Perceived economic opportunity index dips

Wednesday, 25 April 2012 01:15 - - {{hitsCtrl.values.hits}}

The perceived economic opportunity in the country has dipped for the fourth consecutive month as per an index compiled by the Foundation for Economic Freedom in Sri Lanka, a unit promoted by consultant economist Dr. Harsha de Silva, who is also an UNP MP.

The Perceived Economic Opportunity Index (PEOI) is calculated on a monthly basis via 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 Foundation said the answers for the continuous dip 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 far more important indicator of changing perceptions than the absolute number.

The PEOI has been on a downward trend since the beginning of 2012 having lost the momentum generated by the budget indicating that the population is beginning to become rather pessimistic about the emerging economic opportunities for themselves.

Perhaps the reasons could be the realisation that the stability of the economy has been dealt a severe blow with the exchange rate seeing a significant depreciation; from around Rs. 114 to the USD to around 128 combined with increasing lending rates; rising by around 500 basis points at the retail counter with leasing rates rising even more.

Added to that has been the dramatic rise in petroleum products and electricity tariffs; both on average by around 30 per cent. The negative sentiment is in line with other indicators such as the indices of the Colombo Stock Exchange which have also witnessed downward trends this year.

The Perceived Economic Opportunity Index is calculated by the Foundation for Economic Freedom in Sri Lanka with financial assistance from Friedrich NaumannStiftung Fur Die Freiheit. Fieldwork is carried out by market research agency PepperCube Consultants.