Pessimism all over again in Perceived Economic Opportunity Index

Friday, 19 July 2013 03:53 - - {{hitsCtrl.values.hits}}

After a slight increase in optimism in May the Perceived Economic Opportunity Index (PEOI) moved significantly south ending up among the worst ever performances since the index was developed twenty three months ago, its compiler the Foundation for Economic Freedom in Sri Lanka (FEFSL) said.

“In fact, we commented that the improvement last month was ‘surprising’ given the electricity tariff increase and perhaps the ‘may day’ reduction would have helped the positivism. However, the large fall in June seems to suggest that overall the mood is not improving,” FESL added. It also said the economic data suggesting that the rate of economic growth is slowing down indicating falling employment opportunities could also have contributed to the negativism. That the PEOI is well below the midpoint of 2.0 and on a continuous downward trend is certainly not good news. Therefore policy makers need to think carefully about what action should be taken to improve the confidence of the people so that economic growth can be sustained even at a lower level than two years ago. The PEOI is calculated on a monthly basis using a random sample of 100 persons based on seven questions: one each on income, saving and cost of living; one each on law and order, media freedom and corruption; and one question on opportunities to advance in the respondents job, profession or entrepreneurial activity. The answers can only have three possibilities; the current situation with regard to each issue is worse than it was six months ago, the same or better than six months ago. A score of 3 is that Sri Lankans are becoming relatively more optimistic about the emerging opportunities while 1 is they are becoming relatively more pessimistic. A score of 2 indicates no change. Therefore, the trend is a more important indicator of changing perceptions than the absolute number. The Perceived Economic Opportunity Index was developed and is measured by the Foundation for Economic Freedom in Sri Lanka in partnership with Friedrich Naumann Stiftung Fur Die Freiheit. Fieldwork is carried out by market research agency PepperCube Consultants.