Free Submission Public Relations &
Deutsch English

Sri Lanka Business Forecast Report Q4 2012

Sri Lanka Business Forecast Report Q4 2012 - new country guide report published

Print article Print article
2013-01-01 02:26:53 - Sri Lanka Business Forecast Report Q4 2012 - a new country guide report on

Bilateral relations between Sri Lanka and India need to remain as stable as possible should the governments of both countries wish to see the prompt resolution of the long-awaited Comprehensive Economic Partnership Agreement (CEPA). Sri Lanka is poised to suffer a massive slowdown in 2012, as the central bank hits the brakes on an overheating economy, and as the economy suffers from the weakening European demand for its exports.

We expect real GDP growth to come in at 5.0% in 2012, a sharp slowdown from the 8.3% growth rate achieved last year. Private consumption and fixed capital formation growth are expected to slow sharply in 2012 to 4.5% (from 15.5% in 2011) and 6.0% (from 14.6%) respectively. Meanwhile, government and stock



building growth is expected to provide some support, increasing to 5.0% in 2012 (from 2.4% in 2011) and 15.0% (from -56.8%) respectively. Net exports are expected to continue to be a drag on economic growth.

Crucially, leading indicators continue to paint a bleak outlook for the economy. The recent boom in foreign direct investment (FDI) has been nothing short of spectacular. Nonetheless, we believe that the country and its political leadership cannot simply expect FDI to continue flowing in at an ever-increasing pace, given the still-precarious shape of the global economy. The FDI boom could quickly dissipate, given the island nation´s still-mediocre business environment.

While we see more policy rate hikes in the near term (100 basis points to be exact), our outlook for disinflation to start to take hold before the end of the year remains unchanged. Despite the reforms we have witnessed under the umbrella of IMF conditionality, state-owned enterprises (SOEs) remain omnipresent and continue to place a burden on public finances. Privatisation is unlikely to be an option over the medium term, as strong structural political factors act as a hindrance.

Major Forecast Changes

In view of the stronger-than-expected consumer price inflation prints of late, we have revised up our inflation forecasts. We now expect CPI to end the year at 8.5%, implying an average rate of 7.8% for 2012.

Key Risks To Outlook

Risks To Completion Of CEPA: Potential political stumbling blocks remain, which could stall the completion of CEPA. These include the recurring conflict between Indian fishermen and the Sri Lankan Navy, the government´s (perceived) lack of political reconciliation with the country´s Tamil minority, the likelihood of rising domestic protectionist sentiment at home, and New Delhi´s political ineffectiveness.

Upside Risks To Current Account Deficit: Even though the country´s concerted efforts at external rebalancing are starting to take hold, we highlight that the overall process still faces a number of challenges. Risks include the potential for adverse global commodity price movements, deeper weakness in the country´s main export markets, and political instability in its key sources of remittance inflows

Downside Risks To Policy Rate Outlook: The weakening economy and the fact that the Sri Lankan rupee has started to stabilise on the back of the moderation of the country´s external imbalances suggests to us that there is a risk that the central bank decides to stay away from further policy rate hikes.

Click for report details: ..

Browse all All Sectors Country Guide Reports ..

Browse all All Sectors Company Profile Reports ..

Browse all Latest Country Guide Reports ..

About Us is a leading online business information aggregator with over 300,000 market reports and company profiles available to our clients. Our extensive range of reports are sourced from the leading publishers of business information and provide clients with the widest range of information available. In terms of company profiles,’s online database allows clients access to market and corporate information to over 100,000 different companies. We provide clients with a fully indexed database of information where clients can find specific market reports on their niche industry sectors of interest.

Mike King
Phone: London: +44 (0) 203 086 8600

Disclaimer: If you have any questions regarding information in these press releases please contact the company added in the press release. Please do not contact pr-inside. We will not be able to assist you. PR-inside disclaims contents contained in this release.
Latest News
Read the Latest News


Terms & Conditions | Privacy | About us | Contact