Wealth Insights Series: Macroeconomics – Sri Lanka in 2016 – Macro & Political Outlook

Asia Securities, Sri Lanka’s leading independent stockbroking and research firm, hosted the fourth instalment of its “Wealth Insights” series of investor events on Wednesday 20th January 2016. The event, titled “Sri Lanka in 2016: Macro & Political Outlook” focused on the Macroeconomic outlook for the country and brought together industry leaders with institutional and high net worth investors. The session’s discussion focused on unearthing deeper insights into sector dynamics that should better inform investment decisions.

The event kicked off with Dr. Nishan De Mel, Executive Director, Verite Research presenting on the macropolitical outlook. He concluded that Sri Lanka’s growth was debt fueled and consumption based which is unsustainable bringing the need for fiscal consolidation to the fore.

Asia Securities’ Head of Research, Mr. Kanishka Perera, presented the key investment themes out of the macropolitical outlook and concluded that both fiscal and monetary tightening will lead to the banking sector facing headwinds to growth in the near term.

The presentations were followed by a panel discussion consisting of prominent economists; Dr. Indrajith Coomaraswamy, Economist & Former Director, Economic Affairs, Commonwealth Secretariat; Dr. Saman Kelegama, Executive Director, Institute of Policy Studies; Mr. Nihal Welikala, Advisor, Ministry of Public Enterprise Development; Ms. Subhashini Abeysinghe, Head of Economics, Verité Research.

Dr. Coomaraswamy was of the view that Sri Lanka doesn’t have a growth model which would leap the country towards the 8% growth levels. In the 12-18 months focus should not be on boosting growth artificially but, creating an environment to drive sustained growth. Sri Lanka has had repeated boom and bust cycles and no longer has room to drive growth through borrowing which will lead to fairly muted growth over the next 12-18 months. However, during the period, the country should focus on building up a private sector led export driven growth model.

Mr. Welikala stated that there is a need to reposition the local banks with the shift in strategy of global banks away from the universal banking model. But, local banks are profitable so why do they need to reposition? The answer to this is that the supply side of capital for larger projects will necessitate larger and stronger balance sheets. He further stated that FDI will be key in driving the economy over the next few years.

Dr. Kelegama stated that Sri Lanka did not have a strong growth model over the last years but, had a broad framework. It was basically a debt driven consumption growth model. The change of regime has focused more on export driven growth as well as FDI led growth while keeping some part of the previous debt driven growth. He sees the construction and tourism sectors as key growth drivers in 2016 and sees global growth slowdown as the main threat to the country.

About Asia Securities

Asia Securities, Sri Lanka’s leading independent stock brokerage firm, offers best-in-class research across macroeconomics and multiple sectors listed on the Colombo Stock Exchange. The “Wealth Insights” series which has garnered significant investor interest, focuses on investment ideas and outlook for key sectors. Asia Securities provides the broadest reach among investors including domestic institutional, high net worth and retail, as well as foreign institutional and high net worth clients.