PEOI: The confidence challenge continues

Wednesday, 28 May 2014 00:00 - - {{hitsCtrl.values.hits}}

In April, the Perceived Economic Opportunity Index (PEOI) could not maintain its marginal rise in March, its compiler Foundation for Economic Freedom in Sri Lanka (FEFSL) said this week. It said the Index fell to 1.64 from its previous value of 1.71. Even though there was no major reason to expect any significant movement in the PEOI either way, the dip, albeit marginal, could perhaps be due to the weak economic news, during the holiday month, inadequate to maintain a back-to-back increase in confidence.

While it may not be very significant the marginal movement of the PEOI over a few months or quarters, the fact that the index has been stuck in negative territory since its inception in the third quarter of 2011 is certainly a major concern. This low level of confidence most likely is also a reflection of the generally low and constant level of foreign direct investments flowing in to the country; at around one and a half percent of gross domestic product. Perhaps it also reflects the more recent slowdown in the expansion of private sector credit even as interest rates have fallen to historic lows. The Perceived Economic Opportunity Index (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 PEOI was developed and is measured by the Foundation for Economic Freedom in Sri Lanka. Fieldwork is carried out by market research agency PepperCube Consultants.