www.combank.lk

1. EconomicCapsule
March 2024
Research & Development Unit
326th Issue

2. CONTENTS
BANKING & FINANCE
 ComBank named Best SME Bank in Sri Lanka at Global Finance Awards 2024
in UK
 ComBank opens first ‘DigiZone’ experience centre at Wellawatte branch
 ComBank opens newly built Kegalle Branch
ECONOMY, BUSINESS & DEVELOPMENT
 IMF reaches staff-level agreement on the second review
 GDP Growth – 2023
 SL Purchasing Managers’ Index (PMI) – February 2024
 Tourism
 ADB approves USD 100mn loan to support SMEs in Sri Lanka
 News Snippets
GLOBAL UPDATE
 US economy avoids a recession in 2023
 Africa’s largest economy is battling a currency crisis and soaring inflation
 Egypt strikes expanded USD 8bn deal with the IMF
 India signs USD 100bn free trade deal with four European nations
 Russia’s economy is surprisingly resilient despite sanctions
 Saudi oil giant Aramco posts 25% fall in full-year profit
 Global news snippets
Research & Development Unit

3. Banking & Finance
News
Research & Development Unit

4. Research & Development Unit
ComBank named Best SME Bank in Sri Lanka at Global
Finance Awards 2024 in UK
The Commercial Bank of Ceylon has been declared the
‘Best SME Bank’ in Sri Lanka at the Global Finance
Awards 2024 in an emphatic reaffirmation of the Bank’s
status as the biggest benefactor by far to the country’s
small and medium enterprises.
Already recognized by the Ministry of Finance as the
biggest lender to the country’s SMEs, Commercial Bank
received the prestigious Global Finance award in this
sphere for the second consecutive year.
Announcing the winners of the World’s Best SME Bank Awards 2024 across all regions, Global Finance
said it used a proprietary algorithm with criteria – such as knowledge of SME markets and needs,
breadth of products and services, market standing, and innovation – weighted for relative importance.
“The winners are those banks that best meet the specialised needs of SMEs in their markets,” the
magazine said.

5. Research & Development Unit
ComBank opens first ‘DigiZone’ experience centre at
Wellawatte branch
The Commercial Bank of Ceylon has opened
its first ‘DigiZone’ – a purpose-designed
space for customers to be introduced to,
and experience the convenience and
functionality of the Bank’s comprehensive
digital banking offering.
Located at the Bank’s Wellawatte branch at 343,
Galle Road, Colombo 6, the DigiZone is intended to
be a familiarisation centre for customers to get
acquainted with digital banking and get hands-on
experience with the help of the Bank’s Digital
Assistants if necessary.

6. Research & Development Unit
ComBank opens newly built Kegalle Branch
The Commercial Bank of Ceylon recently moved its Kegalle branch to a spacious new
two storey building at the same location, designed to better serve customers in this
bustling municipality.

7. Economy, Business
& Development
News
Research & Development Unit

8. Research & Development Unit
IMF reaches staff-level agreement on the second review
IMF staff and the Sri Lankan authorities, on 21
March 2024 reached a staff-level agreement on
economic policies to conclude the second review
of the EFF-supported program and the 2024
Article IV Consultation.
Highlights
The staff-level agreement is subject to the approval by IMF management and the IMF Executive Board in the
period ahead, contingent on:
(i) The implementation by the authorities of prior actions
(ii) The completion of financing assurances review, which will focus on confirming multilateral partners’
committed financing contributions and whether adequate progress has been made with the debt
restructuring to give confidence that the restructuring will be concluded in a timely manner and in line with
the program’s debt targets.
Read more: https://www.imf.org/en/News/Articles/2024/03/21/pr2494-sri-lanka-imf-staff-level-agreement-for-second-review-sla

9. Research & Development Unit
IMF reaches staff-level agreement on the second review
(Cont.)
Highlights (Cont.)
• IMF commended on the progress made in the reform agenda including rapid disinflation, reserve accumulation, initial signs of
economic growth and preserving the stability of the financial system.
• All quantitative performance criteria and indicative targets for end-December 2023 met except for the indicative target on social
spending.
• Most structural benchmarks due before end-February 2024 were either met or implemented with delay. Reforms in some areas are
still ongoing.
• Emphasized the importance of introducing the “Property tax” together with revenue measures to meet the revenue mobilization
goals in 2025 and beyond.
• Commended on the agreements made in principle with official creditors and EXIM bank China and stressed the importance of
finalizing those initial agreements.
• The fund also expects authorities to reach agreements in principle with the main external private creditors in line with program
parameters in a timely manner.
Once the review is approved by IMF Management and completed by the IMF Executive Board, Sri Lanka will have
access to SDR 254mn (about USD 337mn) in financing.

10. Research & Development Unit
GDP Growth – 2023
Highlights
GDP growth rate for the 4th quarter of
2023 recorded 4.5%. This is the highest
quarterly growth since Q2-2021.
However, the economy contracted by 2.3% in 2023.
The economy is expected to fully move in to the
positive territory by end 2024, with the World Bank
estimating a 1.7% growth for 2024.
Read more: http://www.statistics.gov.lk/NationalAccounts/StaticalInformation/Reports/press_note_2023q4_eng
* Revised
**WB forecasts
**
**
* *
2024f
CBSL 3.3%
Source: CBSL

11. Research & Development Unit
GDP Growth – 2023 (Cont.)
Constant prices – Inflation adjusted prices

12. Research & Development Unit
GDP Growth – 2023 (Cont.)
Growth rates of Agricultural activities Growth rates of Industrial activities
Growth rates of Services activities
Source: CBSL

13. Research & Development Unit
SL Purchasing Managers’ Index (PMI) – February 2024
This survey is conducted monthly by the Statistics Department of the Central Bank for both manufacturing and services. The purpose of the survey is
to provide purchasing professionals, business decision-makers and economic analysts with a timely set of data to help better understand industry
conditions.
Source: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_20240315_sl_pmi_2024_february_e.pdf
Expanding
Expectations for the manufacturing activities for the next three months remain positive, mainly due to the
upcoming festive season.

14. Research & Development Unit
SL Purchasing Managers’ Index (PMI) – February 2024
(Cont.)
PMI is calculated as a ‘Diffusion Index’, where it takes values between 0 and 100.
PMI=50 - sector remained neutral on month-on-month basis;
PMI>50 - sector is generally expanding on month-on-month basis
PMI<50 - sector is generally declining on month-on-month basis
Expanding
Expectations for Business Activities for the next three
months continued to rise in February due to upcoming
New Year and Ramadan season.

15. Research & Development Unit
Tourism
Sri Lanka’s tourist arrivals have soared past the 500,000
mark in just the third month of the year, with March alone
crossing the 100,000 milestone, over the first three weeks
(1-17 March 2024)
Source: SLTDA
• International tourism is well on track to fully recover to pre-pandemic levels in 2024 despite economic
challenges such as high inflation and weaker global output, as well as geopolitical tensions and conflicts.
(UNWTO World Tourism Barometer)
• Building on the robust momentum gained in 2023, where Sri Lanka welcomed almost 1.5 million visitors
and surpassed USD 2 billion in earnings (for the first time since 2019), the SLTDA has set an ambitious target
of 2.3 million tourists and aims to generate over USD 4 billion in revenue for 2024.
Outlook
*
*(1 to 17 March 2024)

16. Research & Development Unit
ADB approves USD 100mn loan to support SMEs in
Sri Lanka
The Asian Development Bank (ADB) has
approved a USD 100mn loan to provide small
and medium-sized enterprises (SMEs) in Sri
Lanka more access to finance and build their
resilience to external shocks, such as the
economic crisis and climate change.
ADB, through participating financial institutions, will open a USD 50mn line of credit for
underserviced SMEs in the export, tourism, technology, agriculture, and manufacturing sectors.
It will establish a USD 500,000 special facility to cover guarantee subsidies for women-led SMEs. A
gender gap assessment will be conducted with a view to improving women’s access to finance.
Source : https://www.adb.org/news/adb-approves-100-million-loan-support-smes-sri-lanka

17. News Snippets
Research & Development Unit
Government announces fresh support for gem and jewellery sector
President unveiled plans to provide concessions to those who are engaged in the gems and jewellery sector. The
President directed officials to develop a viable system aimed at bolstering the gem and jewellery industry. He
instructed them to collaborate with both the public and private sectors to draft a proposal addressing these
issues within two weeks.
Low-level teacher capacity key barrier for educational-technology (ed-tech) implementation
The low level of teacher capacity along with reduced affordability of hardware remains major barriers
towards successfully implementing ed-tech in Sri Lanka, a recent Institute of Policy Studies (IPS) study
revealed.
Colombo Port transshipment growth surges for third month
In February, the Port of Colombo saw its transshipment volume growth accelerate for the third
consecutive month, with a 29.1% year-on-year increase. This growth was driven by ongoing
disruptions in the Red Sea, benefiting the port.
https://pmd.gov.lk/news/presidents-attention-on-addressing-issues-of-those-engaged-in-gem-and-jewellery-sector/
https://www.ips.lk/wp-content/uploads/2024/02/Ed-tech-Towards-Achieving-SDGs1_compressed.pdf

18. Global
Update
Research & Development Unit

19. US economy avoids a recession in 2023
Research & Development Unit
The US economy remained shockingly robust
in the fourth quarter to close out a remarkably
strong 2023 as consumers and businesses
continued to spend, crushing expectations of a
recession.
Gross domestic product rose at a seasonally and inflation-
adjusted annualized rate of 3.3% from October through
December, the Commerce Department reported.
Growth in 2023 overall, from January through December
of last year, registered at a robust 2.5% rate.
How did US manage to avoid a recession?
• Strong labor market performance ensuring demand has been met by growing supply
• A well contained unemployment rate.
• Massive pandemic stimulus amounting 26% of GDP (although this fuelled inflation, it also contributed to growth. In fact consumers have yet to
spend all the cash they received during the pandemic)
• Even some bad news turned out to be good for the Fed’s effort to avoid a recession: The regional banking crisis in March 2023 forced the FED
to slow its historic rate hikes a bit. That saved businesses and consumers some funds that they would have otherwise paid for their mortgages
or credit card bills.
Source: US Bureau of Economic Analysis

20. Africa’s largest economy is battling a currency crisis and
soaring inflation
Research & Development Unit
With annual inflation nearing 30% and a currency in
freefall, Nigeria is facing one of its worst economic
crises in years, provoking nationwide outrage and
protests.
The Nigerian naira hit a new all-time low against the
U.S. dollar on both the official and parallel foreign
exchange markets, sliding to almost 1,600 against
the greenback on the official market from around
900 at the start of the year.
Years of foreign exchange controls have also
generated enormous pent-up demand for U.S.
dollars at a time when overseas investment and
crude oil exports have declined.
Source: BBC Economy, The Guardian

21. Egypt strikes expanded USD 8bn deal with the IMF
Research & Development Unit
Egypt has signed an expanded USD 8bn deal with the International Monetary Fund (IMF).
The new agreement announced on 06 March 2024 is an expansion of the USD 3bn, 46-month
Extended Fund Facility that the IMF struck with Egypt back in December 2022, which was
predicated on the shift to a more flexible exchange-rate system.
The deal comes as the central bank said it would let the pound currency trade freely and announced
an interest-rate hike of 600 basis points in a bid to stabilize the economy.
Source: https://www.imf.org/en/News/Articles/2024/03/06/pr-2459-egypt-staff-and-authorities-reach-agreement-on-reviews-under-the-eff-arrangement

22. India signs USD 100bn free trade deal with four European
nations
Research & Development Unit
India has signed a free-trade agreement (FTA) with a group of four European
countries that are not members of the European Union. The deal with the European
Free Trade Association (EFTA) will see investments in India of USD 100bn
(Euro 77.8bn), the country's trade minister says.
Source: BBC
The announcement comes as the UK and India
have been holding negotiations over an FTA for
the last two years.
Investments are expected to be made across a
range of industries, including pharmaceuticals,
machinery and manufacturing.
The EFTA is made up of Norway, Switzerland, Iceland and Liechtenstein.

23. Russia’s economy is surprisingly resilient despite
sanctions
Research & Development Unit
Despite sanctions imposed by Western companies when the conflict in Ukraine began, the Russian
economy has performed surprisingly well.
In 2022, the year the conflict began, sanctions took a toll, leading to a 1.2% decline in real GDP.
Yet in 2023, Russia has succeeded in boosting trade with non-Western countries, especially China
and India. Further, capital controls helped to stabilize the currency, leading to a sharp decline in
inflation.
The result was that real GDP grew by 3.6% in 2023.
Source: Deloitte, Reuters
However, Russia's war economy is in for tough times due to the outflow of people and reduced
access to technology, the International Monetary Fund's managing director Kristalina Georgieva
said.

24. Research & Development Unit
Source: Saudi Aramco financials, The Economist
Saudi Arabia’s state oil giant Aramco reported a 25% decline in profit to USD 121.3bn
in 2023, down from USD 161.1bn in 2022.
Its market value of USD 2trn is five times that of the second-biggest oil firm,
ExxonMobil (USA).
Saudi oil giant Aramco posts 25% fall in full-year profit
Comparison of the *PE ratios
Aramco, ExxonMobil, Shell and Chevron are among the largest
energy companies in the world.
*The price-to-earnings (P/E) ratio is a metric that compares a
company's share price to its earnings per share (EPS). This
ratio helps assess the relative value of a company's stock

25. Global news snippets
Research & Development Unit
America’s annual rate of inflation rose slightly in
February, to 3.2%. Separate data showed that
American employers created 275,000 jobs last
month. Although that was more than expected,
January’s red-hot figure of 353,000 new jobs was
revised down to 229,000. Neither set of figures
changed investors’ expectations that the Federal
Reserve will start cutting interest rates in June.
Japan's central bank has raised the cost of borrowing for
the first time in 17 years. The Bank of Japan (BOJ)
increased its key interest rate from -0.1% to a range of
0%-0.1%. It comes as wages have jumped after consumer
prices rose. In 2016, the bank cut the rate below zero in
an attempt to stimulate the country's stagnating
economy. The hike means that there are no longer any
countries left with negative interest rates.
In Argentina the annual rate of inflation surged again, to 276% in February. But the month-on-month increase
in prices slowed to 13%, from 21% in January. Javier Milei, the country’s president, has embarked on economic
reforms that he acknowledges are painful. UNICEF has warned that 70% of Argentine children could be living in
poverty. Meanwhile, the government rolled over USD 50bn-worth of debt that was to mature this year for
securities that are due next year, the largest debt-swap in Argentina’s history. And the central bank cut its
benchmark interest rate from 100% to 80%.
Sources: BBC, The Economist, The Federal Reserve,
Australia’s economy grew by 1.5% in the fourth quarter 2023, year on year, the slowest pace since the
pandemic. That adds more pressure on the central bank to cut interest rates.

26. 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…
“Although tax concessions are often claimed to be necessary to
encourage investment, particularly foreign direct investment,
there is plenty of survey evidence to show that foreign
companies do not choose their location based mainly on tax
considerations. Factors that truly matter include a stable macro-
economic environment, reliable electricity and physical
infrastructure, the rule of law, an efficient dispute resolution
system, secure access to land, and a high-quality labour force.”
-Dr Sharmini Coorey : Advisor to President and former IMF Director