manusath-derana

Dark Clouds Loom over Economy

August, 6, 2018

The corporate community is less than impressed by prospects for the national economy

The number of tourist arrivals to Sri Lanka reached almost 1.2 million in the first half of 2018, which corresponds to a healthy growth of 15.3 percent year on year. The largest source markets for travellers to Sri Lanka were India, China and the UK – they accounted for 22 percent, 14 percent and eight percent of total arrivals respectively in June.

Meanwhile, the tourism industry reportedly earned US$ 1.9 billion in the first five months of the year.

Worker remittances also rebounded in the five months to May to reach 3.1 billion dollars, which represents a 3.3 percent increment compared to the corresponding period in the previous year. In full year 2017, worker remittances to Sri Lanka decelerated to less than 7.2 billion dollars on account of tightening in gulf economies, which are home to a large number of Sri Lanka’s migrant workers.

THE ECONOMY Sentiment regarding the economy remains largely the same with almost 50 percent of business executives spoken to by the pollsters saying they expect the trend to be down rather than up. The 3.2 percent GDP growth recorded in the first quarter is deemed inadequate as the industry sector remained stagnant.

To this end, a member of the corporate community laments: “The decisions taken by the government with regard to the economy have really inconvenienced the general public, which in turn impacts our business.”

BIZ PROSPECTS Business prospects too are muted in the eyes of corporates as only 15 percent of respondents feel that sales volumes will improve in both the short and long terms.

Nearly a third of those polled state that their biz prospects are likely to get worse in the next 12 months while the majority view (53%) is that the status quo will be the order of the day. A similar underlying sentiment exists in regard to business prospects for the next three months as well.

INVESTMENT A mere eight percent of those consulted by Nielsen are positive about the investment climate in the country.

One such optimistic businessperson remarks that “there seems to be relatively more freedom now for investors to invest in the economy – we have seen investments taking place as well, which is a good sign for the economy moving forward.”

However, the majority (67%) of respondents are of the view that the investment climate in Sri Lanka is ‘poor’ or worse.

“With the current state of affairs regarding the economy, investors are thinking twice before investing due to the high uncertainty…,” observes a corporate executive.

Another adds: “The prevailing investment climate in the country is in a very poor state and political influence is playing a huge role in this.”

WORKFORCE Less than one in five businesspeople plan to increase their workforce in the coming six months. Much like in previous months, a massive majority (81%) claim they will maintain employee numbers in the six month period ahead.

However, a further three percent (up from 1% in June) of survey respondents reveal plans to resort to staff cuts – presumably because of the state of the economy.

– LMD