Sri Lanka Country Risk Report

Published 26 August 2015 | Quarterly

  • 46 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
$1,195.00
Sri Lanka Country Risk Report

Core Views

  • The Sri Lankan rupee depreciated 2.0% in H115, and we expect the currency to weaken further against the US dollar over the coming quarters, to LKR135.00/USD and LKR138.00/USD by end-2015 and 2016, respectively. However, strong tourism earnings growth and a positive real interest rate environment will likely provide some support for the rupee.

  • As electoral politics once again take centre stage in Sri Lanka, fiscal consolidation efforts by the government will likely take a hiatus as politicians are likely to present populist manifestos in order to muster public support. As such, we maintain our expectation for the country's budget deficit as a share of GDP to come in at 5.3% in 2015, versus the government's forecast of 4.4%.

  • The CBSL will likely cut its benchmark interest rates again (by 75bps) over the coming months as a combination of low inflationary pressures and below-target economic growth provides incentive for the central bank to act. As inflation came in weaker than expected at 0.7% y-o-y in H115, we now forecast inflation to average just 1.0% in 2015, down from 3.0% previously.

  • The forthcoming general election in Sri Lanka will have a significant impact on policymaking following the handover of executive power to parliament via the 19th Constitutional Amendment in April 2015.The outcome, which will likely depend on the level of collaboration between President Sirisena and former President Rajapaksa, will have considerable bearing upon business sentiment over the medium-term.

  • Sri Lanka's real GDP growth came in at 6.4% y-o-y in Q115, and will likely remain below 7.0% for the remainder of the year due to weak external dynamics, as well as political uncertainty. As such, we maintain our forecast for Sri Lanka's real GDP growth to come in at 6.5% for 2015.

Major Forecast Changes

  • As inflation came in weaker than expected at 0.7% y-o-y in H115, we now forecast inflation to average just 1.0% in 2015, down from 3.0% previously.

Key...

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
An Arduous Path For Sinhalese-Tamil Reconciliation
8
Long-Term Political Outlook
9
Major Challenges In Coming Decade
9
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Growth To Slow In 2015
14
table: Economic Activity
14
Fiscal Policy
15
Slight Improvement To Government Debt In 2015
15
table: Fiscal Policy
16
Monetary Policy
17
Bound For Further Rate Cuts
17
Table: Revenue Measures
17
table: Monetary Policy
18
Balance Of Payments
19
Strong Sri Lankan Rupee To Widen Trade Deficit
19
table: Current Account
19
Chapter 3: 10-Year Forecast
21
The Sri Lankan Economy To 2024
21
A Constructive Long-Term Outlook
21
Table: Long-Term Macroeconomic Forecasts
21
Chapter 4: Operational Risk
23
SWOT Analysis
23
Operational Risk Index
23
Operational Risk
24
Table: Operational Risk
24
Legal Environment
25
Table: Asia - Legal
26
Costs Of Labour
29
Table: Asia - Cost Of Labour
29
Table: Average Annual Wage (LKR)
30
Table: Regulations Governing Flexibility of Workforce
30
Chapter 5: Key Sectors
33
Telecommunications
33
Table: Telecoms Sector - Mobile - Historical Data & Forecasts
33
Table: Telecoms Sector - Wireline - Historical Data & Forecasts
34
Other Key Sectors
37
table: Pharma Sector Key Indicators
37
table: Food & Drink Sector Key Indicators
37
table: Autos Sector Key Indicators
37
Chapter 6: BMI Global Macro Outlook
39
Global Outlook
39
EMs Still Slowing
39
Table: Global Assumptions
39
Table: Developed States, Real GDP GrowtH, %
40
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
40
Table: Emerging Markets, Real GDP Growth, %
41

The Sri Lanka Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Sri Lanka and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market..

An influential new analysis of Sri Lanka's economic, political and financial prospects through end-2017, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Sri Lanka's economic and industry growth through end-2017.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Sri Lanka's country risks against regional peers using BMI's country comparative Risk Ratings system.
  • Evaluate external threats to doing business in Sri Lanka, including currency volatility, the commodity price boom and protectionist policies.

The Sri Lanka Country Risk Report by Business Monitor International (BMI) includes three major sections: Economic Outlook, Political Outlook and Business Environment.

Economic Outlook:

How will the Sri Lankan economic policy-making and performance impact on corporate profitability over 2013-2017?

BMI provides our fully independent 5-year forecasts for Sri Lanka through end-2017 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Sri Lanka Country Risk Report features BMI's forecasts with supporting analysis for 2013 through to end-2017, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Ratings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2017 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Sri Lanka and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Sri Lanka, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Sri Lanka over the next 5-years?

BMI's Sri Lanka country Risk Ratings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Sri Lankan Market - Political Strengths, Weaknesses, Opportunities and Threats facing Sri Lanka.
  • Political Stability and Risk Assessment - BMI's Risk Ratings assess explicit short- and long-term risks to political stability; latest ratings, rankings and trends for Sri Lanka's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Sri Lanka's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Business Environment

Business Environment Risk Ratings with SWOT Analysis - Business environment Risk Ratings for Sri Lanka, benchmarked against ratings for regional neighbours.

Country Competitiveness - Competitiveness of Sri Lanka's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Ratings.

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