The document provides an economic summary for December 2018. It discusses several topics: - Commercial Bank of Sri Lanka won numerous awards for its annual report and performance in Sri Lanka and Bangladesh. It also partnered with Daraz to provide online payment services. - Sri Lanka's economy grew 2.9% in Q3 2018 led by agriculture and manufacturing. Inflation rates increased slightly in November. New investment projects were signed in tourism and pharmaceuticals. - Sri Lanka is entering knowledge-based textile manufacturing and won awards for its ICT sector performance. - Internationally, the IMF warned of risks to the global economy from trade wars. Argentina's economic reforms were yielding results. Real estate

1. Economic Capsule
December2018
264th Issue
Research & Development Unit

2. CONTENTS BANKING & FINANCE
 ComBank Annual Report Best in Banking sector for 14th year
 ComBank honoured with top awards in Sri Lanka and Bangladesh
 ComBank provides Internet Payment Gateway to online retail giant Daraz
ECONOMY & BUSINESS
 Economy of Sri Lanka grew by 2.9% in the third quarter of 2018
 NCPI –November Inflation
 New BOI projects signed in tourism and pharmaceutical sectors
 Sri Lanka enters new field of knowledge-based textile garments
 Sri Lanka becomes 3rd best country in Asia Pacific ICT Awards
INTERNATIONAL
 IMF warns storm clouds gathering for global economy
 Argentina's economic program yielding results: IMF
 Real estate trends to watch out for in 2019 and beyond
 Qatar Petroleum to invest USD 20bn in US in major expansion
 India appoints Modi ally as new central bank head

3. Banking & Finance

4. ComBank Annual Report Best in Banking
sector for 14th year
Research & Development Unit
• Commercial Bank was reaffirmed the best among
Sri Lanka’s banks for financial disclosure for a
consistent 14th year, winning
the Gold in the Banking Institutions category at the 2018
CA Sri Lanka Annual Report Awards.
• The Bank also won the Bronze award for Overall Excellence
in Annual Financial Reporting across all sectors of business, the Gold for ‘Integrated
Reporting – Best Disclosure on Capital Management,’
the Gold for ‘Corporate Governance Disclosure,’ and the Silver for ‘Integrated Reporting’ at
the 54th edition of these awards.• This was the highest number of awards received by a banking institution.

5. ComBank honoured with top awards in
Sri Lanka and Bangladesh
Research & Development Unit
• Commercial Bank has won the titles of
‘Best Commercial Bank’ in Sri Lanka and
the ‘Best Foreign Bank’ in Bangladesh in
2018 from the UK-based Global Business
Outlook (GBO) magazine, ending a year of
international and local accolades with twin
honours across the Palk Strait.
• This is the first occasion that Commercial
Bank has participated in the Global
Banking Outlook awards programme.

6. ComBank provides Internet Payment Gateway
to online retail giant Daraz
Research & Development Unit
• Commercial Bank has been appointed the Internet
Payment Gateway (IPG) service provider to ‘Daraz,’
South Asia’s premier online shopping market, to
enable seamless online transactions for its large
base of shoppers.
• The online payment processing of Daraz will be
facilitated by Commercial Bank through Mastercard
Payment Gateway Services (MPGS) and will provide
the portal the convenience of a secure, cost-
effective way to perform card on file transactions
through tokenisation, keeping sensitive card details
away from its systems.

7. Economy & Business

8. Economy of Sri Lanka grew by 2.9% in the third
quarter of 2018
Research & Development Unit
Source: DCS
• Sri Lanka has recorded a growth of 2.9% in Gross Domestic Product
in the third quarter of 2018.
• Agricultural activities expanded favourably by 3.3 %, compared to
the contraction of 3.1 % reported in the third quarter of 2017.
Among the sub activities 'Growing of Rice and Growing of
Oleaginous fruits including coconut' reported substantial growths of
46.9 % and 11.9 % respectively. The sub activities of 'Fresh water
fishing' and 'Growing of Tea' have recorded a substantial decline by
19.1 percent and 14.9 percent respectively in this quarter.
• The Industrial activities recorded a slight expansion of 1.9 %. The
overall manufacturing activities have grown by 2.2% during the third
quarter of 2018, supported mainly by the sub activities of
'Manufacture of food, beverages and tobacco ' and 'Manufacture of
textile and wearing apparels', which recorded positive growth rates
of 3.7% and 3.2% respectively
• Among the three major activities, the Services activities, which gave
the highest contribution (56.8%) to the 'GDP, has grown by 3.9%
during the third quarter of 2018, when compared to the same
quarter in the year 2017
Contribution to the GDP %

9. NCPI – November Inflation
NCPI
Point to Point
NCPI
Annual Average
Source: DCS
November 2018 Month Ago Month AgoNovember 2018
1.0% 0.1% 2.7% 3.3%
3.1% 3.4% 2.4% 2.4%
November 2018 Month Ago Month AgoNovember 2018
NCPI Core
Point to Point
NCPI Core
Annual Average
 The increase observed in YoY inflation (based on NCPI) in November 2018 is mainly driven by the increase
of the prices of Food items. YoY Food inflation increased to-3.9% in November 2018 from -6.6% in October
2018.
 YoY Non-food inflation decreased from 5.8% in October 2018 to 5.2% in November 2018.
Research & Development Unit

10. New BOI projects signed in tourism and
pharmaceutical sectors
Research & Development Unit
• The Board of Investment signed agreements for projects in the field of hotels and the
manufacture of pharmaceuticals.
• According to the Director of Melwa Hotels and Resorts , the company has already
signed two projects with the BOI, one will be located in Negombo (construction has
already begun) and the other in Yala . Both hotel projects will be opened in 2021 and
will be operated by the Hilton Chain .
• The other project signed by the BOI was with Kelun Life Sciences Ltd. to manufacture
IV fluids for the local and export markets. The plant will be located in the Kandy
Industrial Park. According to the Managing Director Kelun Life Sciences Ltd, the
company plans to manufacture injectables and supply these to the Health Ministry.
This will help reduce the shortages in the country, result in freshly manufactured
stocks and also contribute towards import substitution.

11. Sri Lanka enters new field of knowledge-
based textile garments
Research & Development Unit
• Sri Lanka’s apparel industrialists are now exploring new
avenues in entering the e-textile and smart clothing
global market while promoting quality and fashionable
smart garments overseas, the Export Development
Board’s (EDB) recent research report revealed.
• The country has gained the status of the highest per
capita apparel exports in the Asian region with an
ambition of reaching the USD 8.5bn mark by the year
2020 by combining local resources with global
technologies, the report predicted.
• Several leading readymade garment manufacturers are using environment-friendly fabric
treatment and colour processing ingredients in the production cycle and this initiative has
enabled them to transform Sri Lanka as an innovative manufacturer of novel smart clothing
and fashion solutions in the international market.

12. Research & Development Unit
• Several apparel companies in the island
have been making innovations in the field
of smart clothing with embedded digital
computing devices and delicate sensors
adopting digital technologies.
• Smart clothes are garments such as shirts,
pants, socks, and shoes with an
embedded computing device that
monitors health statistics such as heart
rate, respiration, skin temperature, and
oxygen saturation
Sri Lanka enters new field of knowledge-based textile
garments (cont)
Source: EDB

13. Sri Lanka becomes 3rd best country in
Asia Pacific ICT Awards
Research & Development Unit
• Sri Lanka clinched three coveted gold and seven
merit awards at the recently concluded Asia Pacific
ICT Alliance Awards (APICTA) 2018 in Guangzhou,
China, the Federation of Information Technology
Industry Sri Lanka (FITIS), and BCS Chartered
Institute for IT Sri Lanka (BCSSL) announced.
• The competition consists of 16 categories of which
Sri Lanka competed in seven and won the above
awards. This is the largest number of awards that Sri
Lanka has won in one year and it made Sri Lanka the
third highest ranking country just behind China and
Hong Kong in the 2018 competition.

14. International

15. IMF warns storm clouds gathering for
global economy
• One of the International Monetary Fund’s top officials warned that storm clouds were gathering
over the global economy and that governments and central banks might not be well- equipped to
cope.
• The fund had been urging governments to “fix the roof” during a sunny last two years for the world
economy, IMF First Deputy Managing Director David Lipton said.
• “Central banks would likely end up exploring ever-more unconventional measures. But with their
effectiveness uncertain, we ought to be concerned about the potency of monetary policy. Many
governments won’t have much room for manoeuvre, either, having already racked up high debts.
We should not expect governments to end up with the ample space to respond to a downturn that
they had 10 years ago. Stimulus may also be a hard sell politically, considering the financial burden it
creates”, he said.
• The biggest immediate risk, though, is the current trade war between the United States and China. If
all of the threatened tariffs are put in place, as much as three-quarters of a percent of global GDP
would be lost by 2020
Source: Reuters
Research & Development Unit

16. Argentina's economic program yielding
results: IMF
Research & Development Unit
• Argentina's economic program, including tough budget cuts, is
yielding results and stabilizing financial markets, an International
Monetary Fund spokesman said.
• The key now is to press ahead with the reform policies to return to
growth, IMF spokesman Gerry Rice told.
• The IMF board is due to approve the next installment of the expanded
USD 56bn loan deal approved for Argentina in late October. That
would release USD 7.6bn for the crisis-battered country.
Source: Yahoo
Argentina, the world’s 21st largest economy, is facing an economic crisis. Its currency, the peso, has lost
more than half of its value against the U.S. dollar over the course of 2018. With trouble financing its
budget deficit, the Argentine government in June turned to the International Monetary Fund (IMF) for
a USD 50bn program, one of the largest programs in IMF history.

17. Real estate trends to watch out for in 2019
and beyond
Research & Development Unit
Rebirth of malls, but in a different format
• While the super-mall is new to Sri Lanka and a few of them
launched only as recently as a few months ago, countries which
have had this culture are seeing a huge increase in mall closures.
• The US seems to be the most affected, followed by mature
European markets and established brands like Macy’s, JC Penney
and Debenhams have announced store closures, mostly inside
malls.
• The obvious reason for this has been a shift towards online
shopping while costs to maintain huge floor space in prime
locations has been increasing.
• According to Credit Suisse, up to a quarter of the existing malls in the US could be closed by 2022.
This would leave a lot of empty retail space. In order to counter this, property owners and
developers are looking at other options than retail to fill the void. Some developers are turning malls
into experience centres where the family can enjoy with movies, activities and restaurants. Others
are converting them into office spaces.

18. Qatar Petroleum to invest USD 20bn in US in
major expansion
• Qatar Petroleum (QP) is looking to invest at least
USD20bn in the United States over the coming few
years, its chief executive told, after the Gulf Arab
state quit OPEC, freeing Doha from potential legal
risks in the United States.
• Saad al-Kaabi, who holds the energy portfolio of
the world’s top liquefied natural gas (LNG)
producer, also said QP aimed to announce its
foreign partners for the new LNG trains it is
building by the middle of next year.
Research & Development Unit
Source: CNBC

19. India's high growth enough to keep credit rating stable: S&P Global
Research & Development Unit
Source: Reuters/AFP
• India’s rapid economic growth will be enough to offset worries about the
independence of its central bank and keep its credit rating in the coveted investment
grade bracket, S&P Global said.
• India’s BBB- rating puts it on the bottom rung of the investment grade ladder, and
sentiment towards the country was hit when central bank governor Urjit Patel
resigned following a months-long tussle over policy with the government.
India appoints Modi ally as new central bank head
• The Indian government named an ally of Prime Minister Narendra Modi as new
central bank head on December 12th after his predecessor quit following a row
about alleged government interference.
• Shaktikanta Das, named in a government statement as new Reserve Bank of
India Governor, is a former senior finance ministry official and a key figure in
Modi’s controversial “demonetization” scheme of 2016.

20. 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.
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Robin Sharma