The government’s inability to contain the spread of the pandemic and the resulting loss of confidence in the capability of their delivery has eroded the high expectations generated after the convincing win by the SLPP at the general election to cement the win at the presidential election. Perceived economic opportunity is very low.

Methodology

The PEOI is calculated based on data collected on an island-wide random survey of face-to-face interviews of 500 persons.

Presentation of Findings

Monthly survey data is presented quarterly. The focus is on the movement of the perception on economic opportunity. The data is available since July 2011 making PEOI the longest running series on such measurement. The perception on one’s ability to save is also regularly presented. The survey also tracks perceptions on cost of living, development of the country, media freedom, corruption and law and order among others. These are reported periodically.

Perceived Economic Opportunity

The question posed to the respondents is whether they believe their economic opportunities, be it in the workplace or in their business would increase, stay the same or diminish in the year ahead.

In the last quarterly report (September 2020) we mentioned, “Going in to the final quarter of 2020, the sentiments of population would hinge on the impact of the second lockdown and the expectation of the ability of the government to contain the spread of the virus in order to ensure economic activity to take place.”  The people have now spoken. They are certainly not happy with the economic outcome of the government’s efforts to contain the spread of the pandemic.

As shown in the above graph complied by Johns Hopkins University, confirmed cases in Sri Lanka have been increasing at an increasing rate in the final quarter of 2020 in spite of the military led tough movement restrictions imposed on the population. With the failure of the government to contain the spread of the virus the economy took a hit. In fact, the second wave that is indicative in the fast-rising curve since September had quite a significant negative impact on business across the board with unemployment numbers moving up while those employed had to take cuts in salary and allowances. The self-employed were caught up in the falling demand for goods and services. In general, the economic outlook was negative.

At the end of December only 7 percent felt that their economic opportunities would get better. This is in sharp contrast to the hope of moving to a ‘new normal’ with a renewed hope of economic opportunities where, by end August 2020, 23 percent of those surveyed felt that the opportunities would get better, equaling the figure obtained soon after the presidential elections of November 2019 when President Rajapaksa assumed office. The government’s attempts at dealing with the rapid spread by urging people to consume various faith healer type concoctions backfired as even the Minister of Health who publicly endorsed one such syrup fell victim to the disease (and still in hospital). It is most likely that the confidence in the government took a very heavy beating with it. With the pandemic spreading, jobs being lost and the economy shrinking and the government unable to keep matters under control, it is quite obvious that perceptions on economic opportunity took a nose dive.

Perception on Ability to Save

Here our objective is to determine the perceptions on the ability to save; an inadvertent way to estimate cost of living as well.

Having obtained their views on cost of living and ability to save some of what they earn, we asked the respondents on their perceptions on their personal savings in the coming 12 months. The perception on the public’s ability to save a ‘little more’ than what they do at present fell to a multi-year low of just 4 percent, after the 17 percent relative-high recorded after the presidential election.

With gloom in the horizon with the deteriorating economic conditions it is no surprise that people feel they will have to spend most of what they earn, and more, just to survive. As noted in the previous quarter, other indicators show that indebtedness among the population is increasing as many continue to find it impossible to meet their daily expenses due to decreasing income. While those who had outstanding loans and leases continued to receive some relief due to moratoria, the number of credit card defaults have seen an increase.

Perception on Corruption

Every day, people complain about corruption from the highest to the lowest person of authority. Whether factual or not the perception of corruption is high. The question posed is if the respondents perceive that corruption will lessen in the coming year.

The positive sentiments among the people that corruption will fall recorded in the previous quarter, which was in fact the highest since we started measuring it almost ten years ago; at 64 percent, fell by end of December 2020 to 36 percent. While it is still a lot better than what has been seen over the last several years, it is nevertheless disappointing that the momentum was not maintained.

Concluding Thoughts

The general perception of the public about their future economic opportunity saw a significant positive movement with the election of President Gotabaya Rajapaksa in November 2019. However, it was short-lived with expectations falling to levels just above what was witnessed before the election in only a matter of three months. Thereafter having risen again with President Rajapaksa’s party winning the general election with the installation of former President Mahinda Rajapaksa as Prime Minister in August 2020 in the middle of the unprecedented disruption of the economy due to the Covid19 pandemic lock-down, sentiment fell again. By the end of 2020, the positive perception on economic opportunity had fallen to a low of just 7 percent; a complete reversal of fortunes.

Whether this fall is temporary, meaning the gloom is due specifically to the disruptions due to the pandemic and would recover once the economy gets back to a ‘new normal’ or whether it will linger on at the bottom due to issues beyond the pandemic will only become apparent with time. The economy of Sri Lanka is faced with multiple challenges, the most serious of which is the impending balance of payments crisis aggravated by falling reserves leading to a precarious position in its foreign debt repayment. The confidence of the people in the ability of the government to deliver prosperity would be dependent on how it will ride the coming storm.

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.