle East conflict and further supply disruptions could intensify price pressures across the world.

PROJECTIONS The bottom line paints a picture of an uncertain last four months of 2026 with the trajectory of the BCI likely to remain susceptible to shifts in sentiment both here at home and abroad.

Much will depend on how the domestic eco­nomy evolves and equally, on developments in the Middle East and their wider repercussions on developing nations such as ours.

It follows that the corporate mindset is likely to remain in cautious mode. As such, the trajectory of the unique index that measures biz confidence in this country in the months ahead remains virtually impossible to foretell.

– LMD