BUSINESS SENTIMENT
BIZ CONFIDENCE AT AN ALL-TIME HIGH
The barometer skyrockets to an all-time peak amid undertones about sustainability
It’s been a month of highs and headwinds, as promising economic gains were met with political drama and renewed reform efforts clashed with lingering uncertainties on multiple fronts.
In a positive development, the IMF and local authorities reached a staff level agreement following the fifth review of the four year Extended Fund Facility (EFF) arrangement valued at approximately US$ 3 billion.
While acknowledging progress, the International Monetary Fund cautioned that the reform momentum must be maintained amid heightened global trade risks.
Meanwhile, the World Bank commended recent economic gains but warned that the country’s recovery remains incomplete with growth still below pre-crisis levels and poverty persistently high.
THE INDEX The LMD-PEPPERCUBE Business Confidence Index (BCI) shot up to a record high in October, surging by 17 basis points to 212 – from 195 in September.
What’s more, the index outperformed key benchmarks, standing 87 points above its historic median of 125 and 21 points higher than the 12 month average (191). The BCI registered only 139 in October last year.
Despite this notable rebound, recent movements depict a mixed trajectory: the previous all-time high of 210 recorded in June was followed by a sharp decline and a modest recovery within the 190-195 range.
According to PepperCube Consultants, the latest upswing has been driven by the government’s efforts to ease public pressure through relief measures and positive media narratives projecting greater stability.
However, it cautions that sustaining this momentum will depend on the administration’s ability to translate this optimism into concrete reforms that reinforce both business and national confidence.
PROJECTIONS The new record high, while exhilarating, raises questions about the sudden spike in confidence following three months of decline. The surge in sentiment in June proved to be short-lived with confidence wavering in subsequent months.
Adding to the uncertainty, the IMF’s Managing Director Kristalina Georgieva cautions: “Buckle up – uncertainty is the new normal and it is here to stay…”
“Before anyone heaves a big sigh of relief, please hear this: global resilience has not yet been fully tested and there are worrying signs that the test may come,” she adds. The same could apply to the BCI.
Meanwhile, the long-awaited but fragile ceasefire that has eased tensions between Israel and Hamas is perched on a knife-edge as the Middle East pins its hopes on a new dawn that will certainly stabilise the world’s political and economic landscapes.
Here at home, political uncertainty, gang related violence and arrests, and a sudden cabinet reshuffle have hogged the headlines – and they could undermine Sri Lanka’s economic recovery in the months ahead.
As such, October’s record peak may prove to be unsustainable in the medium term.
