The document provides a summary of economic indicators and news from Sri Lanka and around the world. It discusses topics such as: - Fitch revising Sri Lanka's outlook to stable due to improving fiscal finances and credible economic policies. - Sri Lanka's private sector credit growth remaining high at 21.9% in 2016. - Sri Lanka's trade deficit expanding while tourism earnings and remittances increased. - Sri Lanka's January tea output falling 15.3% due to adverse weather and policy changes. - The Colombo port improving its world ranking to 23rd in 2016 due to infrastructure upgrades. - India's GDP growth slowing slightly in the last quarter of 2016 while China's growth was 6

1. Economic Capsule
February 2017
Research & Development Unit
242nd Issue

2. C O N T E N T S
ECONOMY & BUSINESS 
 Fitch revises Sri Lanka’s outlook to Stable
 Credit continues to grow
 External Sector
 Oil Price
 Sri Lanka January tea output falls by 15.3 %
 Sri Lanka’s Colombo Port ranked among the world’s best 25 ports
 Special Infrastructure Company to lobby for loans and manage mega road projects
 Cabinet approves USD 75 mn WB loan to upgrade financial sector
 Government Debt
INTERNATIONALBANKING & FINANCE
 Commercial Bank ends 2016 as 1st private bank to cross Rs. 1 Trillion in assets
 Commercial Bank named Best Internet Bank in Sri Lanka
 GDP – India, China, USA & UK

3. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
Banking & Finance

4. Commercial Bank ends 2016 as 1st private
bank to cross Rs. 1 Trillion in assets
< Research & Development Unit >
• Commercial Bank of Ceylon PLC continuing its trailblazing performance has reported
profit before income tax (PBT) of Rs 20.051 bn for 2016, marking the end of a
spectacular year in which it made history as the first private bank in Sri Lanka to
surpass a trillion rupees in assets.
• Profit before value added tax (VAT) grew by 18.58% to Rs 23.755 bn, disclosing that
an increase in the financial VAT rate from 11% to 15% for four of the 12 months
reviewed had resulted in the Bank’s VAT expense for the full year increasing by
28.17% to Rs 3.703 bn, from Rs 2.889 bn paid for 2015.
• The 16.96% growth achieved in PBT was bettered by the growth in profit after tax,
which improved by 21.92% to Rs 14.513 bn during the year ending December 31,
2016.
• The Bank paid Rs 9.385 bn in taxes in respect of the year reviewed, an increase of
15.78% even after discounting the Rs 2.570 bn paid in 2015 as Super Gains Tax.
Click here for the full statement

5. Commercial Bank named Best Internet
Bank in Sri Lanka
< Research & Development Unit >
• The Commercial Bank of Ceylon has been
recognized as the Best Internet Bank in Sri Lanka
in 2016 by the prestigious Global Banking &
Finance Review of the UK.
• Created to recognize companies of all sizes that
are prominent in particular areas of expertise
and excellence within the global financial
community, the award acknowledges the high
quality of service and innovation offered by
Commercial Bank’s Online Banking platform.

6. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
Economy & Business

7. Fitch revises Sri Lanka’s outlook to Stable
The Outlook revision to Stable from
Negative, reflects:
− Improving Fiscal Finances
− Improved Policy Coherence & Credibility
− Stable Growth Trends
Sri Lanka's 'B+' IDRs reflect:
− Relatively High Government Debt
− Weak External Liquidity Position a
− Strong Human Development Indicators
Source: Fitch Ratings
< Research & Development Unit >
cont…

8. Fitch revises Sri Lanka’s outlook to Stable (cont..)
< Research & Development Unit >
 The main factors that, individually or collectively, could trigger
positive rating action are:
− Continued improvement in public finances underpinned by a credible medium-term
fiscal strategy, including a broadening of the government revenue base.
− Increase in foreign-exchange reserves supported by smaller current-account deficits
and higher non-debt capital inflows.
 The main factors that, individually or collectively, could trigger
negative rating action are:
− Deterioration in policy coherence and credibility, leading to a loss of investor
confidence, or a derailment of the International Monetary Fund supported
programme that leads to external funding stress.
− Reversal of fiscal improvements that leads to a failure to stabilise government debt
ratios.

9. Credit continues to grow
• The year-on-year growth of credit
extended to the private sector by
commercial banks remained high at
21.9 % by end 2016.
• Although the growth of credit has
somewhat eased from the peak of 28.5 %
observed in July 2016, credit
disbursements in absolute terms remain
high in spite of the substantial upward
adjustments in nominal and real interest
rates.
• Mainly as a result of the growth of credit
to the private and public sectors, broad
money growth (M2b) remained at the
elevated level of 18.4 %, on a year-on-year
basis, at end 2016.
< Research & Development Unit >

10. External Sector
Deficit in the trade balance:
Expanded further as a result of increased
import expenditure, amidst the contraction
in export earnings.
$ 8.2 Bn
$ 7.6 Bn
Gross official reserves:
Estimated at USD 5.45 bn by end
January 2017.
$ 5.45 Bn
$ 6.02 Bn
cont…
< Research & Development Unit >

11. External Sector (cont..)
$ 3.4 Bn
$ 3.0 Bn
Earnings from Tourism:
Increased by 14 % to USD 3.4 bn during
2016.
Workers' Remittances (Inflows):
Increased by 3.7 % to USD 7.2 bn during
2016.
$ 7.2 Bn
$ 7.0 Bn
< Research & Development Unit >

12. Oil Price
Current Oil Price
Brent – 54.01
WTI – 55.59
Sri Lanka’s Oil Bill
as a % of total imports
25%
Jan – Oct,
2016
In general
12.2%
Oil Price
Average, $ per barrel, Brent
Source: The Economist – The World in 2017
As at 01 Mar 17
< Research & Development Unit >

13. Sri Lanka January tea output falls by 15.3 %
• Sri Lanka's tea output fell
15.3 % in January, 2017 due to:
adverse weather, poor
application of fertilisers and a
government ban on pesticides,
according to Sri Lanka Tea Board.
 11.1%
Sri Lanka Tea Production 2011-2016
Source: Reuters
Jan 2017 Jan 2016
High Grown 4,540,386 5,525,842
Medium Grown 2,747,836 3,638,392
Low Grown 13,967,529 15,917,458
Total 21,255,751 25,081,691
Sri Lanka's January tea output (kg):
• Sri Lanka’s tea output hit a
7-year low in 2016, falling
11.1 % in its third straight year
of declining production due to
adverse weather. •cont…
< Research & Development Unit >
cont…

14. Sri Lanka January tea output falls by 15.3 % (cont..)
According to brokers;
• Sri Lanka’s Tea exports has dropped to a
14-year low in 2016.
• Export earnings fell 5.3 % to $1.26 bn in 2016
from $1.34 bn in 2015. Sri Lanka recorded its
highest earnings of $1.63 bn in 2014.
• Russia has emerged as the largest importer
of Sri Lankan tea in 2016 followed by Iran
and Iraq.
• Turkey has dropped to the 4th Position in
2016 from the 2nd position it held in 2015.
• Other noteworthy importers are U.A.E.,
Libya and Syria. Meanwhile Kuwait has
shown a significant decrease in volumes
during the period under review whilst Jordan
too has shown a decrease but to a lesser
extent.
Sri Lanka Tea Export Revenue 2011-2016
Source: Reuters
< Research & Development Unit >

15. Sri Lanka’s Colombo Port ranked among
the world’s best 25 ports
< Research & Development Unit >
The Colombo port has improved its ranking by three
notches to be placed at 23 in 2016.
The ranking has been compiled by Alphaliner, a global
specialist in liner shipping.
In 2014 the Colombo port was ranked 27.
• Colombo Port operated 5.2 mn containers in 2015. In 2016 the volume increased
by 10.6 % to 5.7 mn containers. Increase in the depth of the route to access the
Colombo Port, enhancing the depth of the terminals, expansion of terminals,
increase in the number of terminal operations have opened the gate for the
world’s largest vessels to enter the Colombo Port. These developments have
created a positive impact on the Colombo Port and have paved the way to lift up
its rank.

16. Special Infrastructure Company to lobby for loans
and manage mega road projects
< Research & Development Unit >
• In a bid to raise funds for future development projects, the
Government had given approval to establish a separate entity to
develop and manage “critical infrastructure projects”, with powers
to independently lobby for financial assistance.
• The fully Government-owned entity to be known as the Special
Infrastructure Company (SIFCO) will be managed by the Treasury
Secretary and the Road Development Authority (RDA).
• According to the methodology proposed by the Finance Minister, the company will own all the
assets of expressways and undertake future development and recently commenced projects which
require USD 4 bn within the next four years.
Cabinet approves USD 75 mn WB loan to upgrade financial sector
• Cabinet had approved a USD 75 mn loan from the International Development Association (lDA) of
the World Bank to fund a financial sector modernisation project.
• The project, which is to be implemented under three components, will initially concentrate on a
consolidated risk-based approach for supervision of the financial institutions and the
establishment of a Financial Consumer Protection Authority

17. Government Debt
< Research & Development Unit >
• Outlining plans to manage external payments and aim for USD 7.5
bn in reserves by December mostly on planned asset sales by the
Government, the Central Bank governor has stated that Sri Lanka
has “manageable” non-roll over debt commitments of USD 2.6 bn
for 2017,
• The Government plans to raise a syndicated loan up to USD 1 bn
and a sovereign bond with a cap of USD 1.5 bn over the next few
months to facilitate debt commitments and other activities.
• The Governor also backed planned asset sales by the Government, describing them as
“tremendously beneficial” to assist in liability management.
• The projected earnings from the sale of non-strategic State assets including Hyatt, Hilton, Water’s
Edge and Grand Oriental Hotel along with Lanka Hospitals and Mattala Airport could be as high as
USD 1 bn, according to the Governor.
• The Government has already indicated that it expects about USD 1.12 bn from the sale of a 80%
stake of the Hambantota Port to China Merchant Holdings, though the specifics of the transaction
are still being negotiated.

18. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
International

19. < Research & Development Unit >
India: Annual GDP growth for the October-December
period came in at 7.0 %, a tad slower than 7.4 % in the
previous quarter, despite the pain caused by Prime Minister
Narendra Modi's shock crackdown on cash.
The strong performance in the Oct-Dec period allowed the
federal statistics office to retain its growth forecast for the
fiscal year that ends in March 2017 at 7.1 %.
GDP
7.0 %
Oct-Dec, 2016
7.1 %
16/17 - Forecast
China: China’s economy grew by 6.7 % in 2016.
Faced with the slowdown pressure, the Chinese government
adopted a set of measures in various fields to improve the
economic structure and quality, such as reducing
overcapacity, streamlining administrative approvals and
boosting innovation to stimulate the economy.
6.7 %
2016
cont…

20. < Research & Development Unit >
GDP (cont..)
US: GDP grew by 1.6 % in 2016, down from 2.6 % in 2015
and the slowest pace recorded since 2011.
President Trump has pledged to boost annual economic
growth to 4 % through a mix of infrastructure spending,
sweeping tax cuts and deregulation.
1.6 %
2016
UK: UK’s Office for National Statistics (ONS) cut its
estimate for growth in 2016 as a whole to 1.8%, down from
the 2% it forecast.
1.8%
2016

21. 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 >