Perceived Economic Opportunity Index 2021 Q1: January to March, 2021

People’s perception on economic opportunities around the corner seem to have turned positive with daily positive cases of Coronavirus patients receding with the start of the nationwide inoculation program. However, the fall in optimism since the election of the President and the subsequent election of a strong government is stark. Unless the authorities are able to manage the pandemic swiftly and in a sustainable manner it is unlikely that the PEOI will see any significant rise in the near term.

1.0          Methodology

The PEOI is calculated based on data collected by PepperCube Consultants on an island-wide random survey of face-to-face interviews among 500 persons. The surveys took place from 02 to 31 for January; from 01 to 28 for February and from 01 to 31 for March 2021.

2.0          Presentation of Findings

Monthly survey data is presented quarterly. The main focus is on the movement of the perception on economic opportunity. The data is available for almost 10 years; since July 2011, making PEOI the longest running series on such measurement. The perception on one’s ability to save and the perception on corruption are regularly presented. The survey also tracks perceptions on cost of living, development of the country, media freedom and law and order among others. These are reported periodically.

2.1          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.

As opposed to the last quarter of 2020, the perception of people turned positive in February after falling in January. They seemed to begin appreciating the Government’s efforts in managing the pandemic as the daily reported numbers continued to fall and economic activity began to accelerate starting in February.

Daily Coronavirus Positive Cases

Source: Johns Hopkins University, Coronoavirus Resource Centre

As shown in the above graph by Johns Hopkins University, confirmed daily cases in Sri Lanka began to recede from February through March after a rise in January. In February the government started a nation-wide inoculation program using 500,000 doses of the Oxford-AstraZenica vaccine that was gifted and airlifted from India under their ‘Vaccine Maithree’ initiative to share the vaccine manufactured at the Serum Institute in Pune. Thereafter the government announced it had placed orders for millions of doses that would be sufficient to vaccinate all eligible persons amounting to some 15 million citizens and residents. This indicated the possible end of the second wave and made people feel as if the pandemic was actually ending.  A sense of optimism was felt among everyone.

The percentage of people who felt their economic opportunities were going to be brighter increased from just 3 percent in January to 6 percent in February and March. While the March 2021 figure was a significant fall from the 23 percent registered in August 2020 who expected to advance in their job or do better in their business at the beginning of the new term of Parliament with a two-thirds majority to support the policies of the President elected in November 2019, it was nevertheless an improvement from the low of January 2021.

A salient feature of the perception of economic opportunity in the last 12 months is that it is directly linked to the gravity of the pandemic on the economy. All other reasons, generally felt by the people; be it politics or macroeconomic indicators seem to have become much less relevant. For example, if one considers the interest rates, they are the lowest in memory. Policy rates have been brought down by 350 basis points since the election of the President in November 2019 creating a very accommodative monetary policy regime. The objective is to encourage investments and thereby opportunities for entrepreneurship and creating jobs. So, while on the political front there is a strong government with the President and Parliament from the same party and interest rates at historic lows, the variation of the perceptions on the economy seem to be tightly linked to the management of the pandemic.

Central Bank of Sri Lanka Standard Deposit (Policy) Rate

Source: Central Bank of Sri Lanka

2.2          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.

To assess the ability to manage the cost of living and to have something left over, we asked the respondents about their personal savings in the coming 12 months. The perception of the public’s ability to save a ‘little more’ than what they do at present fell in January 2021 to an almost 9-year low of just 1 percent but picked up to 10 by March reflecting the optimism seen earlier.

With gloom in the horizon fading away slowly it is no surprise that people felt they had a better chance at making a little extra every month. In a way this goes to show how dependent they are on the external environment in meeting their personal financial commitments.

2.3          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 was recorded as just 21 percent at end March 2021. That is a decline from 36 percent at the end of December 2020 and massive decline from 64 percent recorded September 2020 with the installation of the new government; which was in fact the highest since we started measuring it almost ten years ago. This fall in confidence on corruption at such a rapid pace is a serious concern.

3.0          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. However, once again the pendulum swung in favor of the government and people’s hopes brightened up with the beginning of the nationwide inoculation program. With men and women over 60 years getting vaccinated after an initial hiccup of who should get the jab, the daily reported cases of Covid19 positive patients declined quite rapidly. This naturally helped improve the level of confidence and the perception of better opportunities ahead of them.

We would now have to see how well the nationwide inoculation program is managed. If it is successful then the green shoots that have sprung up (once again) would grow in to strong confidence and that will help push the economy forward. After all, unless one is optimistic in the middle of this unprecedented pandemic situation, the entire process will lose momentum. But, on the other hand if the management of the nationwide inoculation program fails, then the consequences would be grave as the optimism would turn to pessimism. We as a nation are in a precarious situation with the economy faltering, debt obligations biting, currency under tremendous depreciation pressure. The only consolation is that the pandemic that finally seem to be under some control.

 

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.

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