1. Market Research
  2. > Computer Security Market Trends
  3. > Sri Lanka Country Risk Report Q1 2017

Sri Lanka Country Risk Report Q1 2017

  • November 2016
  • -
  • Business Monitor International
  • -
  • 43 pages

Core Views

The Sri Lankan economy is likely to face multiple headwinds over the near-term arising from a volatile agricultural sector, a poor consumer outlook as well as rising risks of a balance of payments crisis. However, the industrial sector is likely to recover over the coming quarters on the back of a more stable political climate. As such, we forecast Sri Lanka’s economy to grow at 5.0% in 2017, marking a stabilisation of growth from our forecast of 4.6% 2016. The Sri Lankan government will have to adhere to austerity measures imposed by the IMF under the conditions of a USD1.5bn bailout as the country faces risks of a balance of payments crisis. In line with the bailout conditions, the government will reduce its budget deficit to 5.6% of GDP by end-2016 and 4.7% by end-2017. In addition, the CBSL will be forced to raise interest rates and devalue the currency in order to build a foreign reserves buffer.

However, we believe that the government will face difficulty in making short-term adjustments. The election of President Maithripala Sirisena in January 2015 and the UNP’s victory in the August general election have been broadly positive for socio-political and economic reforms in Sri Lanka. However, we believe the coalition government is likely to stall in its efforts to curb corruption and investigate war crimes that occurred during the civil war (1983-2009). The ability of powerful officials loyal to ex-president Mahinda Rajapaksa to resist these political reforms poses a risk to the country’s political stability and could prompt us to downgrade Sri Lanka’s Short-Term Political Risk Score. Major Forecast Changes The LKR will continue to depreciate steadily as elevated inflation rates and headwinds to growth weigh on the currency.

That said, the government’s progress with fiscal consolidation should boost investor sentiments and encourage greater FDI inflows, which should partly offset some of the depreciatory pressures on the LKR. We have accordingly upgraded our LKR forecasts to LKR151.0/USD at the end of 2016, from LKR155.0/USD previously, and LKR152.9 for the 2017 average, from LKR156.2/USD previously. Against a backdrop of weak performance in the agriculture sector and tighter fiscal and monetary policies, we have revised our real GDP growth forecast for Sri Lanka down to 4.6% for 2016, and 5.0% for 2017, from 5.2% and 5.4%, previously. However, a robust domestic services sector will support growth in the near term.

Table Of Contents

Sri Lanka Country Risk Report Q1 2017
Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks5
Chapter 1: Economic Outlook7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Growth Downgrade Amid Headwinds 8
Against a backdrop of weak performance in the agriculture sector and tighter fiscal and monetary policies, we revised our real GDP
growth forecast for Sri Lanka down to 4 6% for 2016, and 5 0% for 2017, from 5 2% and 5 4%, previously However, a robust domestic
services sector will support growth in the near term Sri Lanka's long-term outlook remains positive due to healthy tourism spending and
rising FDI in infrastructure
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS 9
TABLE: PRIVATE CONSUMPTION FORECASTS 10
TABLE: GOVERNMENT CONSUMPTION FORECASTS10
TABLE: FIXED INVESTMENT FORECASTS 10
TABLE: NET EXPORTS FORECASTS 10
Fiscal Policy And Public Debt Outlook11
Fiscal Consolidation Showing Signs Of Progress 11
We believe that Sri Lanka will progress steadily in its fiscal consolidation plans The country's improved fiscal outlook will boost investor
confidence and enhance its long-term growth prospects We have upgraded our forecast for the fiscal deficit from 5 9% of GDP to 5 6
%of GDP in 2016 and the country remains on track to achieve its 3 5% fiscal deficit target by 2020, based on its ongoing tax reforms
However, weak growth and spending pressures ahead of local elections in early 2017 could slow the pace of fiscal consolidation in the
near term
Structural Fiscal Position 12
TABLE: MAIN REVENUE AND EXPENDITURE13
TABLE: FISCAL AND PUBLIC DEBT FORECASTS 13
Outlook On External Position 13
TABLE: MAIN EXPORT AND IMPORT PARTNERS 14
TABLE: CURRENT ACCOUNT BALANCE FORECASTS14
TABLE: MAIN EXPORTS AND IMPORTS 14
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE 15
Monetary Policy 15
Further Tightening To Control Excessive Credit Growth 15
The Central Bank of Sri Lanka (CBSL) held its Standing Deposit Facility and Standing Lending Facility Rate s steady at 7 00% and
8 50%, respectively, at its monetary policy meeting on September 28 We maintain our forecast that the CBSL will hike its benchmark
rates by 50bps by end-2016 as credit and money supply growth remain rampant, but note that risks to our forecast are weighted to the
downside
Monetary Policy Framework 16
TABLE: MONETARY POLICY FORECASTS 16
Currency Forecast 17
LKR: Stabilising On A Depreciatory Path 17
We believe that the LKR will continue to depreciate steadily as elevated inflation rates and headwinds to growth weigh on the
currency That said, the government's progress with fiscal consolidation should boost investor sentiments and encourage greater FDI
inflows, which should partly offset some of the depreciatory pressures on the LKR We have accordingly upgraded our LKR forecasts
to LKR151 0/USD at the end of 2016, from LKR155 0/USD previously, and LKR152 9 for the 2017 average, from LKR156 2/USD
previously
TABLE: BMI CURRENCY FORECASTS 17
Contents
Chapter 2: 10-Year Forecast 19
The Sri Lankan Economy To 2025 19
A Constructive Long-Term Outlook 19
Sri Lanka's economy has grown strongly since the conclusion of the 26 year-long civil war in 2009 and we believe the island is well
placed to sustain its economic growth momentum over coming years Although the overheating remains an ongoing risk for the
economy, the reintegration of resources (particularly labour) into the formal economy and a deepening of financial markets bode well for
robust economic expansion over the medium term As such, we expect Sri Lanka's real GDP growth to aver age 5 8% over the next 10
years
TABLE: LONG-TERM MACROECONOMIC FORECASTS 19
Chapter 3: Political Outlook 21
SWOT Analysis 21
BMI Political Risk Index21
Domestic Politics22
Resistance To Political Reforms Poses Risks To Short-Term Stability 22
Sri Lanka's coalition government will continue to stall in its efforts to curb corruption and investigate war crimes that occurred during the
civil war (1983-2009) The ability of powerful officials loyal to ex-president Mahinda Rajapaksa to resist these political reforms poses
a risk to the country's political stability and could prompt us to downgrade Sri Lanka's Short-Term Political Risk Score Sri Lanka's
heightened political uncertainty could dent investor confidence and reduce inflows of FDI and development funds
TABLE: POLITICAL OVERVIEW 22
TABLE: STALLING REFORMS LIKELY TO WEIGH ON SHORT-TERM POLITICAL RISKS 23
Long-Term Political Outlook 24
Major Challenges In Coming Decade 24
Maithripala Sirisena's election to the presidency in January 2015 and the UNP's victory in the August 2015 general election will set Sri
Lanka on a path of increased political accountability over the coming decade, and greater economic reforms Sirisena's biggest political
challenge will be to reconcile the Tamil minority with the Sinhalese Buddhist majority However, this will not be easy and tensions
between the two groups will persist for the foreseeable future
Chapter 4: Operational Risk 27
Operational Risk 27
TABLE: OPERATIONAL RISK 27
Business Crime 28
TABLE: BUSINESS RESPONSE TO RISK IN SRI LANKA 30
Government Intervention 34
TABLE: BUSINESS TAXES 34
TABLE: PERSONAL INCOME TAX35
Chapter 5: BMI Global Macro Outlook39
Global Macro Outlook 39
Austerity Has Peaked, But Populism Is Not Yet Policy 39
TABLE: GLOBAL ASSUMPTIONS 39
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 40
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % 41
TABLE: MACROECONOMIC DATA and FORECASTS 43

View This Report »

Get Industry Insights. Simply.

  • Latest reports & slideshows with insights from top research analysts
  • 24 Million searchable statistics with tables, figures & datasets
  • More than 10,000 trusted sources
24/7 Customer Support

Talk to Veronica

+1 718 514 2762

Purchase Reports From Reputable Market Research Publishers
Asia-Pacific Distributed Denial of Service (DDoS) Solutions Market

Asia-Pacific Distributed Denial of Service (DDoS) Solutions Market

  • $ 13500
  • Industry report
  • September 2016
  • by Frost & Sullivan

Rise of Volumetric, Sophisticated, and Ransom DDoS Attacks Toward Organizations Driving the Market Growth momentum in the Asia-Pacific Distributed Denial of Services (DDoS) solutions market remained strong ...

Cyber Security: Technologies and Global Markets

Cyber Security: Technologies and Global Markets

  • $ 6650
  • Industry report
  • October 2016
  • by BCC Research

Use this report to: - Analyze regulatory and standardization issues that impact the software-defined radio (SDR) market. - Receive market sizes for cellular SDR base station infrastructure, cellula ...

Analysis of the India Secure Content Management Market

Analysis of the India Secure Content Management Market

  • $ 4950
  • Industry report
  • September 2016
  • by Frost & Sullivan

Targeted and Ransomware Attacks are Driving the SCM Market The Indian SCM market grew strongly at 11.7% year-on-year in 2015 with the web security segment growing at 12.4% and the email security segment ...


ref:plp2016

Reportlinker.com © Copyright 2016. All rights reserved.

ReportLinker simplifies how Analysts and Decision Makers get industry data for their business.