Time right for bold and visionary biz: Expert

•  2021 could provide new opportunities to companies that have secure fundamentals: Amal Cabraal 
• Industries, construction, and service resurgence expected this year 
• But tourism recovery likely only in 2H
• CCC Outlook report puts growth at 4-5% 
• CB projects AWLR to hit new low by April, private sector credit to reach Rs. 850 b
• Companies warned of currency volatility, changes to import measures
• Need for strong pandemic management emphasised 

By Uditha Jayasinghe 

Business leader Amal Cabraal

CCC Chief Economist Shiran Fernando

Bold and visionary businesses that have their fundamentals secure will stand to benefit the most in 2021 from opportunities created by the existing low-interest environment, supportive government policies and pandemic response, experts said this week. 

Speaking at the launch of the Ceylon Chamber of Commerce (CCC) annual Outlook Report for 2021, on Wednesday business leader Amal Cabraal – who is presently Chairman and Non-Executive Director of multiple companies – CCC Chief Economist Shiran Fernando, Central Bank Economic Research Director Dr. Chandranath Amarasekara, and Asia Securities Co-Head - Research Lakshini Fernando opined that Sri Lanka was well-poised to make a strong recovery in 2021.

The Outlook put Sri Lanka’s growth for this year between 4-5%, which is slight below the Central Bank’s projections of 5.5-6%. The report also highlighted manufacturing, construction, agriculture and FMCG companies as most likely to benefit from pent up demand as well as seek expansion by utilising low interest rates. Companies focused on technology, electronics and fringe exports such as seafood and ornamental fish could also experience more prosperous times in 2021. 

Tourism, however, is only expected to pick up in the second half and even then is largely dependent on global recovery and vaccine rollout effectiveness. Presenting the Outlook 2021, Chamber Chief Economist Shiran Fernando highlighted that Sri Lanka will stage a recovery in growth in 2021 driven key industrial sector, improvement in domestic consumption and resurgence in the service sector.

Dr. Amarasekara noted rates have already reached historic lows and projected that the Average Weighted Lending Rate (AWLR) will likely hit single digits as well in the next two months. He said the Central Bank has seen a pickup in private sector lending in the last few months of 2020 and has set a goal of Rs. 850 billion for this year. 

Nonetheless, businesses were cautioned of currency volatility, especially in the first half, ahead of a key $ 1 billion sovereign bond repayment in July, with Fernando saying that businesses may have to brace themselves for changes in import restrictions as well. 

He also pointed out that since Sri Lanka was just starting on a five-year debt repayment journey such volatility could repeat itself in the future. The rupee is expected to remain between Rs. 190 and Rs. 200. 

Despite the low interest rates, a private sector friendly Budget and political stability Cabraal warned that business confidence and risk appetite were still dormant and emphasised this situation changing was dependent on how local and global uncertainties recede. 

“Recovery depends on how swiftly the pandemic is tackled and in parallel how well the economy is managed. There are some early signs of confidence increasing and it will continue to grow as the country overcomes COVID-19 issues. Winning the economic battles will be more challenging and it will take more time. As we see things improving we will see willing businesses stepping out and displaying more risk appetite,” Cabraal said. 

He went onto say that Sri Lanka could use the pandemic to branch out into new sectors as long as structured and practical measures are taken. 

“Businesses that are visionary, astute and risk averse will secure opportunities. Embracing resilience and patience will also be key. To look at new opportunities you have to have your fundamentals in place. If we look at the glass as half full then no one will move forward so you have to look at the optimistic market and if companies do so in a structured and practical manner then we should be able to move forward. 

“As long as the pandemic is managed properly this is a great opportunity for companies to break out to new sectors. Supply chains are getting reinvented, there is AI and machine learning and many other things. Sri Lanka has the ability to ride this wave but need to be bold and visionary and you mitigate the risk by having your fundamentals in place,” he added. 

The Outlook 2021 report published by the Economic Intelligence Unit (EIU) of CCC explores the macroeconomic and sector outlook for the year ahead. The theme for the report is Driving Growth- Bridging Deficits. The sectors covered include Apparel, Tourism, FMCG, Consumer Durables, Construction, Agriculture, Plantations, Fisheries, Dairy, Pharmaceutical, IT/BPM, Electronics and Electrical Sectors and Logistics. 

The sector coverage is compiled after interviews with sector experts and analysis of sector data. The report provides a review of the performance of the global and local economy and the above mentioned sectors and perspectives on the outlook ahead.