Post-Budget optimism rises marginally in Perceived Economic Index

Saturday, 15 December 2012 00:10 - - {{hitsCtrl.values.hits}}

The Perceived Economic Opportunity Index (PEOI) saw a welcome upward movement from 1.69 in October to 1.77 in November after the 2013 Budget was presented in Parliament.

In fact the same phenomenon was observed last year with the 2012 Budget, but, then the movement was much more significant than this year, the Index compiler the Foundation for Economic Freedom in Sri Lanka said.

“Perhaps the absence of any major increases in taxes that would have had an impact on the household’s ability to save and possibly the tax breaks for small and medium enterprises may have contributed to the slight upswing,” it added.

The weak uptick on the other hand perhaps indicates the lack of any substantial impetus to future possibilities to improve the standard of living of the household and the success of small businesses.

Notwithstanding both the historical and the budget perspective, the index is at its highest for the second half of this year. However, the crucial factor is that the PEOI is still stuck in the ‘relatively pessimistic’ territory; below the midpoint of 2.0, since its inception in July 2011.

The table shows the breakdown of the answers to the question about how the respondents felt about the opportunities to advance in their livelihood in the coming six months. It is perhaps not surprising to note that most believe the situation to be same. However, the fact that slightly more believing that conditions may deteriorate as opposed to improve is what is keeping the PEOI from moving to positive territory.

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 in partnership with Friedrich Naumann Stiftung Fur Die Freiheit. Fieldwork is carried out by market research agency PepperCube Consultants.