Perceived Economic Opportunity Index falls again in July

The Perceived Economic Opportunity Index (PEOI) declined sharply in July to one of its lowest values in the last twelve months having plateaued after the rise following the previous drop precipitated by the Valentine season price increases.

The Index compiler, the Foundation for Economic Freedom in Sri Lanka (FEFSL), said in the background of the PEOI yet to clear the bar from ‘relatively pessimistic’ to ‘relatively optimistic’ territory since its inception, the current movement of falling optimism about the future of the household economy was significant.

“The finding that perception of economic opportunity is actually lower than a year ago is a major disappointment given the expectations of rapid post-war development,” said the Foundation, which does the Index in partnership with Friedrich Naumann Stiftung Fur Die Freiheit. Fieldwork is carried out by market research agency PepperCube Consultants.

FEFSL said a breakdown of the index components show that over the last 12 months people seem to have increased people’s expenditure on basic necessities while cutting down on others. “Their ability to save has also taken a damaging hit with obvious negative implications on the future,” it added.

Beyond the economics related issues, FEFSL said the perceptions on law and order is at a historic low perhaps driven by the almost daily new reportage of crimes across the country.

“Perhaps it’s time for policymakers to rethink how to build optimism in the economy without which attraction of sustained investments and entrepreneurial initiatives will be difficult,” it opined.

The Perceived Economic Opportunity Index 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 far more important indicator of changing perceptions than the absolute number.