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Expectation On Ability To Save Decreses With Rise Of Inflation

April, 28, 2017

Upward Trend In Expectation For Reduction Of Corruption 

 

Perceived Economic Opportunity PEO: February, 2017

 

This brief report of the Perceived Economic Opportunity (PEO) presents the analysis of a random survey carried out using a sample of 400 men and women in February 2017 covering all districts in Sri Lanka on their expectations of economic prospects in the ensuing twelve months.

 

STATUS OF JOB PROSPECTS OR BUSINESS PERFORMANCE

 

Analysis of the perceived economic opportunities in the month of February 2017 indicates that the expectations in terms of job prospects of people or developing the status of their business, shows a positive trend in the ensuing 12 months. The expectations in terms of job prospects of people or developing the status of their business shows a positive trend in the month of February 2017 compared to the month of January 2017.

 

The same expectations were increased to 12 percent in the month of November and stabilized at same in the month of December 2016.

 

The Government of Sri Lanka’s Hambantota port project which will form 2400 new factories has shown a progress in the past months.

 

It was also reported that the Managing Director of the International Monetary Fund, advocated in favour of the economic policies of Sri Lanka in January.

 

However, On February 23, the selling prices of a US dollar hit record high to 154.21 rupees and the US-based Heritage Foundation, has downgraded Sri Lanka by 19 places in their annual Index of Economic Freedom. Sri Lanka slipped to the 112th place from the 93rd place last year.

 

Meanwhile, on 11th of January, the European Union officially announced that it will again provide the Generalised scheme of preferences (GSP), a tax concession, to Sri Lanka. As EU officially announced, citizens strongly believe that Sri Lanka would be granted the GSP+  in May 2017.

 

 

Inflation, as measured by the change in the National Consumer Price Index (NCPI) (2013=100), which is compiled by the Department of Census and Statistics, increased to 8.2 per cent in February 2017 from 6.5 per cent in January 2017, on year-on-year basis.

 

The expectations in terms of job prospects of people or developing the status of their business in the ensuing 12 months stood at 15 percent in the month of December 2014 and increased to 40 percent in the month of January 2015 soon after the new government assumed office.

 

In January 2017, tourist arrivals increased by 12.9 per cent, year-on-year, compared to the tourist arrivals in January 2016. Also Sri Lankan tea prices show a continued rise compared to the year 2016.

 

Refer the graph below;

PEOI-Feb-01

Sri Lanka’s external sector showed a mixed performance in the month of December 2016. On the external front, the trade balance widened further in the month of December, as a result of increased imports expenditure, amidst the contraction in export earnings. However, strengthening the external position, earnings from tourism and the remittance of workers increased in the month of December 2016.

Export earnings in the month of December 2016 have increased by 4.7 per cent to 859 million dollars compared to the month of December 2015.

These reasons are likely to have had an impact on the expectations of job prospects and the business activities of the people in the month of February 2017.

ABILITY TO SAVE

 

According to the analysis in the month of February 2017, expectation among the people to save a little more from their personal earnings in the ensuing 12 months had shown a significant decrease.  The same was shown a decrease in the month of January 2017 compared to the month of December 2016. The reason for the decline is most likely the growing inflation in Sri Lanka.  The inflation increased to 8.2 per cent in the month of February 2017 from 6.5 per cent in the month of January 2017.  The expectation of the ability to save was at a significantly higher level when the current government came into office. (Please Refer the Graph 02)

PEOI-FEB-02

EXPECTATION FOR REDUCTION OF CORRUPTION

 

The higher expectation for the reduction of corruption in the country that many expected at the time the current government came into office has gradually decreased in past months. But it is significant to note that this perception took a dramatic fall in October 2016   likely due to the much publicized issue of the probe by the Parliamentary Committee on Public Enterprises, or COPE.

 

The same was continued in the month of December 2016.

 

However, the expectation showed an increase in the month of January 2017 likely due to the reason as Sri Lanka appointed a Special Presidential Commission of Inquiry to investigate the controversial Central Bank bond issue and recommend action in the same month. The commission is currently in action and the expectation for reduction of corruption showed an increase in the month of February 2017.

PEOI-Feb-03

PEO; Perceived Economic Opportunity is developed and surveyed by the Foundation for Economic Freedom in Sri Lanka. PepperCube Consultants carry out field research covering the entire country.

 

 

The Perceived Economic Opportunity was developed and is measured by the Foundation for Economic Freedom in Sri Lanka (FEF) in partnership with Friedrich Naumann Stiftung Fur Die Freiheit.