manusath-derana

Sri Lanka’s economic expectation showed a slowdown

December, 27, 2016

Perceived Economic Opportunity PEO: Octomber, 2016

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 October 2016 covering all districts in Sri Lanka on their expectations of economic prospects in the ensuing tweleve months.

Status of job prospects or business performance

Analysis of the perceived economic opportunities shows that expectations among the people of better economic prospects in the coming months had decresed in the month of October 2016 compared to the previous month.

The analysis for the month of September 2016 depicted an increasing trend of expectations in terms of job prospects or developing the status of their business to 12 percent. However it decresed to 9 percent in the month of October. This is in contrast with the expectations of 40 percent in the month of January 2015 soon after the new government assumed office as compared to 15 percent in the month of December 2014.

On the domestic front the economy saw a deceleration of credit growth in the private sector from 27.3 percent in August 2016 to 25.6 percent in September. while on the external front the deficit in the trade account expanded marginally by 0.7 per cent during the first seven months of the year as the decline in export earnings was greater than the contraction in the expenditure on imports. However, strengthening the external position, earnings from tourism increased by an estimated 14.6 percent during the first ten months of the year, while workers’ remittances increased by 3.5 percent during the same period.

Nation-wide inflation, as measured by the change in the National Consumer Price Index (NCPI; 2013=100) increased to 5.0 percent in October from 4.7 percent in September, on an year-on-year basis while inflation in the capital city, as measured by the change in the Colombo Consumer Price Index (CCPI), decreased marginally to 3.9 percent in September from 4.0 percent in August.

The Gross Domestic Product or GDP of Sri Lanka grew by 3.9 percent in real terms in the first half of 2016 mainly attributable to 4.9 percent growth in services and 5.2 percent growth in industrial activities.

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 2016.

Ability to save

According to the analysis of the situation in the month of October 2016, expectation among the people to save a little more from their personal earnings in the ensuing 12 months had changed marginally compared to the month of September 2016. The expectation was just a tad lower in the previous month.

The expectation of the ability to save was at a significantly higher level when the current government came into office, but, gradually decreased.

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 in to office has gradually decreased in past months.

But it is significant to note that this perception took a dramatic fall in October 2016 firm that of the previous month. It is very likely that this decrease is due to the much publicized issue of the probe by the Parilametary Committee on Public Enterprises, or COPE.

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