PEOI: Optimism picks up in August

Saturday, 29 September 2012 04:06 - - {{hitsCtrl.values.hits}}

The Perceived Economic Opportunity Index (PEOI) picked up a bit in August after its steep fall in July to one of its lowest values in the last 12 months.

Index compiler the Foundation for Economic Freedom in Sri Lanka (FEFSL) said it was significant that the PEOI is still languishing in the ‘relatively pessimistic’ territory at 1.72 unable to move up to the ‘relatively optimistic’ territory of above 2.0 since its inception in July 2011.

"In fact the current level of optimism about the future is no different to what it was a year ago indicating no major shift in the perceptions of economic opportunity; for better or for worse, during the year," FEFSL said.

A breakdown of the index components shows that over the last twelve months economic conditions, by and large, have not improved. Most find cost of living to be high with hardly any money left over after expenditure on food and other essentials. Most also find it hard to save. Beyond the economics related issues, the perceptions on law and order is at a historic low for two consecutive months. Making matters worse, perceptions on corruption is at a historic high for the year, with almost four out of five persons saying corruption has gotten worse in the last six months.

However, notwithstanding the negatives, the key positive comes from the feeling that openings available to advance in one’s profession or business is improving.

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 far 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.