Perceived Economic Opportunity PEO: October, 2017

This brief report of the Perceived Economic Opportunity (PEO) presents the analysis of a random survey carried out using a random sample of 400 men and women 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 October 2017 indicates that the expectations in terms of job prospects of people or developing the status of their business in the ensuing 12 months has decresed compared to September 2017. The same expectations showed an increasing trend in the month of September 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 (DCS), increased to 8.8 per cent in October 2017 from 8.6 per cent in September 2017, on year-on-year basis. This monthly increase was mainly due to the increase in prices of the items in the Food category which was led by adverse supply side developments.

The external sector exhibited a significant improvement in October 2017, with a notable decline in the trade deficit and continued inflows to the financial account of the Balance of Payment (BOP). Higher export earnings, which recorded a double digit growth for the fourth consecutive month, and a deceleration in import expenditure resulted in a significant year-on-year decline in the trade deficit in October.

However, earnings from tourism increased moderately, while workers’ remittances further declined, owing to adverse economic and geopolitical conditions prevailing in the Middle Eastern region.

Inflows to the financial account of the BOP continued during the month amidst increased foreign investments in the Colombo Stock Exchange (CSE) and the government securities market. Reflecting these developments, the BOP recorded an overall surplus of around US dollars 2.0 billion by end October 2017. Meanwhile, the level of gross official reserves increased to US dollars 7.5 billion at end October 2017, particularly with the absorption of foreign currency liquidity from the domestic foreign exchange market by the Central Bank. Gross official reserves stood at US dollars 6.0 billion in the end of year 2016.

The main contributor to the export increase in the month of October was from industrial exports reflecting the increase in garment exports to the USA and the EU market. Garment exports to the USA increased by 14.7 per cent, in October 2017 while those to the EU increased by 8.0 per cent with the benefit of GSP+ facility taking effect reflecting increased demand for garments.

The below graph shows the change of expectations in terms of job prospects of people, or developing the status of their business, in the ensuing 12 months.

Refer the graph 01 below;

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 October 2017.

ABILITY TO SAVE

According to the analysis in the month of October 2017, the expectation among the people to save a little more from their personal earnings in the ensuing 12 months has decresed compared to the month of September 2017. Increase of inflation may have majourly impacted this change.   Please Refer the Graph 02;

EXPECTATION FOR REDUCTION OF CORRUPTION

The expectation for reduction of corruption in the country showed a significant positive trend in the month of October 2017.

Sri Lanka appointed a Special Presidential Commission of Inquiry to investigate the controversial Central Bank bond issue and recommend action, in the month of January 2017.

Please Refer the Graph 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.