One question: Do you feel lucky?

Sri Lanka made a bounce back last week, not in the precarious economic situation the country finds itself in, but in cricket. On 11 June, Sri Lanka won by four wickets against Australia in the third T20 international game, a match with a close chase that was one for the history books.

Winning after a tight chase of 58 runs in 17 balls, the boost of morale was palpable for fans at the stadium, and at home feeling very lucky. Given the times, confidence is key in cricket and everywhere else in the country.

According to the Business Confidence Index (BCI), the LMD-Nielsen survey conducted and published in the LMD magazine, the first week of February continues to paint a bleak picture, sentient-wise for Sri Lanka’s economic outlook. Being a backward-looking indicator, this reaffirms what the real economy experienced and further shapes how the immediate months are to follow the lacklustre sentiment for the next 12 months.

However, there is a perception among two-thirds of respondents that sales values are to improve in the same time period. Only 7% of survey participants are optimistic and believe the economy will ‘improve’ in the coming year, while 17% expect no change at all in this time. The magazine notes there has been a marginal improvement since the month of January. The same can be said for the stock market.

Coming after an 80% return was made last year on the Sri Lankan All Share Price Index, year-to-date a loss of 35.4% has been recorded. Being the best-performing market globally in 2021 has been attributed to the vast money printing that propped up the Sri Lankan economy, while this year’s actual market performance is likely to be a key driver given the absence of business confidence.

Monday’s turnover was Rs. 777 million, the lowest since 25 April while the average daily market turnover was Rs. 3.7 billion in 2022. The last three market days saw some gains made on news that Dhammika Perera, with his bets in the CSE stocks, was brought in to fill the ruling party’s national list position and tipped to be appointed as Minister of Technology and Investment Promotion.

All this points to investors being undecided on the current state of affairs in this backdrop. The overall market was dull owing to the government sector’s long-weekend holiday. While this is allegedly to save resources due to the ongoing fuel and power crisis in the country, there are only so many days such a holiday can be given or even the market can be closed.

For much of this year since the real economy started experiencing pains in March, the future was predicated on official responses, locally by the Government and Central Bank and even more so by international actors. With fair-weathered China taking a back seat due to the unravelling of the Rajapaksa grip, diplomatic relationships between India and Japan have come to the forefront, the former of which is now in hot water over preferential treatment of the Adani deal.

Moreover, with the UNP Prime Minister at the helm, IMF and other bilateral organisations’ support needs to be fast secured for economic concerns to be addressed. This is captured in the overall negative sentiment for Sri Lanka as a total foreign outflow of Rs. 957 million was seen. 

Although Sri Lankan investment performance is falling as the dollar strengthens owing to its status as a safe-haven investment. Expectations of aggressive interest-rate hiking from the Federal Reserve added to this with the dollar spiking 1% versus the pound and breaking above Indian Rupees 78  for the first time. Therefore, for Sri Lanka, there is not much to feel lucky about. Following those who were lucky before or otherwise; worse is to come.