Business sentiment nosedives as COVID-19 takes its toll on the state of the state

While all eyes may have been on a presidential election in a land hundreds of thousands of miles away, closer to home, the situation appears to have become graver by the minute with a new set of coronavirus clusters taking a heavy toll on Sri Lanka – both in terms of patients and fatalities, and the fallout from an economic standpoint.

And this is duly reflected in the LMD-Nielsen Business Confidence Index (BCI) survey results, with sentiment taking a turn for the worse in the latest edition.

THE INDEX Set against the backdrop of a second wave of the coronavirus, the BCI has plummeted by 24 basis points – a four month low – to 91 in November from 115 in the previous month, which places the index well below its 12 month and all-time averages of 123 and 127 respectively.

Nielsen’s Director – Consumer Insights Therica Miyanadeniya elaborates: “As predicted, the positive traction that the country was beginning to experience after the initial curfew has begun to alter course. The second wave of COVID-19, far deadlier and more intense than the first wave, is taking its toll on both businesses and the general public once again.”

“The nation, which was on a path to recovery, has been caught unawares and the question remains as to whether we were prepared for what was to come. The country – now bursting at the seams with COVID-19 patients, an escalating death rate and those in quarantine – is struggling to keep up and keep count. Through fear, businesses and the people have gone into self-imposed quarantine,” she adds.

Miyanadeniya also notes however, that “this second wave hasn’t hit Sri Lanka as hard as it has in some European countries, and there is hope that the nation will be able to weather the new onslaught and come out victorious. But it remains to be seen how the country will emerge from an already battered economy.”

SENSITIVITIES Superseding all other concerns, the most pressing issue for businesses in Sri Lanka today continues to be the impact of the coronavirus.

The value of the rupee, high taxes, inflation, interest rates and political interference are highlighted as secondary concerns.

PROJECTIONS Given the trend observed in the most recent editions of the BCI, the immediate future does not appear promising for the index, added to which the jury is out on Budget 2021.

And Miyanadeniya believes that the BCI will continue to come under pressure as the nation struggles to contain the second wave of the COVID-19 influx: “With both businesses and people struggling to survive after the first battering of the virus, and with the second wave beginning to take its toll, confidence is expected to ebb further.”

On the other hand, there could well be some respite with news of one or more vaccines likely to be approved in the near future – and even though it may be months before Sri Lankans are vaccinated in sufficient numbers so as to stem the spread of the virus, the ensuing sense of expectation could turn the tide as far as business confidence is concerned. Only time will tell.