PEOI: Looks like people overshot negativity in April; May is better
Thursday, 27 June 2013 02:14
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Having dipped significantly in April, the Perceived Economic Opportunity Index (PEOI) has improved in May, its compiler the Foundation for Economic Freedom in Sri Lanka (FEFSL) said.
“This (improvement) was surprising given the electricity tariff increase. It is very likely that the relief offered to low users could have reversed somewhat the negative feeling encompassed in the previous month’s fall,” FEFSL said.
“In fact in our comments last month we said: “Whether the fall in optimism would turn around post the assurance of the President in his ‘May Day’ message that the poorest consumers would be exempted for the hike or whether it would continue to fall will be seen next month.”
FEFSL said perhaps the announcement that the Commonwealth agreed to stay with its promise to hold its heads of Government summit in Colombo in November also would have played a role in the upswing.
However, whether this is sufficient to sustain an upward movement in the index will be seen in coming months.
With the PEOI well below the midpoint of 2.0 and on a relatively downward trend policy makers should take action to improve the confidence of the people without which economic optimism will suffer.
The PEOI is calculated on a monthly basis using a random sample of 100 persons based on seven questions: one each on income, saving and cost of living; one each on law and order, media freedom and corruption; and one question on opportunities to advance in the respondents job, profession or entrepreneurial activity.
The answers can only have three possibilities; the current situation with regard to each issue is worse than it was six months ago, the same or better than six months ago. A score of 3 is that Sri Lankans are becoming relatively more optimistic about the emerging opportunities while 1 is they are becoming relatively more pessimistic. A score of 2 indicates no change. Therefore, the trend is a more important indicator of changing perceptions than the absolute number.
The Perceived Economic Opportunity Index was developed and is measured by the Foundation for Economic Freedom in Sri Lanka in partnership with Friedrich Naumann Stiftung Fur Die Freiheit. Fieldwork is carried out by market research agency PepperCube Consultants.
