Economic Capsule - June 2020

Economic Capsule
December 2019
276th Issue
Research & Development Unit
Economic Capsule
June 2020
281st Issue

C O N T E N T S
BANKING & FINANCE
 ComBank declared ‘Strongest Bank Brand’ in Sri Lanka by Brand Finance
 ComBank awarded its 20th ‘Best Bank in Sri Lanka’ title by Global Finance
 ComBank Sri Lanka and Bangladesh win awards from Global Business
Outlook
 ComBank upgrades ‘ComBank Q+’ Payment App with biometric login and
other features
 ComBank unveils ‘ComBank Digital’ with US-based Fiserv
 IFC’s USD 50Mn in Support to Commercial Bank of Ceylon to Boost Finance
for Small Businesses in Sri Lanka Amid COVID-19
 ComBank launches another special loan scheme for COVID-19 affected micro
businesses
ECONOMY & BUSINESS
 EDB initiates digital promotions to revitalize exports
 Tea-for-oil deal with Iran to be sealed
 Tea promo levy suspended
 Poultry producers look to crack new markets impacted by COVID-19
ECONOMY & BUSINESS (Cont)
 Port City beach to be opened for public next year
 Business confidence continues to head south
 Inflation declines to 5.2% in May
 Merchandise exports bounce back in May
 SL Purchasing Managers’ Index (PMI) May 2020
 Manufacturing Sector
 Services Sector
 Exporters cautiously optimistic of business continuity – Ceylon
Chamber of Commerce and USAID Survey findings
INTERNATIONAL
 A Crisis Like No Other, An Uncertain Recovery: IMF
 IEA outlines USD 3tn green recovery plan for world leaders to help
fix the global economy
 Fed sees interest rates staying near zero through 2022, GDP
bouncing to 5% next year
 China’s economy will resume growth this quarter, economists say

ComBank declared ‘Strongest Bank Brand’
in Sri Lanka by Brand Finance
Brand Finance has declared Commercial Bank of Ceylon the
‘strongest banking brand’ in Sri Lanka in 2020, unequivocally
reaffirming the strength of the brand and ranking the Bank
fourth among all brands in the country as well as assigning
the Bank the highest brand value growth among the top 10
corporates in the list.
The Bank retains its position at No 4 in the 2020 Brand Finance ranking of the 100
Most Valuable Brands, and enjoys the distinction of having being in the top 10 of
this prestigious ranking since its inception. Brand Finance assigned Commercial
Bank a brand value of Rs 44bn for 2020, up 18% from last year, emphasizing the
Bank’s continuing success in building its brand.
The ranking also recognizes Commercial Bank as the most valuable brand among
the private sector banks in Sri Lanka

ComBank awarded its 20th ‘Best Bank in
Sri Lanka’ title by Global Finance
The Commercial Bank of Ceylon has been declared Sri Lanka’s Best
Bank in 2020 by the US-based Global Finance magazine, an accolade
the Bank wins for the 20th time in the 27 years that Global Finance
has presented awards to the world’s best banks.
Objective criteria considered encompassed multiple indicators under the headings of Key financials,
Key capabilities and Services Offered, Geographic range, Planned significant developments,
Customer service and Deployment of leading-edge technology, and included growth in assets,
profitability, geographic reach, strategic relationships, new business development and innovation in
products.
Subjective criteria included the opinions of equity analysts, credit rating analysts, banking
consultants and others involved in the industry.

ComBank Sri Lanka and Bangladesh win
awards from Global Business Outlook
The Commercial Bank of Ceylon has been adjudged the
‘Best Commercial Bank’ in Sri Lanka and the ‘Best Foreign Bank’ in
Bangladesh in 2020 by the UK-based Global Business Outlook (GBO)
magazine, adding to the growing list of international awards won by
the Bank this year.
The Global Business Outlook awards recognise and reward excellence in business of companies all
over the globe, both in the public and private sectors. Its goal is to ensure that innovation, creativity
and the drive to create value get due recognition. The prestigious ‘Best Commercial Bank in Sri Lanka’
award is based on quantitative as well as qualitative indicators encompassing the Bank’s financial
performance in the year of assessment, its impact on the national economy, financial inclusion and
rural development, geographic range, achievements, new products, CSR initiatives and awards and
accolades.
The Best Foreign Bank award presented to Commercial Bank Bangladesh recognises growth achieved
in new accounts, deposits and advances, services offered to corporate and personal banking
customers, new products and the growth of the Bank’s Online Banking services in that market.

ComBank upgrades ‘ComBank Q+’ Payment
App with biometric login and other features
The Commercial Bank of Ceylon has announced an
upgrade of both the Consumer and Merchant applications
of the ComBank Q+ Payment App, with features including
biometric authentication login for both applications and
merchant self-registration.
ComBank Q+ was the first Quick Response (QR) based payment App to
be activated under LANKAQR standards when it was launched by
Commercial Bank last year.
Customers can add their ComBank Visa and Mastercard cards to the
ComBank Q+ Payment App, enabling them to perform LankaPay,
mVisa and Mastercard QR transactions. A maximum of five cards can
be registered for this service. ComBank Q+ is the only Payment App
which supports LankaPay, mVisa and Mastercard QR as an issuer and
an acquirer.

ComBank unveils ‘ComBank Digital’ with
US-based Fiserv
The Commercial Bank of Ceylon
has announced the integration
of all its online and mobile
banking channels on a single
omni-channel platform with the
launch of ‘ComBank Digital’
powered by Fiserv, the US-based
global provider of financial
services technology.
The Bank’s digital banking channels including online banking, mobile (WAP) and mobile banking-app
will now run on a new highly secure, user-friendly and responsive web application catering to both
retail and business users.
The new web application is not only more vibrant and elegant, it also guides the users to the
information and options they need. Simplified site navigation improves user experience and is also
more actionable than the current web application.

IFC’s USD 50Mn in Support to Commercial Bank
of Ceylon to Boost Finance for Small
Businesses in Sri Lanka Amid COVID-19
IFC, a member of the World Bank Group, is providing a USD 50mn (approximately
Rs 10 bn) loan to Commercial Bank of Ceylon, to help small and medium businesses
in the country deal with the adverse economic impacts of COVID-19. The funding will
be used to expand lending to small and medium-sized enterprises, with over a third
dedicated to businesses owned by women.
The financing package is part of IFC’s USD 8 bn global COVID-19 fast track financing facility,
which aims to help companies stay in business and preserve jobs. This investment comes
under the Working Capital Solutions Program of the facility, which provides USD 2bn in
funding to emerging-market banks to extend credit to help businesses shore up their working
capital so firms can pay their bills and workers
This assistance would be in addition to the working capital loans scheme implemented under
a credit line provided by the Central Bank of Sri Lanka (CBSL). Cont.

IFC’s USD 50Mn in Support to Commercial Bank of
Ceylon to Boost Finance for Small Businesses in
Sri Lanka Amid COVID-19 (cont.)
- Intended to fund the working capital requirements of businesses affected by the
shutdown necessitated by the COVID-19 pandemic, these loans would be available to
businesses whose annual sales turnover is below Rs 750 mn. The scheme was designed
especially to help midsized SME enterprises that missed out on the benefits of the CBSL
supported ‘Saubhagya Covid-19 Renaissance Facility.’
- The Bank will provide loans of Rs 2 mn to Rs 25 mn to eligible businesses under this new
scheme, and has identified several sectors for priority. Furthermore, women-connected
businesses, export-related businesses, and agriculture-related businesses have been
earmarked as priority segments under the scheme.
- The sectors identified under this scheme are Food & Beverage, Herbal & Medicinal
Products, IT & Software Development, Spices & Processed Spices, Textile & Garments
including health-based protective products, Rubber-based Products and innovative Light
Engineering products.

ComBank launches another special loan
scheme for COVID-19 affected micro
businesses
The Commercial Bank of Ceylon has announced the launch of another Bank-funded
loan scheme, this time to assist micro enterprises affected by the COVID-19
pandemic, in a continuing demonstration of the Bank’s commitment in supporting Sri
Lanka’s post-pandemic economic recovery.
The second Bank-funded loan scheme launched by the country’s benchmark private sector bank in the
past month, the ‘Dirishakthi COVID-19 Support Loan’ scheme is designed to meet the working capital
requirements and revive operations of businesses whose annual turnover is below Rs 15 Million.
These loans will be provided for a maximum period of 24 months, at an interest rate of 9% per
annum.
Commercial Bank 'Divisaru' Savings Account holders who are micro and small entrepreneurs engaged
in any form of livelihood activity and who have not defaulted on payments in any other financial
institutions prior to 25th March 2020 will be eligible to borrow under the ‘Dirishakthi’ Loan Scheme.
Furthermore, individuals and registered businesses too can apply for this loan to revive their
operations.

EDB initiates digital promotions to revitalize
exports
A digital export promotion program was implemented by the Sri Lanka Export Development Board (EDB) to
address the negative impact on exports caused by the outbreak of COVID
Visit - https://www.srilankabusiness.com/
A new web page has been
created in the EDB website
www.srilankabusiness.com and
59 reports have been
published on the main markets
for Sri Lankan export products.
According to EDB, these are
being updated frequently
using the information received
from the Sri Lanka Missions
overseas through the Ministry
of Foreign Relations.
This information was also
circulated to the export
companies through Trade
Chambers, Product
Associations and by direct
emailing .

EDB initiates digital promotions to revitalize
exports (cont.)
The scheduled physical export promotion programs of EDB are on hold due to the global
pandemic, and instead new promotional activities are being accelerated. Hence a new plan of
action has been drawn up to carry out digital promotions during the next two quarters of the year
2020.
The digital export promotion program includes provision of market information, organizing
webinars on market requirements and current trends, organizing virtual B2B meetings and
participation in virtual trade fairs.
The EDB disseminated extensive market information in April this year, giving updated information
on the foreign markets in the context of the COVID 19 pandemic. The information includes current
market scenario, export logistical readiness, new regulations, new market opportunities and
emerging distribution/supply channels.
Further, the EDB has selected 15 product sectors to organize virtual B2B meetings with the Ministry
of Foreign Relations and Sri Lanka Missions; electrical and electronics, boat building, ceramic and
porcelain, coconut products, Ayurveda and spa products and printing sectors will be considered for
the initial round of B2Bs.

Tea-for-oil deal with Iran to be sealed
Sri Lanka will be going ahead with the tea-for-oil deal with Iran and is currently
preparing to sign the agreements required between the Ceylon Petroleum
Corporation (CPC) and the Sri Lanka Tea Board (SLTB) in this regard.
The CPC is due to sign the agreement with the SLTB to ensure that payments for oil
from Iran will be made through sales of tea, although no date has been fixed as yet
to sign the agreement.
The agreement would ensure that Sri Lanka would be allowed to settle its oil
payments in turn for tea exports for a maximum of USD 5mn per month.

Tea promo levy suspended
The promotional levy charged by the Sri Lanka Tea Board (SLTB)
from tea exporters will be suspended from July 1 for a period of
six months.
Tea Exporters Association (TEA) Chairman said they had proposed
the promotional levy of Rs.3.50 per kilo to be removed for a
period of six months.
He explained that under the circumstances with the COVID-19
crisis they have decided not to proceed with promotional
campaigns and only carry out a digital campaign and temporarily
curtail promotions for the next six months.
The monies from this levy have recently been used to provide
assistance to other stakeholders in the sector like the
smallholders and the Regional Plantation Companies (RPCs) as
well in a bid to overcome certain crisis situations.

Poultry producers look to crack new markets
impacted by COVID-19
Despite being hit by import restrictions on
maize, Sri Lanka’s poultry producers are
planning to capture markets vacated by
COVID-19 hit foreign companies to export to
the Middle East and elsewhere spurred by
Government promises to assist in finding new
markets.
Negotiations are underway with several Middle East countries including Oman and Kuwait to
secure export orders according to All Island Poultry Association (AIPA) Chairman.
Sri Lanka has built up the poultry industry to international standards and is hoping to secure
several export orders for frozen chicken, eggs and value added products.

Port City beach to be opened for public next
year
CHEC Port City Colombo (Pvt) Ltd., is planning to open
the beach in the Colombo Port City to the public next
year, the Urban Development, Water Supply and
Housing Ministry said.
Secretary to the Ministry of Urban Development, Water
Supply and Housing said the construction work of the
Colombo Port City is accelerated to enable the
completion of the project by 2021.
A 2km long stretch of the beach is now being developed
and infrastructure development, including a beach
stadium, a beach park, a children’s park and a yacht
marina is due to begin soon.
Construction of the breakwater, which is 4.5m above
sea level and 3.2kms long has been completed.

Business confidence continues to head south
The LMD-Nielsen Business Confidence Index (BCI)
registered 89 in May, nudging down by four basis
points from the previous month.
While this marks the fifth consecutive monthly fall,
LMD notes that it represents only a marginal decline
compared to April when the index plummeted by 52
basis points at the height of the curfew.
Additionally, the leading business magazine points out that the BCI remains higher than in the
immediate aftermath of last year’s Easter Sunday attacks when the unique barometer of
corporate sentiment registered 62 in May.

Inflation declines to 5.2% in May
Headline inflation as measured by the Year-on-
Year (Y-o-Y) change in the National Consumer Price
Index (NCPI) decreased further to 5.2% in May 20
from 5.9% in April 20.
This was mainly driven by the statistical effect of
the high base prevailed in May 2019. Meanwhile,
Food inflation (Y-o-Y) declined to 11.1% in May
from 12.2% in April and Non-food inflation (Y-o-Y)
also declined to 0.8% in May from 1.1% in April.
The change in the NCPI Core measured on Year on
Year basis increased marginally to 5.2% in May from
5.1% in April.
Source:DCS

Merchandise exports bounce back in May
Merchandise exports for the month of May
2020 has bounced back to USD 602mn,
compared to the previous month of April,
which was only USD 277mn, according to
Customs provisional statistics.
This increase of USD 325mn is a positive signal
that Sri Lanka is in the path of recovery faster
than anticipated.
However, exports were behind USD 355mn compared to USD 957mn recorded in May 2019, which is a
decline of 37.08%.
According to EDB, almost all the export sectors fared well in May in comparison to last month
Earnings from tea exports stood at USD 108mn while earnings from apparel exports amounted for USD
219mn. However, on a year-on-year (YoY) basis, both tea and apparel exports fell 13.75 % and 48.23%
respectively. Source:EDB

SL Purchasing Managers’ Index (PMI) May 2020
Manufacturing Sector
Source: CBSL
Manufacturing sector PMI recorded a noticeable bounce in
May 2020.
Production sub-index reported an index value of 51.1 in May
2020 compared to 3.5 reported in April, reflecting a
significant expansion in volume produced, particularly in
manufacturing of food, beverages and manufacturing of
textiles, wearing apparels sectors.

Services sector PMI
rebounded
significantly to 43.1
in May 2020 from a
record-low of 29.8 in
April 2020, with the
steps taken towards
resumption of civilian
life and institutions
back to normalcy in
the country following
the curb in the
spread of COVID-19
pandemic.
This increase was
underpinned by
increases observed in
New Businesses,
Business Activities
and Expectations for
Activity sub-indices.
Business Activities sub index also increased
significantly during the month indicating a
moderation in contraction of Service activities.
Business activities of transportation, wholesale and
retail trade, professional services and
telecommunication sub-sectors showed an
improvement over the previous month with the
normalization of business activities.
However, business activities related to tourism
industry including accommodation, food and
beverage sub sector declined owing to restrictions
imposed on hotel operations and zero international
tourist arrivals for the second consecutive month.
SL Purchasing Managers’ Index (PMI) May 2020
Services Sector
Source: CBSL

Exporters cautiously optimistic of business continuity
Ceylon Chamber of Commerce and USAID Survey findings
Sri Lankan exporters are cautiously
optimistic on business continuity
as a large number of firms have
identified new business
opportunities arising from the
needs combating the COVID-19
pandemic, a survey carried out by
USAID revealed.
The survey was designed by the
Economic Intelligence Unit of the
Ceylon Chamber of Commerce
(CCC) and the USAID ‘Partnership
for Accelerating Results in Trade,
National Expenditure and
Revenue (PARTNER)’ project.
Source: USAID
For the full report click - https://www.chamber.lk/images/COVID19/pdf/Surveyv2.pdf

Ceylon Chamber of Commerce and USAID Survey findings (Cont)
77% of export firms operated with partial production activity
57% of the firms were well prepared or very well prepared
to manage the impact of COVID-19
Source: USAID

63% of firms have identified new business
opportunities due to the COVID 19 impact
33% of the firms identified new business opportunities are
for export of new products/services
Source: USAID

70% of the firms reported
having a Business
Continuity Plan (BCP) in
place, which helped
continue to deliver their
products/services through a
major disruption such as
COVID-19 lockdown
50% of the firms
expect a
reduction in
export revenue
of above 40% in
2020
53% of the firms
anticipate no change in
export destination
Source: USAID

A Crisis Like No Other, An Uncertain
Recovery: IMF
Global growth is projected at –4.9 % in 2020, 1.9
percentage points below the April 2020 World
Economic Outlook (WEO) forecast.
The COVID-19 pandemic has had a more negative
impact on activity in the first half of 2020 than
anticipated, and the recovery is projected to be more
gradual than previously forecast.
In 2021 global growth is projected at 5.4 %. Overall, this
would leave 2021 GDP some 6½ percentage points
lower than in the pre-COVID-19 projections of January
2020.
The adverse impact on low-income households is
particularly acute, imperiling the significant progress
made in reducing extreme poverty in the world since
the 1990s.
Source: IMF

IEA outlines USD 3tn green recovery plan for
world leaders to help fix the global economy
The International Energy Agency has laid out a
USD 3tn green recovery plan, offering
governments around the world a “once-in-a-
lifetime” roadmap to sustainably rebuild their
economies in the wake of the coronavirus
pandemic.
The Sustainable Recovery report is designed to present world leaders with cost-effective
measures that could be implemented from 2021 through to 2023.
The Sustainable Recovery plan was published in collaboration with the International
Monetary Fund as part of the energy agency’s flagship World Energy Outlook series.
The IEA believes the plan could add 1.1% points to global economic growth each year
through to 2023

Fed sees interest rates staying near zero
through 2022, GDP bouncing to 5% next year
The Federal Reserve kept interest rates near zero
and indicated that’s where they’ll stay as the
economy recovers from the coronavirus pandemic.
“We’re not thinking about raising rates. We’re not
even thinking about thinking about raising rates,”
Fed Chairman Jerome Powell said. “What we’re
thinking about is providing support for the
economy. We think this is going to take some time.”
Date Increase % Decrease % Range %
01st Aug 2019 - 0.25 2.00-2.25
19th Sep 2019 - 0.25 1.75-2.00
31st Oct 2019 - 0.25 1.50-1.75
03rd Mar 2020 - 0.50 1.00-1.25
16th Mar 2020 - 1.00 0-0.25
Along with the rate decision, central bankers projected that the economy will shrink 6.5% in 2020, a
year that saw an unprecedented halting of business activity in an effort to combat the coronavirus
pandemic. However, 2021 is expected to show a 5% gain followed by 3.5% in 2022, both well above
the economy’s longer-term trend.
The Fed also said it will continue to increase its bond holdings, targeting Treasury purchases at
USD 80bn a month and mortgage-backed securities at USD 40bn.
FED rate movements

China’s economy will resume growth this
quarter, economists say
Economists upgraded their forecasts for China’s economic growth this quarter and
for 2020, signaling more optimism that the country is on track for a gradual recovery.
Gross domestic product will expand at 1.5% in the second quarter from a year
earlier, according to the median estimate of economists in a Bloomberg survey last
week.
That’s faster than 1.2% growth seen in the last survey in May. Economists also dialed
up their full-year growth projection to 1.8% from 1.7%.

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 >
Sometimes change occurs only
as a result of a crisis

Economic Capsule - June 2020

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