TURNAROUND IN BIZ CONFIDENCE

The confidence barometer heads north after two successive months of stagnation

Despite the protracted period of suffering in recent months, Sri Lankans are gradually reclaiming a sense of their previous existence as the interminable wait in long queues has dwindled to minutes rather than hours and days, and basic necessities are in higher supply.

Thank goodness for that island mentality and short memories. Soon, it is hoped that we will be able to set aside some of the darkness of our recent past, and get on with getting back to work and growing an economy.

THE INDEX There is indeed cause for cautious optimism as the LMD-NielsenIQ Business Confidence Index (BCI) has risen by 32 basis points – from the dismal 49 registered in the consecutive months of June and July to 81 in August.

If this trend can be sustained, there can be real reason to rejoice.

In August last year, the barometer recorded 98 basis points and an upward trajectory thereafter, until as recently as March this year. It’s hoped that this ascent augurs a similar inclination.

But while we cautiously raise our hopes, one must be mindful that the BCI is still as uncomfortably below its all-time average of 125, and the climate of optimism that prevails today is very different from even what the nation was experiencing in the first quarter of the year.

NielsenIQ’s Director – Consumer Insights Therica Miyanadeniya remarks: “The introduction of the QR code and rationing of fuel has greatly reduced queues… The immediate concern is the high rate of inflation, which continues to rise unabated.”

SENSITIVITIES Globally, the political and environmental temperatures continue to soar, and too many nations are embattled by numerous challenges on too many fronts.

Many pundits predict that the world is on the brink of yet another recession. This may very well be the last straw for countries struggling to revive their economies in the aftermath of the pandemic and fall out from the Ukraine-Russia conflict.

It would appear that Sri Lanka has ameliorated its fuel and cooking gas crisis; but the man on the street remains careworn as the cost of living escalates, and basic food and services grow increasingly unaffordable.

At the same time, small and medium size businesses are struggling for their very survival – not unlike during the height of the pandemic – which may mean that the ‘working poor’ will be hard-pressed to earn higher wages despite seeing their disposable incomes dwindle.

PROJECTIONS How the business community views the interim budget proposals along with the long awaited outcome of staff level talks with the IMF will likely determine whether the index heads north or south next month.

Thankfully however, there is an air of optimism in business circles – for example, the number of corporates who were doubtful about the economy improving has diminished from 83 percent in July to 73 percent a month later.

So the glimmer of hope for recuperation that we cited in last month’s edition could well blossom into something more enduring. We said that the only way was up – and indeed, the index’s turnaround could be a sign of things to come.

– LMD