Biz confidence makes a comeback – but not without specter of lingering concerns

In mid-August 2019, the Cabinet approved a proposal to present a Vote on Account (VoA) with the aim of allocating government expenditure for the first quarter of 2020. This move is attributed to the belief that it would not make sense to introduce a fully fledged budget in the lead up to the Presidential Election.

With a Presidential Poll being expected to be held in December, the presentation of Budget 2020 would have to be postponed pending the composition of a new Cabinet and policies of the next regime.

Consequently, a VoA is expected to be tabled in Parliament this year, to cover all expenditures deemed necessary to maintain the government during the first four months of 2020. A vote on account was also presented for the first quarter of this year in the wake of the constitutional crisis that had beset the nation in October 2018.

But while the corporate had voiced concern over political uncertainty in the country, results of the latest LMD-Nielsen Business Confidence Index (BCI) survey paints a more positive picture - in fact, the increase in the index is the highest since November last year.

According to the latest monthly LMD-Nielsen Business Confidence Index (BCI) Survey, the BCI registered a noteworthy improvement of 20 basis points to reach 94 in August, which reflects a six month high. In addition, the barometer of business sentiment is five points above average for the last 12 months (89) and virtually the same as an year ago (95).

Nielsen’s Managing Director Sharang Pant comments: “There seems to be a wind of positive change blowing across Sri Lanka. Sentiment is improving with both business people and consumers feeling that the worst is behind them and the future had better things in store. This is backed by macro and micro factors, such as export performance, currency stability, inflation and others.”

“When asked for reasons for the improvement in sentiment, business people cite the positive signals provided by the authorities in attracting tourists back to the island. They expect similar initiatives to also bring investments into the country,” he noted.

According to respondents, political uncertainty remains the most daunting issue facing the nation amid the prospect of a Presidential election later this year, while taxes continue to be the main business concern.

Moreover, survey results reveal that concern over national security has tapered off compared to the preceding months.

In last month’s analysis of the BCI, we noted that barring the introduction of genuine confidence building measures by the powers that be, an improvement in sentiment would fall within the realms of a topian fantasy! On the other hand, we hoped that sanity would prevail in the light of multiple international travel guides affirming that Sri Lanka is still a ‘must visit’ destination this year.

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