2. CONTENTS
BANKING & FINANCE
ComBank arrives in Kantale
ComBank launches Sri Lanka’s first Teen Digital Bank account ‘Flash FAM’
ECONOMY, BUSINESS & DEVELOPMENT
World Bank set to approve USD 700mn for Sri Lanka next week
Sri Lanka now able to boost trade with UK as DCTS goes live
Sri Lanka extends freeze on outward capital transactions by 6 months
Plantation sector to see growth in Q2 amid labour issues: RIUNIT Report
Food security improves in Sri Lanka – FAO and WFP
CSE announces new constituents of *S&P SL20 Index
Radisson to manage Galadari Hotel Colombo after facelift
News Snippets
GLOBAL UPDATE
Euro zone enters a recession
India’s Economy is humming along even with still-high rates
China unveils USD 72bn tax break for EVs, other green cars to spur
demand
Pakistan budget ‘missed opportunity’ as IMF bailout cutoff looms
India, China bought 80% of Russia's oil in May: International Energy
Agency
Iraq approves record USD 153bn budget aimed at creating jobs
Global central bank policy decisions
Research & Development Unit
4. Research & Development Unit
ComBank arrives in Kantale
Kantale in Sri Lanka’s Eastern Province has become the latest town to
receive state-of-the-art banking facilities from the Commercial Bank of
Ceylon, the country’s leading private sector bank.
Branch number - 271
5. Research & Development Unit
ComBank launches Sri Lanka’s firstTeen Digital Bank
account ‘Flash FAM’
The Commercial Bank of Ceylon has
launched ‘Flash FAM’– a first in Sri Lanka–
as an extension of the Bank’s award-
winning ‘Flash’ Digital Bank Account app,
to encourage parents to foster financial
independence and responsible money
management skills in their children.
This stimulating new feature enables children aged 10 to 17 to use ‘Flash FAM,’ the country’s first teen digital bank
account, for their daily transactions and savings, once a parent who is also a Flash Account user, has registered and
created a separate login via his or her main Flash account.
After ‘Flash FAM’ has been activated via a simple verification process, the child will receive login details to his or her
registered mobile number and email, and thereafter can commence using the app, the Bank said.
7. Research & Development Unit
World Bank set to approve USD 700mn for Sri Lanka next
week
The World Bank is likely to approve
USD 700mn in budgetary and welfare
support for Sri Lanka at its next board
meeting on June 28, the biggest funding
since an IMF deal in March 2023.
Of the proposed World Bank funding, USD 500mn
will be for budgetary support and is likely to come
in two tranches of USD 250mn each.
Source: Reuters
The remaining USD 200mn will be earmarked for programs to assist the poor.
8. Research & Development Unit
Sri Lanka now able to boost trade with UK as DCTS goes
live
Source: Department of Commerce
To support business take-up of the DCTS, the UK Trade Partnerships program (UKTP) has expanded and now covers Sri Lanka as
well. UKTP provides technical assistance to almost-ready-to-export small and medium-sized enterprises (SMEs) and is delivered by
the International Trade Centre (ITC).
Sri Lanka will be able to improve trading with the United
Kingdom as the new Developing Countries Trading
Scheme (DCTS) has come into force with effect from 19
June, 2023.
The scheme was introduced by the UK Government to
facilitate developing countries to integrate into the
global economy, create stronger trade and investment
partnerships and strengthen supply chains.
DCTS will provide duty-free, quota-free trade to least
developed countries (LDCs) on everything but arms and
duty-free, quota-free trade on at least 85% of eligible-
-goods to most low income (LIC) and lower-middle income (LMIC) countries.
DCTS replaces the UK’s current Generalized Scheme of Preferences (GSP)
Source: CSBL AR 2022
9. Sri Lanka extends freeze on outward capital transactions
by 6 months
Research & Development Unit
Government has decided to extend the restriction on outward capital transactions by
six months due to limited foreign exchange reserves.
Although, the country’s foreign exchange reserves have risen to over USD 3. 5 billion
(May 2023) from near zero levels driven by remittances and tourism inflows, they have
not still grown to respectable levels to lift the capital controls.
During the pre-crisis period when the economy was booming, Sri Lanka managed to
maintain around USD 8.2bn in official foreign reserves.
Hence, Central Bank has recommended to extend the capital controls (which was set to
expire on June 30, 2023) by a further six months.
Source: Government news portal
10. Research & Development Unit
Plantation sector to see growth amid labour issues:
RIUNIT Report
Plantation companies remain optimistic about revoking of
the ban imposed on the usage of chemical fertilizer and
see it as the ex-factor for a production boost in 2023, as
compared with 2022 according to a latest study done by
“Research Intelligence Unit-RIUNIT”
Source: RIUNIT
The companies consider labour as a crucial element of their business
and the ‘revenue-share model’, which is a newly adapted model from
the 150-year-old daily wage model, is expected to correct most of the
issues related to the productivity of plantation companies.
RIUNIT added that in addition to the replanting strategies, most of the
large listed companies prioritize increasing labour productivity and
recruiting the properly skilled workers to the industry.
11. Research & Development Unit
Food security improves in Sri Lanka – FAO and WFP
Food security in Sri Lanka is improving across all
provinces, according to the Crop and Food Security
Assessment Mission (CFSAM) report jointly carried
out in February/March 2023 by the Food and
Agriculture Organization of the United Nations (FAO)
and the United Nations World Food Program (WFP).
Source: https://www.fao.org/3/cc6202en/cc6202en.pdf
As per the report, 3.9 million people (17%) were estimated to be moderately acute food insecure including
about 10,000 people assessed to be severely acute food insecure.
This represents a 11% decrease from May 2022 (28%).
The highest levels of acute food insecurity were once again found in the Estate sector (42%). Acute food insecurity
was also high in Eastern (23%) and Northern (28%) provinces.
Acute food insecurity trend by province and sector
(percent/household)
12. Research & Development Unit
CSE announces new constituents of *S&P SL20 Index
The Colombo Stock Exchange (CSE) has announced a
new set of constituents in S&P Sri Lanka 20 index at the
2023 mid-year rebalance.
Exclusions from S&P SL 20 Inclusions to S&P SL 20
Brown & Co. Ltd Hatton National Bank PLC
Teejay Lanka PLC Hemas Holdings PLC
Watawala Plantations PLC Sri Lanka Telecom PLC
*The S&P SL 20 index includes the 20 largest companies, by total
market capitalization, listed on the CSE that meet minimum size,
liquidity and financial viability thresholds
13. Research & Development Unit
Radisson to manage Galadari Hotel Colombo after facelift
Galadari Hotels Lanka PLC intends to rope in with multinational hospitality
management company Radisson Hotels Asia Pacific Investments Pte. Ltd under the
name ‘Radisson Blu Hotel Galadari Colombo’.
The company in May 2019 initially announced its
plan to refurbish 400 rooms, at an estimated cost
of USD 15mn.
The refurbishment was originally scheduled to
commence in June 2019. However, it was pushed
back.
14. News Snippets
Research & Development Unit
Government rules out any prospects of
relaxing ban on vehicle imports this
year
The government ruled out a possible
relaxation of the ban on vehicle imports
this year due to possible negative
impact on the country’s limited foreign
exchange reserves and the overall
economy.
Pharmaceutical industry ready to cut drug prices by up to
13%
Sri Lanka Chamber of Pharmaceutical Industry (SLCPI) said
the industry stands ready to reduce prices of pharmaceuticals
up to 13% in line with the recent rupee appreciation under
the condition of flexibility for future price increases in case
of deprecation of the currency.
Over 22,000 tourist arrivals in June first week
Sri Lanka welcomed a total of 22,200 international visitors for the first
eight days of June, maintaining a tourist inflow momentum similar to
that of May.
The provisional data released by the Sri Lanka Tourism Development
Authority showed that the daily arrival average for the month so far is
2,775.
For the corresponding period in May, the daily arrival average was of
2,675, which indicates a slight improvement in the daily arrivals.
16. Euro zone enters a recession
Research & Development Unit
The euro zone entered a recession in
the first quarter of this year. The 20-
member bloc reported a GDP growth
of -0.1% for the first quarter 2023.
Before the weak performance over
January-March, the euro zone also
contracted by 0.1% in the last
quarter of 2022.
Source: https://ec.europa.eu/eurostat/documents/2995521/16921720/2-08062023-AP-EN.pdf/70e6937f-93ad-2936-ed03-5dbc9fd762f6
The two consecutive quarters of negative GDP performance have also dragged the wider region into a technical
recession.
“News that GDP contracted in the first quarter after all means that the euro zone has already fallen into a technical
recession. We suspect that the economy will contract further over the rest of this year,” Andrew Kenningham, chief
Europe economist at Capital Economics, said.
Ireland, the Netherlands, Germany and Greece are among the euro economies that reported an economic quarter-
on-quarter contraction for the first quarter.
17. India’s Economy is humming along even with still-high
rates
Research & Development Unit
Source: Bloomberg
India’s economic activity continued to expand
in May thanks to buoyant domestic demand,
assuring policymakers that rates can be kept
higher for longer though the biggest risk now
is heat waves and below-normal rains.
major economies in the world. It’s giving room to the Reserve Bank of India to keep borrowing costs
higher until inflation is firmly under control.
The central bank, which left its benchmark rate unchanged this month, expects the economy to grow
6.5% in the current financial year, but professional forecasters expect a slower rate of expansion on the
uneven monsoon.
Robust demand and moderating raw material costs are
helping the South Asian nation grow faster than most
World Economic Outlook – April 2023
2. Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area countries.
3.For India, data and forecasts are presented on a fiscal year basis, and GDP from 2011 onward is based on GDP at market prices with fiscal year 2011/12 as a
base year. Quarterly data are non-seasonally adjusted and differences from the January 2023 WEO Update and October 2022 WEO are not available.
Source: World Bank
18. China unveils USD 72bn tax break for EVs, other green
cars to spur demand
Research & Development Unit
China unveiled a 520 billion yuan
(USD 72.3bn) package of tax breaks over four
years for electric vehicles (EVs) and other
green cars, its biggest yet for the industry as it
seeks to boost slower auto sales growth.
Source: Reuters
-economic growth and while financial support was widely expected after an earlier
government pledge to promote the industry, shares in major automakers jumped after
the details were released.
Weakening sales growth in the world's biggest
auto market has raised concern over China's-
19. Pakistan budget ‘missed opportunity’ as IMF bailout
cutoff looms
Research & Development Unit
The International Monetary Fund (IMF) has expressed dissatisfaction with
Pakistan’s recently presented budget, a blow for the cash-strapped country which has
only two weeks left until its bailout program expires.
Pakistan has barely enough currency reserves to cover one month’s imports. It had hoped to
have USD 1.1bn of the funds released in November – but the IMF has insisted on a number of
conditions before it makes any more disbursements.
With time for only one last IMF board review before the end of the USD 6.5bn Extended Fund
Facility (EFF), Pakistan was expected to present a budget in line with program objectives,
restore the proper functioning of the FX market, and close the USD 6bn gap ahead of the board
review.
“Staff remains engaged to discuss policies to maintain stability. However, the draft FY24 Budget misses
an opportunity to broaden the tax base in a more progressive way,” Esther Perez Ruiz, the IMF’s resident
representative in Pakistan, said to Reuters news agency. Source: Reuters
20. India, China bought 80% of Russia's oil in May:
International Energy Agency
Research & Development Unit
Source: IEA, The Hindu
India and China, the world's top oil users,
continued to lap up heavily discounted Russian
crude oil, buying as much as 80% of the oil that
Moscow exported in May, the International
Energy Agency (IEA) said in a report.
"Heavily discounted Russian crude oil has found new
buyers primarily in Asia. India has increased
purchases from almost nothing to close to 2mn
barrels per day, while China has raised its purchases
by 500,000 barrels per day to 2.2mn barrels per day,"
the Paris-based energy agency said in its latest Oil
Market Report
21. Iraq approves record USD 153bn budget aimed at creating
jobs
Research & Development Unit
Iraq’s parliament has approved a budget of 198.9 trillion dinars
(USD 153bn) for 2023 that sets out record spending on a growing
public wage bill and development projects to improve services
and rebuild infrastructure ruined by neglect and war.
The approved budget is the largest in the country’s history,
covering three years – 2023, 2024 and 2025.
The budget aims to create tens of thousands of public sector jobs
as the country, which has been racked by decades of war and
sectarian strife in the wake of the 2003 US military invasion,
wants to improve services and rebuild war-damaged facilities.
The country has one of the fastest-growing populations in the
world, projected to double from 43 million to about 80 million by
2050, while most of the economy is state-led, with high
unemployment. The country has seen frequent protests over the
lack of jobs and public services.
Source: Reuters
22. Global central bank policy decisions
Research & Development Unit
The Federal Reserve decided to leave its key interest rate unchanged at a range of 5% to 5.25% on June 14. It was
the first time that America’s central bank left the rate on hold following ten consecutive increases, which started
in March 2022. However, it indicated that it would probably lift the rate twice again this year.
With inflation remaining elevated in the euro zone, the European Central Bank lifted interest rates again by a
quarter of a percentage point on 14 June. That takes its policy rates to 4.0%.
The Bank of England raised interest rates by a bigger-than-expected half a percentage point on June 22 after it
said there had been "significant" news suggesting British inflation would take longer to fall. The BoE's Monetary
Policy Committee (MPC) raised its main interest rate to 5% from 4.5%, its highest since 2008 and its largest rate
increase since February 2023.
The Swiss National Bank raised its policy interest rate by 25 basis points on June 22 to 1.75% as the central bank
pressed ahead with its campaign to dampen stubborn inflation and signaled that more tightening was likely to
come.
China’s central bank slashed policy rates by 10 basis points to 3.55% on June 20 as it seeks to reignite economic
growth. Both the one-year and five-year loan prime rates were lowered. The widely expected move follows other
measures to reduce financing costs for businesses announced last week. After growing rapidly in the first quarter
of the year, China’s economy has faltered in recent months.
Sources : Respective Central Banks
23. 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 >
Sri Lanka: Emerging from the economic crisis…
The recent policy rate cut signals the government’s intention to drive
growth. However, this drive for growth will have to be carefully balanced
with inflationary consequences that it may trigger.
