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Multiple crises push biz sentiment to 2022's lowest

03 May 2022

  • Drop attributed to cashless Treasury, inflation, austerity measures, power cuts, political unrest
The LMD-NielsenIQ Business Confidence Index (BCI) has plummeted 16 basis points in April to 116, which is its lowest level this year, the statistics show.  LMD stated that compared to a year ago, the barometer of business confidence is a “whopping” 22 notches lower, and it has fallen below the all-time average of 126.  “If there’s a silver lining amid the doom and gloom, it is that the BCI is higher than its 12-month average of 109,” LMD added.  The drop was attributed to the “ignominy of a virtually cashless treasury, shortages of essentials (not to mention galloping inflation), the prospect of more belt tightening measures ahead of the proposed debt restructuring programme, protracted power outages, a political minefield of dangerous proportions and ongoing demonstrations”. NielsenIQ’s Director – Consumer Insights Therica Miyanadeniya stated: “People are struggling to survive in a country that’s facing more adverse economic constraints than ever before. Sri Lanka’s GDP growth rate at constant prices (2010) has slowed down; and by the last quarter of 2021, it stood at 1.8% with the services, agriculture, and industry all being affected.” She continued: “Imports have outpaced exports and year on year inflation was at a 20-year high of 21.5% in March with food inflation at 24.7% in February.” The countless downside risks that hover over the economy and political landscape at the time of going to print continue to cast a shadow over the BCI’s prospects in the near and medium terms, LMD added. “And to add to our woes, the ongoing war in Ukraine is sending ripples through an already battered world economy with the soaring cost of energy, in particular, taking its toll on nations such as ours. So the most obvious near-term sensitivities at this juncture include the price of oil, the value of the Sri Lankan rupee, an ongoing power crisis, and the political upheaval we have witnessed since early April,” it further noted.  In the last three editions of LMD, they asserted that the business community may well have been taking a longer-term view: “But it has to be said that until there’s a revival of Sri Lanka’s economy and an easing of the restrictions that the forex crisis has necessitated, this level of confidence will be hard to maintain.” In the meantime, Miyanadeniya stated that “all indicators point towards gloom and doom unless drastic measures are taken to reverse the downward spiral”, adding that “the patience of the people has reached a climax with protests and demonstrations becoming the norm rather than the exception”.

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