The exclusive business barometer falls and withdraws its promise of hope

As nitty-gritties with regard to the IMF bailout are still to be resolved – especially with regard to debt restructuring with Sri Lanka’s creditors and the implications of Budget 2023 sink in – it would seem that corporates have retracted their optimism.

THE INDEX The LMD-NielsenIQ Business Confidence Index (BCI) dropped by a considerable 12 basis points – from 98 in November to 86 a month later.

The business sentiment barograph is now an insurmountable 33 basis points away from where it stood in December 2021 (119); and one can only surmise its trajectory in the New Year. The index is now far below March’s 132, the highest for 2022 – when business sentiment was high even at the time when the nation faced myriad challenges and strife.

NielsenIQ’s Director – Consumer Insights Therica Miyanadeniya asserts: “The end of 2022 is at hand and for the past two years, the calendar ended with hope for a better tomorrow.  However, reflecting on the past three years, and the current state of affairs in the country, 2023 is very uncertain.”

SENSITIVITIES It seems inconceivable – seeing the apparently brisk business both online and off, and the alacrity with which people have returned to restaurants and recreation – that a few months ago, we were burdened by fuel shortages and long power outages.

Harsh realities persist and cannot be ignored. Soaring inflation and the unbearable cost of living will cast a shadow over the new year across the globe; and here at home, we are likely to feel the rigours of a weakened currency even more acutely in the near term at least.

PROJECTIONS There is some back and forth on whether or not electricity tariffs will be increased – yet again – in the new year.

There is also news that the World Bank has approved Sri Lanka’s request to access concessional financing from the International Development Association (IDA). Increased tariffs and access to low interest financing would impact and influence the state of business in the coming year.

At the opening of the 2022 Economic Summit conducted by the Ceylon Chamber of Commerce, President Ranil Wickremesinghe stated that the country needs a new economy rather than reforms, and urged the private sector to focus on a green hydrogen sector for the future.

The president was also upbeat about Sri Lanka’s transformation into a major logistics hub.

Against this backdrop, it could well be that the LMD-NielsenIQ – the Business Confidence Index (BCI) will continue to fluctuate as business sentiment ebbs and flows between victories and defeats.

And 2023 could get off to a rocky start as calls for local government polls intensify, which could bring political instability back on the radar and present greater challenges to business viability.

But it is as ever the fiscal landscape of the here and now that preoccupies the nation, and parti­cularly its business leaders. The proof of the pudding is in the eating and it is to be seen how effective Budget 2023 and its implementation will prove to be.

For now the jury is out, and the notable drop in business confidence indicates that the nays have it.