Biz confidence rebounds following election and with an eye on the post-COVID era

While the plaudits for Sri Lanka’s COVID-19 response continued to flow in and the successful conclusion of a largely peaceful election was duly recognised, the country faced yet another challenge in the form of a nationwide blackout in mid-August.

A technical problem at the Kerawalapitiya oil fired thermal power station plunged the island into chaos for over eight hours on 17 August, followed by power outages for up to four days announced by the state owned Ceylon Electricity Board (CEB) to carry out the necessary repair work.

This also meant a return to a state of uncertainty and a spanner in the works of business continuity, which was only beginning to return to a state of normalcy – so undoubtedly, a long-term resolution is the need of the hour.

Nevertheless, the latest LMD-Nielsen Business Confidence Index (BCI) survey – which was conducted in the first week of August – reflects a visible improvement in sentiment and sense of cautious optimism vis-à-vis corporate interests.

THE INDEX The index recorded a 20 basis point increase from the previous month to 117 (to only four points shy of the average in the last 12 months) in August, which Nielsen’s Director – Consumer Insights Therica Miyanadeniya describes as “not remarkable” but nonetheless “a good achievement” for the BCI that performed dismally at the height of the COVID-19 crisis.

She explains: “Although the presidential election held in November last year brought about a phenomenal jump in the BCI as well as the Consumer Confidence Index (CCI) whereby both indices recorded five year highs, the recent general election didn’t command such a remarkable improvement.”

Furthermore, Miyanadeniya observes that “businesses, still smarting from the effects of the COVID-19 pandemic, seem to have other things on their mind” in looking to plan the next steps to revive business.

SENSITIVITIES With fears over COVID-19 appearing to be on the wane, the fact that inflation is beginning to creep up is taking precedence among the concerns of businesspeople today.

And the value of the rupee, not to mention the financial instability of businesses and consumers alike, also emerge as key corporate sensitivities.

The coronavirus is viewed as the foremost concern from a national perspective with the likes of the economy and inadequate per capita income also featuring among the major priorities for the nation.

PROJECTIONS We did speculate in last month’s edition of the BCI that no matter what the election outcome turns out to be, the mere fact that there will be political continuity for the next five years could see the index heading north – and indeed, this has transpired.

Miyanadeniya remains hopeful that “the BCI will continue to rise with the work put in by corporate leaders to improve the state of their businesses as well as efforts of the recently elected government to come up with new strategies to uplift an economy under stress.”

The other side of the coin will be how corporates view the new regime’s handling of matters of the constitution and indeed, their take of cabinet and other key portfolio announcements.