economic capsule - february 2017

Economic CapsuleFebruary 2017

Research & Development Unit

242nd Issue

C O N T E N T S

ECONOMY & BUSINESS Fitch revises Sri Lanka’s outlook to Stable

Credit continues to grow

External Sector

Oil Price

Sri Lanka January tea output falls by 15.3 %

Sri Lanka’s Colombo Port ranked among the world’s best 25 ports

Special Infrastructure Company to lobby for loans and manage mega road projects

Cabinet approves USD 75 mn WB loan to upgrade financial sector

Government Debt

INTERNATIONAL BANKING & FINANCE Commercial Bank ends 2016 as 1st private bank to cross Rs. 1 Trillion in assets

Commercial Bank named Best Internet Bank in Sri Lanka

GDP – India, China, USA & UK

Condominium Industry in Sri Lanka

October, 2014


Banking & Finance

Commercial Bank ends 2016 as 1st private bank to cross Rs. 1 Trillion in assets

< Research & Development Unit >

• Commercial Bank of Ceylon PLC continuing its trailblazing performance has reported profit before income tax (PBT) of Rs 20.051 bn for 2016, marking the end of a spectacular year in which it made history as the first private bank in Sri Lanka to surpass a trillion rupees in assets.

• Profit before value added tax (VAT) grew by 18.58% to Rs 23.755 bn, disclosing that an increase in the financial VAT rate from 11% to 15% for four of the 12 months reviewed had resulted in the Bank’s VAT expense for the full year increasing by 28.17% to Rs 3.703 bn, from Rs 2.889 bn paid for 2015.

• The 16.96% growth achieved in PBT was bettered by the growth in profit after tax, which improved by 21.92% to Rs 14.513 bn during the year ending December 31, 2016.

• The Bank paid Rs 9.385 bn in taxes in respect of the year reviewed, an increase of 15.78% even after discounting the Rs 2.570 bn paid in 2015 as Super Gains Tax.

Click here for the full statement

http://www.combank.net/newweb/en/news/8-news-and-events/posts/704-commercial-bank-ends-2016-as-1st-private-bankto-cross-rs-1-trillion-in-assets

Commercial Bank named Best Internet Bank in Sri Lanka


• The Commercial Bank of Ceylon has been recognized as the Best Internet Bank in Sri Lanka in 2016 by the prestigious Global Banking & Finance Review of the UK.

• Created to recognize companies of all sizes that are prominent in particular areas of expertise and excellence within the global financial community, the award acknowledges the high quality of service and innovation offered by Commercial Bank’s Online Banking platform.


October, 2014


Economy & Business

Fitch revises Sri Lanka’s outlook to Stable

The Outlook revision to Stable from Negative, reflects: − Improving Fiscal Finances − Improved Policy Coherence & Credibility− Stable Growth Trends

Sri Lanka's 'B+' IDRs reflect: − Relatively High Government Debt− Weak External Liquidity Position a− Strong Human Development Indicators

Source: Fitch Ratings


cont…

Fitch revises Sri Lanka’s outlook to Stable (cont..)


The main factors that, individually or collectively, could trigger positive rating action are:− Continued improvement in public finances underpinned by a credible medium-term

fiscal strategy, including a broadening of the government revenue base.

− Increase in foreign-exchange reserves supported by smaller current-account deficits and higher non-debt capital inflows.

The main factors that, individually or collectively, could trigger negative rating action are:− Deterioration in policy coherence and credibility, leading to a loss of investor

confidence, or a derailment of the International Monetary Fund supported programme that leads to external funding stress.

− Reversal of fiscal improvements that leads to a failure to stabilise government debt ratios.

Credit continues to grow• The year-on-year growth of credit

extended to the private sector by commercial banks remained high at 21.9 % by end 2016.

• Although the growth of credit has somewhat eased from the peak of 28.5 % observed in July 2016, credit disbursements in absolute terms remain high in spite of the substantial upward adjustments in nominal and real interest rates.

• Mainly as a result of the growth of credit to the private and public sectors, broad money growth (M2b) remained at the elevated level of 18.4 %, on a year-on-year basis, at end 2016.


External Sector

Deficit in the trade balance: Expanded further as a result of increased import expenditure, amidst the contraction in export earnings.

$ 8.2 Bn

$ 7.6 Bn

Gross official reserves: Estimated at USD 5.45 bn by end January 2017.

$ 5.45 Bn

$ 6.02 Bn

cont…


External Sector (cont..)

$ 3.4 Bn

$ 3.0 Bn

Earnings from Tourism: Increased by 14 % to USD 3.4 bn during 2016.

Workers' Remittances (Inflows): Increased by 3.7 % to USD 7.2 bn during 2016.

$ 7.2 Bn

$ 7.0 Bn


Oil Price

Current Oil PriceBrent – 54.01WTI – 55.59

Sri Lanka’s Oil Bill as a % of total imports

25%

Jan – Oct, 2016

In general

12.2%

Oil Price Average, $ per barrel, Brent

Source: The Economist – The World in 2017

As at 01 Mar 17


Sri Lanka January tea output falls by 15.3 %

• Sri Lanka's tea output fell 15.3 % in January, 2017 due to: adverse weather, poor application of fertilisers and a government ban on pesticides, according to Sri Lanka Tea Board.

11.1%

Sri Lanka Tea Production 2011-2016

Source: Reuters

Jan 2017 Jan 2016 High Grown 4,540,386 5,525,842 Medium Grown 2,747,836 3,638,392 Low Grown 13,967,529 15,917,458 Total 21,255,751 25,081,691

Sri Lanka's January tea output (kg):

• Sri Lanka’s tea output hit a 7-year low in 2016, falling 11.1 % in its third straight year of declining production due to adverse weather. • cont

…


cont…

Sri Lanka January tea output falls by 15.3 % (cont..)According to brokers;• Sri Lanka’s Tea exports has dropped to a

14-year low in 2016. • Export earnings fell 5.3 % to $1.26 bn in 2016

from $1.34 bn in 2015. Sri Lanka recorded its highest earnings of $1.63 bn in 2014.

• Russia has emerged as the largest importer of Sri Lankan tea in 2016 followed by Iran and Iraq.

• Turkey has dropped to the 4th Position in 2016 from the 2nd position it held in 2015.

• Other noteworthy importers are U.A.E., Libya and Syria. Meanwhile Kuwait has shown a significant decrease in volumes during the period under review whilst Jordan too has shown a decrease but to a lesser extent.

Sri Lanka Tea Export Revenue 2011-2016

Source: Reuters


Sri Lanka’s Colombo Port ranked among the world’s best 25 ports


The Colombo port has improved its ranking by three notches to be placed at 23 in 2016.

The ranking has been compiled by Alphaliner, a global specialist in liner shipping.

In 2014 the Colombo port was ranked 27.

• Colombo Port operated 5.2 mn containers in 2015. In 2016 the volume increased by 10.6 % to 5.7 mn containers. Increase in the depth of the route to access the Colombo Port, enhancing the depth of the terminals, expansion of terminals, increase in the number of terminal operations have opened the gate for the world’s largest vessels to enter the Colombo Port. These developments have created a positive impact on the Colombo Port and have paved the way to lift up its rank.

Special Infrastructure Company to lobby for loans and manage mega road projects


• In a bid to raise funds for future development projects, the Government had given approval to establish a separate entity to develop and manage “critical infrastructure projects”, with powers to independently lobby for financial assistance.

• The fully Government-owned entity to be known as the Special Infrastructure Company (SIFCO) will be managed by the Treasury Secretary and the Road Development Authority (RDA).

• According to the methodology proposed by the Finance Minister, the company will own all the assets of expressways and undertake future development and recently commenced projects which require USD 4 bn within the next four years.

Cabinet approves USD 75 mn WB loan to upgrade financial sector• Cabinet had approved a USD 75 mn loan from the International Development Association (lDA)

of the World Bank to fund a financial sector modernisation project. • The project, which is to be implemented under three components, will initially concentrate on a

consolidated risk-based approach for supervision of the financial institutions and the establishment of a Financial Consumer Protection Authority

Government Debt


• Outlining plans to manage external payments and aim for USD 7.5 bn in reserves by December mostly on planned asset sales by the Government, the Central Bank governor has stated that Sri Lanka has “manageable” non-roll over debt commitments of USD 2.6 bn for 2017,

• The Government plans to raise a syndicated loan up to USD 1 bn and a sovereign bond with a cap of USD 1.5 bn over the next few months to facilitate debt commitments and other activities.

• The Governor also backed planned asset sales by the Government, describing them as “tremendously beneficial” to assist in liability management.

• The projected earnings from the sale of non-strategic State assets including Hyatt, Hilton, Water’s Edge and Grand Oriental Hotel along with Lanka Hospitals and Mattala Airport could be as high as USD 1 bn, according to the Governor.

• The Government has already indicated that it expects about USD 1.12 bn from the sale of a 80% stake of the Hambantota Port to China Merchant Holdings, though the specifics of the transaction are still being negotiated.


October, 2014


International


India: Annual GDP growth for the October-December period came in at 7.0 %, a tad slower than 7.4 % in the previous quarter, despite the pain caused by Prime Minister Narendra Modi's shock crackdown on cash.

The strong performance in the Oct-Dec period allowed the federal statistics office to retain its growth forecast for the fiscal year that ends in March 2017 at 7.1 %.

GDP7.0 %Oct-Dec, 2016

7.1 %16/17 - Forecast

China: China’s economy grew by 6.7 % in 2016.

Faced with the slowdown pressure, the Chinese government adopted a set of measures in various fields to improve the economic structure and quality, such as reducing overcapacity, streamlining administrative approvals and boosting innovation to stimulate the economy.

6.7 %2016

cont…


GDP (cont..)

US: GDP grew by 1.6 % in 2016, down from 2.6 % in 2015 and the slowest pace recorded since 2011.

President Trump has pledged to boost annual economic growth to 4 % through a mix of infrastructure spending, sweeping tax cuts and deregulation.

1.6 % 2016

UK: UK’s Office for National Statistics (ONS) cut its estimate for growth in 2016 as a whole to 1.8%, down from the 2% it forecast.

1.8% 2016

The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC

The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the information, it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise, suffered in consequence of using such information for whatever purpose.


https://upload.wikimedia.org/wikipedia/commons/4/48/En-us-A.p.j._Abdul_Kalam_from_India_pronunciation_(Voice_of_America).ogg



economic capsule - february 2017

Economy & Finance