Outlook positive for business - CCC
The Ceylon Chamber of Commerce (CCC) anticipates a better year for
Sri Lankan business in 2014. There are a number of factors that point to
a more positive outlook at home and abroad, a media release from the CCC
said. Inflation is in mid-single digits, trade and current accounts of
the balance of payments have improved, the growth impetus in the economy
has picked up in 2H, 2013 and is likely to continue. All this is likely
to have a positive impact on corporate top and bottom lines in 2014. It
is encouraging that the authorities have demonstrated resolve in
pursuing fiscal consolidation. The burden of adjustment falling on
recurrent expenditure, while capital expenditure is protected, is a
The CCC would, however, urge that priority be attached to increasing
education and health expenditure through a combination of a stronger
revenue performance and greater recourse to private provision.
The government's continued focus on infrastructure development is to
It boosts the growth potential of the economy and opens up
opportunities for Public Private Partnerships (PPPs).
The adjustment of electricity and fuel prices has strengthened
macroeconomic conditions by improving the balance sheets of State banks
and creating more space for private sector credit.
The relaxation of monetary policy has generated a greater impetus to
economic activity with private sector credit picking up in 2H, 2013.
We would, however, suggest a note of caution regarding further
monetary accommodation as the output gap closes and yield differentials
between Sri Lankan and US treasury instruments decline as the Fed
unwinds the QE3 program. There are also favourable trends regarding the
country's external position. The trade and current account deficits of
the balance of payments have improved, with export receipts recording $1
billion per month for three consecutive months for the first time ever
in October, November and December, 2013. The recovery in the US, the
upturn in Europe and the anticipated stability in oil prices create an
improving external environment for the country.
It is also a source of comfort for business that the authorities have
been proactive in building up reserves to $8.2 billion to provide a
cushion against any adverse effects of Fed tapering linked to the
recalibration of risk in relation to emerging markets.
While, Sri Lanka's macroeconomic outlook over the next 12 months
seems benign, the unchartered territory associated with the US Federal
Reserve's tapering program, and to a lesser extent the easing of growth
in China, poses exogenous risks that need to be monitored and managed
The CCC looks forward to the completion of the FTA with China.
The two FTA's with China and India, combined with the proposed
commercial hub legislation are potential game changers for the
development prospects of the country.
The CCC looks forward to working with the relevant authorities, the