Business Monitor International


Sri Lanka Business Forecast Report

Published 19 November 2014

  • 43 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 Business Forecast Report

Core Views

  • We have upgraded our 2014 real GDP growth forecast to 7.1%, from our previous estimate of 6.8%, as we expect the country's manufacturing and services sectors to maintain their strong performances in 2014.

  • We believe that the successful passage of the United Nations Human Rights Council's (UNHRC) third resolution will neither hurt the political stability in Sri Lanka nor derail its economy. We therefore maintain our short-term political risk rating for the country at 77.1 out of 100 and our 2014 real GDP forecast of 7.1%.

  • We maintain that the Central Bank of Sri Lanka (CBSL) will keep its standing lending facility rate and standing deposit facility rate unchanged at 8.00% and 6.50% respectively over the course of 2014, as inflation will remain relatively subdued and the strong economic growth momentum seen in 2013 will likely continue this year.

  • We continue to expect the Sri Lankan rupee to remain fairly stable against the US dollar over the course of 2014, as the improvement seen in the external accounts for 2013 will likely continue this year, while the central bank continues to build up reserves. We are forecasting the currency to trade within LKR130.00-131.50/US$, and the current account deficit to narrow to 3.5% of GDP in 2014.

  • We believe that the pace of fiscal consolidation in Sri Lanka will remain slow, as we expect the impact of ongoing tax reforms to remain marginal, and see a substantial reduction in government expenditures as unlikely.

Major Forecast Changes

  • We have revised our 2014 real GDP growth forecast to 7.1%, from our earlier projection of 6.8%.

  • We have upgraded our 2014 current account forecast to -3.5% of GDP, from -5.0% previously.

  • We are projecting the budget deficit to narrow further to 5.4% of GDP, from our previous estimate of 5.8%, owing in large part to rapid real GDP growth in the country.

Key Risks To Outlook

  • Risks To Current Account Deficit: A flare-up in sovereign risk in the EU could quickly...

Table of Contents

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
Foreign Policy
8
Stronger Ties With China And Japan To Boost Trade And FDI
8
TABLE: POLITICAL OVERVIEW
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
GDP To Remain Robust In 2014 And 2015
14
TABLE: Economic Activity
14
Fiscal Policy
15
Public Debt-To-GDP Ratio To Tumble
15
TABLE: Fiscal Policy
16
Monetary Policy
17
Continued Rate Hold Ahead
17
TABLE: Monetary Policy
18
Currency Forecast
18
LKR: Small Depreciation In 2015
18
TABLE: CURRENCY FORECAST
19
TABLE: Current Account
19
Chapter 3: 10-Year Forecast
21
The Sri Lankan Economy To 2023
21
A Constructive Long-Term Outlook
21
TABLE: Long-Term Macroeconomic Forecasts
21
Chapter 4: Operational Risk
23
Operational Risk Index
23
Operational Risk
24
TABLE: Operational Risk
24
Transport Network
25
TABLE: Transport Network Risks
26
Economic Openness
29
TABLE: Economic Openness
30
TABLE: Product Exports (USDmn unless otherwise noted)
31
TABLE: Top 5 Trade Partners & Product Imports (USDmn unless otherwise noted)
32
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 and Drink Sector Key Indicators
37
Chapter 6: BMI Global Assumptions
39
Global Outlook
39
Reality Check: Uncertainty Reigns
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 Business Forecast 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 Business Forecast 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 Business Forecast 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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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express