By:Staff WriterColombo (LNW): As nitty-gritties with regard to the IMF bailout are still to be resolved – especially with regard to debt restructuring with Sri Lanka’s creditors and the implications of Budget 2023 sink in – it would seem that corporates have retracted their optimism.
Sensitivities seems inconceivable – seeing the apparently brisk business both online and off, and the alacrity with which people have returned to restaurants and recreation – that a few months ago, people were burdened by fuel shortages and long power outages.
Harsh realities persist and cannot be ignored. High inflation and the unbearable cost of living will cast a shadow over the past five months of the year across the globe; and here at home, we are likely to feel the rigours of a weakened currency even more acutely in the near term at least.
There is some back and forth on whether or not electricity tariffs will be increased – yet again – in the year.
There is also news that the World Bank has approved Sri Lanka’s request to access concessional financing from the International Development Association (IDA). Increased tariffs and access to low interest financing would impact and influence the state of business in the coming year.
Business confidence takes a downturn following last month’s 12 month high,” business magazine LMD reported, in its forthcoming June edition.
The exclusive LMD-NielsenIQ Business Confidence Index (BCI) shed six basis points in May to register 102 – this follows the previous month’s whopping 36 point spike that marked a 12 month high, the magazine explained.
“If one were to be thankful for small mercies, however, the BCI is slightly higher than a year ago (99) and a healthy 22 notches ahead of its average in the last 12 months (80) – but in contrast, as many as 22 points shy of the barometer’s all-time median,” LMD noted.
It continued, “At the top of the list of sensitivities may well be the outcome of debt restructuring negotiations – and most importantly, whether local debt will come into the equation as this could undermine confidence not only in business circles but among the people as well.”
NielsenIQ’s Director – Consumer Insights Therica Miyanadeniya cautioned, “It is very evident that the BCI is sensitive to whatever is happening in the country – be it social, political, economic, environmental or otherwise.”
“At this rate, the direction of both the business and consumer confidence indices will depend on ‘what happens next’ – and all we can do is ‘wait and see’,” she added.
A spokesperson for the magazine said that, “the burning question for the weeks ahead is whether the perceived pros will outweigh the cons. If so, we expect the BCI to stand its ground and not fall below the psychologically important 100 mark – which is where it hovered for many months between May 2022 and March this year.”