Sri Lanka’s corporates pause on how they view the outlook for business

Business Sentiment – BIZ Confidence Stabilises

As far as biz sentiment goes, 2020 had its ups and downs – the LMD-Nielsen Business Confidence Index (BCI) oscillated between a high of 174 basis points at the beginning of the year, fell progressively thereafter against a backdrop of an unprecedented pandemic until August when it bounced back to above the century mark, only to shift into reverse gear and end the calendar year at a lowly 83 on the BCI scale.

In August, a new government assumed power following a landslide victory at the general election – amid a lull in the spread of the virus, albeit temporarily – although the gains were soon wiped out with the onset of the second wave of the deadly virus.

Since then however, there’s been a welcome turnaround thanks in the main to news of Sri Lanka’s immunisation programme – and a hope that efforts to mitigate the deadly virus will succeed sooner rather than later.

THE INDEX The BCI’s January score of 122 is followed by two point dip a month later (to 120 in February) – a sign perhaps that the unique index has stabilised as the government set a target of vaccinating sufficient numbers of the citizenry to reach the so-called ‘herd immunity’ that humanity desires in the first half of 2021.

And thankfully, the barometer of business confidence is 10 notches above its average for the last 12 months.

As Nielsen’s Director – Consumer Insights Therica Miyanadeniya cautions, “the COVID-19 situation has not abated in Sri Lanka, and new cases as well as deaths continue to rise. In spite of this, Sri Lankans are bravely forging ahead cautiously in order to salvage their businesses, which were badly hit in 2020…”

SENSITIVITIES The most pressing issues cited by businesspeople include the impact of COVID-19, followed by inflation and the unabated spread of bribery and corruption.

On the national front, corporate executives cite the spread of the virus and the economic outlook as being the priorities. In addition, the plight of children insofar as their education is concerned has emerged as being a cause for concern.

PROJECTIONS “With a new and more virulent strain of the virus identified in Sri Lanka, and an increased rate of infection and deaths,” Miyanadeniya believes that the hope of the country getting back to normal is somewhat muted. She opines: “If this trend continues, there is a possibility that both indices (the BCI and Nielsen’s Consumer Confidence Index) will plummet again.”

In our conclusion last month, we said that “should we see more light at the end of what’s been a long and dark tunnel, business confidence will surely reach for higher ground.”

While this continues to hold true, the pace and effectiveness of Sri Lanka’s immunisation programme is likely to drive sentiment in the near term – along with whether or not the ongoing spread of COVID-19 persists.

The outlook beyond our shores will also drive sentiment this year given that an interconnected world relies on international supply chains, travel and markets, all of which are presently under a cloud.


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Author: Biz Editor
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