Economic Capsule - January 2020

Economic Capsule
December 2019
276th Issue
Research & Development Unit
Economic Capsule
January 2020
277th Issue

C O N T E N T S
BANK & FINANCE
 100 years of banking in Sri Lanka: Commercial Bank celebrates a century of supporting the nation
 ComBank launches ‘Vibe’
 Commercial Bank launches Pre-paid Travel Card with latest technology
 ComBank conducts knowledge sharing event exclusively for women entrepreneurs
ECONOMY & BUSINESS
 IMF World Economic Outlook
 Sri Lanka growth projections
 Fitch and S&P revise Sri Lanka’s outlook to Negative
 Sri Lankan authorities strongly dispute the premise of the revision of the outlook by Fitch Ratings
 External Sector : Jan-Nov 2019
 All Govt. digital technology services and projects under ICTA supervision & management
 Apparel industry eyes 6% export growth in 2020
 New targets for Sri Lanka tourism
 Structured global promotional campaign for SL tourism
 Private sector steps up lobbying for tourist visa fee waiver
 Green light for civil helicopter flights from Galle Face
 EU reassures continuity of GSP+ to Sri Lanka till 2023
 Govt. approves USD 900mn mixed development project
 Sri Lanka's first floating solar plant in Kilinochchi
 South Asia's first all-electric supercar heads for Geneva Motor Show
 Port City Colombo progress
INTERNATIONAL
 Top concerns of the CEO’s: PwC 23rd Annual Global CEO Survey
 International News

100 years of banking in Sri Lanka:
Commercial Bank celebrates a
century of supporting the nation
The Commercial Bank of Ceylon
celebrates 100 years of banking in
Sri Lanka and in its citizens, and a
century of indispensable support to
the national economy in 2020, and
has begun its centenary year with a
staff gathering of unprecedented
scale.
The dreams of the future and the
history of the past were interwoven
when more than 4,000 staff
members from all over Sri Lanka
came together in Colombo in early
January to celebrate the 100th
anniversary of the Bank and its
forerunners.

ComBank launches ‘Vibe’
– an exclusive Savings Account for youth
• A ‘Vibe Youth Account can be opened by any
Sri Lankan between the ages of 18-35 years, and will offer an
interest rate that is 0.5% p.a. higher than regular savings
accounts, provide employed youth Personal Loans, Leasing
and Home Loans at interest rates that are 0.25% p.a. lower
than published rates, and offer instant loans of up to 90% on
their available account balances.
• Furthermore, Vibe Account holders will be entitled to
Educational Loans up to Rs 1 mn. This facility will be available
to the employed, self-employed professionals and non-
employed youth. Laptop and Computer loans too can be
applied for under the Personal Loans category, up to a value
of Rs 175,000 or more if necessary, after evaluation of
requirements.
More info:Vibe Savings Account

Commercial Bank launches Pre-paid
Travel Card with latest technology
• Commercial Bank has announced the launch of its latest card
product, a Prepaid Travel Card to improve customer experience
and convenience when travelling overseas.
• Issued in collaboration with the world’s leading payment
network Visa and issued in five currencies – US Dollar, Great
Britain Pound, Euro, Singapore Dollar and Australian Dollar, the
card has NFC and PIN compatibility, making it convenient and
secure to be used around the world.
• Available to any resident in Sri Lanka over the age of 18, the ComBank Travel Card can be obtained from any of
the Bank’s 268 branches and service locations island-wide.
• The card can be loaded up to the equivalent of the foreign exchange allowance the cardholder is entitled to when
travelling overseas and can be topped-up again on subsequent overseas visits during the validity period of the
card.
• The card is issued subject to Exchange Management and Anti-Money Laundering regulations enforced in
Sri Lanka.

ComBank conducts knowledge
sharing event exclusively for
women entrepreneurs
• Commercial Bank recently conducted ‘WomEntrepreneur,’
the first programme by the Bank in collaboration with the
Women’s Chamber of Industry & Commerce (WCIC)
exclusively for women entrepreneurs engaged in small and
medium enterprises (SMEs), with emphasis on steering a
‘vision towards sustainable business.’
• The programme at the Kingsbury Hotel, Colombo, was
attended by more than 125 female entrepreneurs who are
either members of the WCIC or SME clients of the Bank.
‘WomEntrepreneur’ focused on how to evaluate and
forecast one’s business in a professional manner while
ensuring a steady business growth and continuity by
minimising wastage.

IMFWorld Economic Outlook
IMF projects global growth to increase
modestly from 2.9 % in 2019 to 3.3 % in
2020 and 3.4 % in 2021.
The projected recovery for global growth
remains uncertain. It continues to rely on
recoveries in stressed and underperforming
emerging market economies, as growth in
advanced economies stabilize at close to
current levels.
IMF Full Statement
IMFGlobal Outlook -Tentative Stabilization, Sluggish Recovery?
- January 20, 2020

Sri Lanka growth projections
2019 2020 2021 Comments
CBSL 2.8 4.5 N/A -
WB 2.7 3.3 3.7
Growth acceleration will be supported by recovering
investment and exports, as long as the security
challenges and political uncertainty of 2019
dissipate.
Fitch 2.8 3.5 3.7
Fitch expects a boost to growth in the short-term
from the tax cuts, higher agricultural output and an
ongoing recovery in tourism following last April's
terrorist bombings. Remittances are also likely to
remain supportive of domestic demand. (Fitch)
S&P 2.7 4.0 N/A
Growth is supported by, fiscal stimulus implemented
by the interim Cabinet - which include steep cuts to
the value-added tax (VAT) rate and the elimination of
several tax items - thereby boosting private
consumption and investment activity. (S&P)

Fitch and S&P revise Sri Lanka’s
outlook to Negative
• VAT rate changes and the scrapping of the NBT could alone lower revenue by as much as 2% of GDP
in the absence of off-setting measures.
• Budget deficit will be around 6.5% of GDP in 2020 and 6.2% in 2021.
• External debt obligations totaling approximately USD 19 bn fall due during 2020-2023 (roughly USD 5
bn per year). In 2020, the government’s external debt obligations amount to USD 4.8 bn (approx)
compared with foreign-exchange reserves of around USD 7.5 bn as at end-November 2019. Further,
pressure on the current account deficit is building up.
It is in this context that Fitch Ratings revised the Outlook on Sri Lanka's Long-Term Foreign-Currency
Issuer Default Rating (IDR) to Negative from Stable, while affirming the IDR at 'B' on the 18th of
December, 2019.
Fitch Ratings
Cont

Fitch and S&P revise Sri Lanka’s outlook to
Negative (cont)
S&P
“The negative outlook reflects S&P’s view that Sri Lanka’s fiscal trajectory over the next two to three
years could deviate from a fiscal consolidation path”.
“The sizable fiscal deficits will add to Sri Lanka’s already-large debt stock at a faster pace”.
• S&P estimates that the overall impact of the tax measures will further widen the fiscal deficit by
about 0.8%-1.0% of GDP in 2020, even after taking into account benefits from higher growth
prospects.
• As a base case, S&P estimates the change in net general government debt to reach 6.7% of GDP on
average over 2019-2022.
• S&P estimates net general government debt to reach 83.1% of GDP in 2020 while general
government interest expenditure is expected to account for 46.1% of revenues. This is the third-
highest ratio among the sovereigns S&P currently rates, trailing only Lebanon and Egypt.

Sri Lankan authorities strongly dispute
the premise of the revision of the outlook
by Fitch Ratings – Ministry of Finance
Ministry of Finance has made the following observations:
• Sri Lankan authorities reiterate that the recent rating action by Fitch Ratings to revise Sri Lanka’s
Outlook to ‘Negative’ has been hastily done without considering facts on the ground.
• Such action is untimely and constitutes a rush to judgment. This rating decision has mainly been
based on the hypothesis that Sri Lanka would shift away from the revenue-based fiscal consolidation
stance, thereby causing risks to debt sustainability.
• What is lacking throughout the Fitch’s analysis is the impact of offsetting measures that the
Government is undertaking to meet any revenue loss, and lack of due recognition of the favorable
macroeconomic impact that such policies would deliver over the medium-term.
MoF Full Statement:
Sri Lankan authorities strongly dispute the premise of the revision of the outlook by Fitch Ratings

External Sector : Jan-Nov 2019
Category Jan- Nov 2018 Jan-Nov 2019 Change (%)
Exports 10,856 10,939 0.8
Textile & apparel 4,284 5,113 6.0
Tea 1,311 1,240 -5.4
Imports 20,496 18,153 -11.4
Personal vehicles 1,496 732 -51.1
Gold 439 2 -99.4
Trade Balance (net) -9,642 -7,214 25.2
Earnings from Tourism 3,905(b) 3,138(c) -19.6
Workers’ remittances 6,431 6,052 -5.9
Inflows to the CSE (net) (d) -29 -30 -3.4
Inflows to the Government (gross) 5,490 6,451 9.3
Summary of External Sector Rs Mn (a)
(a) Provisional (b) Revised based on survey results of SLTDA on average stay period and average spending per day estimates for 2018
(c) This provisional estimate may be revised once the SLTDA releases its survey results for 2019 (d) Include secondary and primary market transactions
Source: CBSL
CBSL Full Statement - External Sector Performance - November 2019

All Govt. digital technology services and
projects under ICTA supervision &
management
The decision was taken by President Gotabhaya Rajapaksa to
implement the government's digitalization policy more efficiently,
and as such the Sri Lanka Information and Communication
Technology Agency was taken over by the Ministry of Defense,
because of its importance and necessity.
Defense Secretary Maj. Gen. Kamal Gunarathne has
stated that the government has decided to implement
all government digital technology services and
technology projects under the supervision and
management of the ICT Agency.
Gathering personal information
under one data centre
President Gotabaya Rajapaksa has
backed measures to gather all personal
information including National Identity
Cards, driving licenses, immigration and
emigration documents, and registration of
births and deaths under one data
collection centre.
President appoints tech-studded
ICTA board to drive digital SL
President has appointed a tech-studded
board for the Information and
Communication Technology Agency of Sri
Lanka (ICTA), featuring industry leaders,
technology entrepreneurs, academics,
and public sector technologists, to steer
digital Sri Lanka. The Board came into
effect from 18 December 2019 and will
work towards digitally transforming
Sri Lanka.

Apparel industry eyes 6% export
growth in 2020
“We are expecting growth to be around 6 % overall for 2020, equally from both the United States (US) and
European Union (EU) markets”. “The industry expects a significant growth to materialize once the fabric park in
Eravur is established, as we can source fabric locally, cutting down our lead times, instead of importing from
overseas, specially from India and China. This is our main target for the year,” Sri Lanka Apparel Exporters
Association (SLAEA) Chairman Rehan Lakhany told.
Sri Lanka’s apparel industry targets a 6%
year-on-year (YoY) growth in exports for this
year, moving ahead with plans to set up a
200-acre fabric park with foreign
investments in collaboration with the BOI in
the Eastern province, eyeing to attract
large-scale orders by reducing lead times
with locally-sourced fabrics.

New targets for Sri Lanka tourism
ARRIVALS
2019 1.9 Mn
2020 4.0 Mn
2025 7.0 Mn
EARNINGS (USD)
Jan-Nov 2019 3.1 Bn
2020 5.0 Bn
2025 10.0 Bn
According to Sri LankaTourism Minister, new tourism targets are as follows:
Sri LankaTourism hope to see
the average daily spending
jump from USD 180 to USD
210, while also expecting the
average stay of a traveller be
extended from 8 days to 10
days or more by the end 2020.

Structured global promotional
campaign for SL tourism
As per the finalised plan, SLTPB has proposed to appoint a creative agency initially to develop promotional
material.
Consequently, SLTPB plans to appoint destination representation companies for key source markets, which include
UK, Germany, France, India, China, Gulf Cooperation Council (GCC) countries, Australia and Russia within the year.
In 2021, it is proposed to appoint PR companies for six emerging tourism source markets—Spain, Italy,
Scandinavia (Denmark, Norway, and Sweden), Japan, South Korea and USA.
The proposal has to go through the SLTPB board and put forward for the approval of Cabinet of Ministers.
Sri LankaTourism Promotion Bureau (SLTPB)
has finalised a 5-year global promotional
campaign targeting eight tier one (primary)
source markets and six tier two (emerging)
markets to reach the government’s objective
of generating USD 10 bn revenue from tourism
by 2025.

Private sector steps up lobbying for
tourist visa fee waiver
The private sector stepped up lobbying for the waiver of
visas for tourists, citing the successes of other Asian
nations which have taken similar bold measures, calling on
the Government not to focus only on the visa revenue.
Source: DailyFT
Industry sources said within the Asian region, much of the
tourists are from within Asia itself. However, Sri Lanka has a
much lower proportion of Asian tourists out of the total
tourists (around 41% of total tourist arrivals) compared to
destinations like Myanmar and Cambodia who receive over
75% of tourists from Asia.
While this fee has currently been removed for 49 countries in
an attempt to revive tourism following the Easter Sunday
attacks, industry experts believe that this should continue
beyond being an interim measure, and recommend that the
Visa requirement be removed altogether, as the loss in fiscal
revenues earned due to this measure is likely to be more than
offset by the expansion in arrivals, and, in turn, earnings.

Green light for civil helicopter flights
from Galle Face
SL Government has granted
permission for domestic aviation
operators to use the helipad at Galle
Face after a lapse of 25 years.
The move was welcomed by domestic operators,
who pointed out that operating out of Galle Face
would allow tourists and locals access to any part
of the island quickly.
Four operators—IWS Aviation, Senok Aviation,
Sakurai Aviation and Daya Aviation—flew four
helicopters into the MOD grounds to test the
concept.

EU reassures continuity of GSP+ to
Sri Lanka till 2023
Contrary to speculations, the European Union (EU) has reassured that it will
continue the Generalised Scheme of Preferences Plus (GSP+) concessions to Sri
Lanka till 2023, while noting that there will be ‘no changes’ in the rigorous
monitoring of the country’s progress in implementing the conventions.
This support was conveyed by the EU Mission to Sri Lanka and the Maldives Deputy
and Head of Political, Trade and Communications when he called on Industrial
Exports, Investment Promotion, Tourism and Aviation Minister .
At present there are eight GSP+ beneficiaries which include; Armenia, Bolivia, Cape
Verde, Kyrgyzstan, Mongolia, Pakistan, the Philippines and Sri Lanka.

Govt. approves USD 900mn mixed
development project
State Minister for Investment Promotion said that the project will initially invest
USD 500mn under the first stage with plans to expand the project to USD 900mn. It will
contain apartments and office space and is expected to be completed in six years.
The agreement was signed with Shang Properties Ltd., a joint venture of Kerry
Properties Ltd. listed in Hong Kong and Shang Properties Inc. of the Philippines, which
signed a 99-year land lease agreement with the Urban Development Authority (which at
the time was under the Megapolis and Western Development Ministry) for the land
parcel in Colombo 2.
The Government has granted approval for a USD 900mn mixed development
project to be built in Colombo on six acres of land held by the Urban Development
Authority (UDA), with the involvement of Shang Properties Ltd., a top official has
said.

Sri Lanka's first floating solar plant in
Kilinochchi
The Norwegian Ambassador to
Sri Lanka, HETrine Jøranli Eskedal, will
open Sri Lanka’s first floating solar plant
in Kilinochchi on 24th January 2020
The floating solar plant is a result of the
research collaboration since 2017
between the University of Jaffna and the
Western Norway University of Applied
Sciences (HVL) supported by the Royal
Norwegian Embassy in Colombo.

South Asia's First
All-electric Supercar
Heads For Geneva
Motor Show
Vega EVX will be the first-ever vehicle in
history, entirely designed and engineered in
Sri Lanka to be showcased at a premier
international motor show.
This all electric Supercar is powered by a dual-motor all-
wheel-drive drivetrain delivering 804HP and 720NM of
torque.
With a 40kWh battery-pack, recent test drives confirm a
staggering 0 to 100 kmph acceleration in 3.1 seconds, an
estimated range of 250 kilometres and a top speed of 240
kmph denoting the overall performance of the Vega EVX
Supercar. This two-seater Supercar showcases advanced
multidisciplinary technology applications and a skillfully
fabricated lightweight carbon fiber body.
Vega EVX is a production of Vega Innovations, which is a
subsidiary of CodeGen International Ltd.

Port City Colombo progress
Source: Port City Colombo

Top concerns of the CEO’s:
PwC 23rd Annual Global CEO Survey
Full Report
Navigating the rising tide
of uncertainty
PwC’s 23rd Annual Global
CEO Survey

• Davos 2020: The 50th World Economic Forum has kicked off in the Swiss city of Davos, with an agenda that focused heavily on
climate change as world leaders struggle to tackle the crisis.
The forum's own Global Risks report published earlier warned that "climate change is striking harder and more rapidly than
many expected" with global temperatures on track to increase by at least 3 degrees Celsius (5.4 degrees Fahrenheit) by the end
of the century.
• China’s growth slows: China’s economy expanded by 6.1% in 2019 from the year before - the worst figure in 29 years. The
country has faced weak domestic demand and the impact of the bitter trade war with the US. The government has used a
combination of measures aimed at easing the slowdown, including tax cuts and allowing local governments to sell large amounts
of bonds to fund their infrastructure programmes. The country's banks have also been encouraged to lend more, especially to
small firms.
• US and China sign deal: The US and China signed an agreement aimed at easing a trade war that has rattled markets and
weighed on the global economy. US President Donald Trump has said the pact would be "transformative" for the US economy.
Chinese leaders called it a "win-win" deal that would help foster better relations between the two countries.
China has pledged to boost US imports by USD 200 bn above 2017 levels and strengthen intellectual property rules. In exchange,
the US has agreed to halve some of the new tariffs it has imposed on Chinese products. However the majority of the border
taxes remain in place, which has prompted business groups to call for further talks.
• Economic impact of Australia’s bushfires: Economists have said the cost to Australia’s A$ 1.95 trillion (USD 1.33 trillion)
economy could be as high as A$ 5 billion (USD 3.4 billion) due to the bushfires. Australia is one of the world’s largest carbon
emitters per capita due to its reliance on coal-fired power plants, and the bushfires have become a global talking point with
regard to climate change politics.
International News

The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the information,
it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise, suffered in consequence
of using such information for whatever purpose.
< Research & Development Unit >

Economic Capsule - January 2020

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