Perceived economic opportunity optimism flat in September

Saturday, 27 October 2012 00:00 - - {{hitsCtrl.values.hits}}

The Perceived Economic Opportunity Index (PEOI) remained almost flat in September, moving up just 0.02 from August to 1.74.

In contrast, the index was at its peak a year ago in September last year at 1.89. Thus over the year the index has seen a downward trend.

The PEOI is developed and measured by the Foundation for Economic Freedom in Sri Lanka in partnership with Friedrich Naumann Stiftung Fur Die Freiheit.

Segmenting the index components shows that over the last twelve months economic conditions, by and large, have deteriorated. The components related to family economics are continuing to drag the index down with people genuinely feeling the increasing cost of living resulting in difficulty in saving for the future.

However the perceptions on law and order saw a significant increase after historic lows over the last two months. Perhaps the reduction in the reporting of crimes with no major incidents led to this feeling.

However perceptions on corruption are at almost historic highs with four out of five persons saying corruption has gotten worse in the last six months.

An important point for policy makers to note is that the PEOI has been languishing in the ‘relatively pessimistic’ territory unable to move up to the ‘relatively optimistic’ territory of above 2.0 since its inception in July 2011.

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.

Fieldwork for PEOI is carried out by market research agency PepperCube Consultants.