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“We believe, challenges posed by the macro environmental factors such as high interest rate regime, high energy and commodity prices, volatility in the exchange rate, etc. would have severely hindered the bottom line of the companies,” MTI said.
As per the survey, country’s economy is expected to stabilise in 2014 by 62% of respondents compared to 56% in 2013, whilst 20% indicated acceleration in the economy which is slightly higher than the last year’s 17%.
However, MTI said it must be noted that only 18% of the respondents expect the economy to 
decline in 2014 which is a sharp drop of 9ppt from 2013.
“Despite the economy being greatly challenged in 2013 due to unfavourable movements in local macro environmental factors and gloomy global growth, it is encouraging to see the improvement in confidence level among the business community over country’s economic outlook which we believe would have partially attributed by desirable actions taken by the CBSL and the recovery signs of world economy,” MTI said.
It said 58% of respondents expressed their confidence over their business which is expected to see a higher growth in 2014 as opposed to 52% who were confident that the business will see a higher growth in 2013. This is also mirrored through an increase in confidence level over the Sri Lankan economic outlook for 2014.
The pessimism over the business outlook declined by 6ppt to 4% in 2014 compared to 2013, whilst 38% (as last year) find that the present challenges in the business environment are likely to be continued in 2014. 
“In spite of country failing to sustain the confidence level in 2013 that was witnessed immediately after post war era, ongoing developments in country’s economic environment namely reduction in key monetary policies, relatively stabilised exchange rates coupled with the improvement in external trade are expected to thrust towards a conducive environment for businesses,” MTI said.
Similar to the previous year, there is a clear expression of economic governance (46% - Government Policies and Economic & Political Stability combined) being the top economic challenge that CEO’s felt need addressing due to its significant impact on their business performance. Under this category interest rates (cost of financing), exchange rates (depreciation of the rupee) , political stability (Geneva Intervention) and exports were some of the key concerns voiced repeatedly. The expansion and completion of construction activity and the ambitious infrastructure developments were all applauded and considered in positive light.
Unlike the survey in 2013 which highlighted the major challenge for the business as cost and consumption level, CEOs largely (24%) expressed their concern over government regulation and polices in 2014 which is followed by sales growth, competition and consumer demand deterioration.
MTI said it was noteworthy that the interest rates, tax, duty and tariff structure, and stability of exchange rate were highlighted as the most worrisome factors under the government regulations and policies. However, as the continuation of 2013, shrinking consumer buying power is also expected to pose challenges to the business as it is reflected through indentifying sales growth and consumer demand deterioration as among the key challenges which collectively account for 29%.
Surprisingly, cost which topped the challenges list in 2013 has been ranked as one of the least challenges in 2014. Perhaps, the expected reduction in market interest rates which may drive the companies towards new investments and relatively stabilised exchange rates could have been some of the underlying reasons behind it.
This is the third consecutive year MTI Consulting has carried out the CEO Business Outlook survey this time around in association with CIMA. The survey covered more than 150 CEOs and approximately 65% of the sample comprised of CEO’s from CSE Top 100 listed companies. The rest of the sample represented mid-tier businesses based on a combination of revenue, economic representation/influence based indicators.
Furthermore, the survey was supplemented by learnings from CSE Listed Company Performance Analysis (2013 Q1-3), MTI CFO Survey 2013, MTI HRM Survey 2013, MTI Thought Leadership Research on Sri Lanka’s banking, exports and tea domains and MTI’s consulting and corporate finance experience in 2013 – Sri Lanka and international.
