PEOI: New Year uptick of optimism gone

The Perceived Economic Opportunity Index (PEOI) lost the welcome uptick in optimism in anticipation of the traditional New Year.

The only positive change recorded for 2013 in March turned negative soon after the holidays. During the period of the survey there was some significant ‘bad news’ on the economic front; an increase in electricity tariffs.  It is very likely that this pending increase had an impact on the perceptions of the people.

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.

Indications, however, are that people are expecting cost of living to worsen.  With the PEOI well below the midpoint of 2.0 and on a downward trend, it is time that policymakers take necessary steps to improve the confidence of the people, without which economic performance itself 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.