C.W. Mackie/Scan Products COO welcomes Budget

C.W. Mackie PLC/ Scan Products Chief Operating Officer Mangala Perera yesterday welcomed the Government’s 2012 Budget saying it was development oriented.

Here are some of his observations.

When observing the key proposals of the budget 2012, it is evident that the government is committed towards developing the priority sectors of the economy such as agriculture, exports, tourism, passenger and goods transportation as well as the SME sector. Particularly, the export oriented industries will greatly welcome the 3 % depreciation in the local currency considering the depreciation of currencies witnessed during recent times in regional economies such as India, Malaysia and Thailand. This move by the government will facilitate in improving our declining export competitiveness in the international market. However, it is important to consider the negative impact of an overnight depreciation in the currency as well, considering the excessive dependence on imports our economy is having and the resultant inflationary pressure which could occur in the short term. High cost on imports will further widen the trade deficit which will negatively affect the country’s Balance of Payment as well.  When considering the FMCG sector, there will be an increase in price levels as most of the raw materials and finished products are imported. However, this effect will be temporary as market will adjust to the new exchange rate levels in the medium term. Incentives given to the agriculture and SME sector are highly encouraging since the government is committed towards promoting and encouraging local entrepreneurs and manufacturers. Furthermore, incentives given to promote investments in new enterprises as well as incentives for expansion of existing enterprises are also encouraging. Customs duty exemptions to encourage local value addition in industries, to support passenger and goods transport industry as well as to promote the ICT and BPO sector are also heartening.