As Sri Lanka grapples to mitigate the third wave of the COVID-19 pandemic, the business community continues to operate in an environment of uncertainty as it looks to plan for financial year 2021/22 in the ‘new normal’ era.

Perspectives on the impact of the pandemic range from it being a temporary phenomenon to a feeling that the downturn will persist for the foreseeable future.

However, the consensus seems to be that as long as the virus continues to spread, businesses will need to be flexible and ensure their operations can adapt to the ever-changing circumstances.

As for the various effects of the pandemic, many corporate leaders acknowledge that some are here to stay with businesses continuing to embrace technology in their operations.

CHALLENGING LANDSCAPE The current financial year is expected to be challenging for corporates due to factors that include the prevailing uncertainty, the pandemic and macroeconomic conditions among others, according to several of LMD’s 2020 A Listers.

Thankfully however, a number of big businesses have reported higher year-on-year revenues and profits so far this calendar year.

The unpredictability of the business environment means that medium-term plans are impacted by health risks, lockdowns and other restrictions imposed by the authorities, and the declining value of the rupee to name a few.

DIGITAL OPPORTUNITIES On the other hand, the pandemic has also presented opportunities, enabling businesses to leverage technology, adopt new ways of working and expand operations to serve new segments – online education and banking are prime examples of this.

In fact, COVID-19 is seen as having helped drive digital adoption among our corporates and the public, making remote working and virtual workplaces a reality while promoting digital transactions.

For example, a number of financial services institutions have adopted digital technology to ensure business continuity and their ability to serve customers during the lockdowns.

IMMUNISATION CAMPAIGN Among the main challenges that businesses are facing is the uncertainty associated with the pandemic and pace of recovery, as vaccination roll outs across the world take time and new variants of the virus continue to be discovered.

Despite the challenging environment, the gradual recovery in many sectors towards the end of last year is expected to continue with pent-up demand being released to compensate for the restrictions imposed.

The management of the pandemic is expected to have a direct impact on tourism and the hospitality sector with many industry leaders anticipating a rebound towards the end of 2021.

As the country looks to emerge relatively unscathed from the pandemic, Sri Lanka’s leading businesspeople emphasise the importance of an efficient and effective vaccination programme – within the country and globally – to bring about a sustained economic recovery.

This is expected to boost tourism, manufacturing and exports among other economic segments.

BUSINESS CONFIDENCE Following the outbreak of the third wave of COVID-19, biz sentiment has plummeted; the nation’s only gauge of corporate sentiment – the LMD-NielsenIQ Business Confidence Index (BCI) – plunged by 49 basis points to 89 in May.

This reflects similar developments during the first and second waves last year when biz sentiment deteriorated as restrictions were imposed across the island, limiting business and economic activities.

However, the unique measure of biz confidence also witnessed gains earlier this year on the back of Sri Lanka’s vaccination roll out.

As such, the ongoing immunisation programme may prove to be vital to the country’s economic recovery this year, and in rebuilding confidence among corporates and consumers alike – provided of course, that it is rolled out expeditiously.

While the uncertain business environment is likely to continue in the foreseeable future due to the thus far slow roll out of the vaccination programme and discovery of new COVID-19 variants in many parts of the world, a relaxation of restrictions is expected to underpin a gradual recovery and could drive sentiment north so to speak.

As such, the outlook for the index hinges on the success of the vaccination programme with its recovery hinging on the pace of immunisation across the island.

CONSUMER CONFIDENCE The impact of the third wave has also been reflected in the Consumer Confidence Index (CCI), which fell to 40 in May, marking a drop of six points.

However, the decline was not as steep as the BCI, suggesting that the impact on consumers has been less severe compared to the business community.

Much like the BCI, the performance of the CCI has also correlated with the pandemic, declining in the wake of the first and second waves, and improving on the back of the country’s vaccination programme. Given this scenario, consumer sentiment is also likely to improve if the immunisation campaign gathers pace, and there’s a relaxation of restrictions.

However, this is contingent on the ability to manage the pandemic in the coming months by securing more consignments of vaccines and reducing the number of positive cases and fatalities.

It goes without saying that the government’s goal of reaching herd immunity by the end of the year holds the key to the nation’s business and economic prospects.