Sri Lanka Country Risk Report

Providing comprehensive data and in-depth analysis of political, financial and economic risk.

Report includes: BMI's Core Views, 10-year Forecasts, BMI's Economic Risk Index, Political Stability and Risk Index, Long-term Political Outlook, Operational Risk Index, SWOT Analysis and Structural Economic Sections

Why you should buy this report

  • Understand and measure the political, business environment and operational risks to your company
  • Gain insight on emerging trends that could support, strengthen or disrupt your activities in the market
  • Benefit from 10-year macroeconomic forecasts and insight into the structural characteristics of the economy
  • Get the long-term political outlook and explore possible scenarios for change
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Sri Lanka Country Risk Report
Product Price
$1,195.00

Core Views

  • Given that the Sri Lankan economy is relatively small and open, the administration's balanced and pragmatic approach towards ethnic reconciliation on the island and foreign relations will be positive for growth over the medium-to-long term. However, we believe that there will be several key challenges which will inhibit progress over the near-term.

  • The Central Bank of Sri Lanka (CBSL) will likely keep its policy rates on hold over the coming months with a tightening bias in order to manage the cost of refinancing for public debt, ensure price stability, and down play the risk of a balance of payment crisis.

Major Forecast Changes

  • Despite a likely recovery in the industrial sector over the coming quarters, we expect the Sri Lankan economy to face mounting headwinds from a difficult global economic outlook, a high fiscal deficit, and rising risks of a BoP crisis. As such, we have downgraded Sri Lanka's real GDP growth forecast for 2016 to 6.3%, from 6.7% previously, representing a stabilisation of growth in the economy (with growth estimated to come in at 6.2% in 2015).

  • We are bearish on the Sri Lankan rupee and expect the currency to depreciate further to LKR152.00/USD by end-2016 (versus our previous forecast of LKR148.00/USD) due to persistent external headwinds, global economic uncertainties, rising inflationary pressure, and elevated levels of public indebtedness.

  • We are bearish on Sri Lanka's fixed income market in 2016 as the central bank could be forced to raise interest rates to prevent a balance of payments crisis. Meanwhile, due to higher budget expenditures and a less optimistic revenue growth outlook, we are now forecasting a budget deficit equivalent to 6.3% of GDP (up from our previous forecast of 5.8%), which will exert upside pressures on sovereign bond yields.

Key Risks

  • The CBSL could be forced to return to capital controls if the country once again sinks into a full-fledged balance of payments crisis, but this will likely be a method of last resort given that the central bank had refrained from doing so in the past despite moderate BOP shocks.

Macroeconomic Forecasts (Sri Lanka 2014-2017)
Indicator 2014e 2015e 2016f 2017f
National Sources/BMI
Nominal GDP, USDbn 74.9 77.2 77.2 81.3
Real GDP growth, % y-o-y 7.4 6.2 6.3 6.4
Consumer price inflation, % y-o-y, eop 2.1 2.0 3.0 3.0
Exchange rate LKR/USD, eop 131.21 144.25 152.00 156.56
Budget balance, % of GDP -6.0 -6.2 -6.4 -6.2
Current account balance, % of GDP -2.7 -3.2 -3.8 -3.4
Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks
5
Chapter 1: Economic Outlook
7
SWOT Analysis
7
BMI Economic Risk Index
7
Economic Growth Outlook
8
Growth To Remain Stable In 2016
8
GDP By Expenditure Outlook
9
TABLE: GDP GROWTH FORECASTS
9
TABLE: PRIVATE CONSUMPTION FORECASTS
9
Fiscal And Public Debt Outlook
10
Bond Market Under Fire As BoP, Fiscal Risks Mount
10
TABLE: GOVERNMENT CONSUMPTION FORECASTS
10
TABLE: FIXED INVESTMENT FORECASTS
10
TABLE: NET EXPORTS FORECASTS
10
TABLE: REVENUE MEASURES IN 2015
11
Structural Fiscal Position
12
Currency Forecast
13
LKR: Heading Weaker Amid Multiple Headwinds
13
TABLE: MAIN REVENUE AND EXPENDITURE
13
TABLE: BMI CURRENCY FORECAST
14
Outlook On External Position
15
TABLE: MAIN EXPORT AND IMPORT PARTNERS
15
TABLE: MAIN EXPORTS AND IMPORTS
15
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
15
Monetary Policy
16
CBSL To Keep Rates On Hold Amid Mounting Fiscal Deficit
16
Monetary Policy Framework
17
Chapter 2: 10-Year Forecast
19
The Sri Lankan Economy To 2025
19
A Constructive Long-Term Outlook
19
TABLE: LONG-TERM MACROECONOMIC FORECASTS
19
Chapter 3: Political Outlook
21
SWOT Analysis
21
BMI Political Risk Index
21
Domestic Politics
22
Moderate Approach Positive For Growth, But Challenges Remain
22
TABLE: POLITICAL OVERVIEW
22
Long-Term Political Outlook
23
Major Challenges In Coming Decade
23
Chapter 4: Operational Risk
27
SWOT Analysis
27
Operational Risk Index
27
Operational Risk
28
TABLE: OPERATIONAL RISK
28
Trade Procedures And Governance
29
TABLE: IMPORT & EXPORT DOCUMENTS
29
TABLE: TRADE PROCEDURES BREAKDOWN
29
TABLE: ASIA - TRADE PROCEDURES AND GOVERNANCE
30
Vulnerability To Crime
31
Chapter 5: BMI Global Macro Outlook
37
Global Macro Outlook
37
Downside Risks Gather Momentum
37
TABLE: GLOBAL ASSUMPTIONS
37
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
38
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
38
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
39
TABLE: MACROECONOMIC DATA & FORECASTS
41

Assess your risk exposure in Sri Lanka with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Sri Lanka with confidence.

Your subscription service includes:

  • Delivery of the report in print and PDF
  • Online access for 12 months
  • The functionality to translate your online report into your choice of 10 languages - Arabic, Chinese, French, German, Italian, Japanese, Korean, Portuguese, Russian and Spanish
  • The ability to export data and graphs from the online report directly into your workflow
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  • Access to our team of leading analysts who will be happy to answer any questions you might have about the data and forecasts included in this report