Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.

Thank You

Join the forum, it's quick and easy

Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.

Thank You
Would you like to react to this message? Create an account in a few clicks or log in to continue.

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

Click Link to get instant AI answers to all business queries.
Click Link to find latest Economic Outlook of Sri Lanka
Click Link to view latest Research and Analysis of the key Sectors and Industries of Sri Lanka
Worried about Paying Taxes? Click Link to find answers to all your Tax related matters
Do you have a legal issues? Find instant answers to all Sri Lanka Legal queries. Click Link
Latest images

Latest topics

» Maharaja Foods PLC (MFL) - IPO Analysis
by ChooBoy Mon Jul 22, 2024 12:27 am

» කොළඹ කොටස් වෙළඳපොල විශ්ලේෂණය - 2024
by ChooBoy Fri Jul 19, 2024 11:53 am

» Winds of Change: Sri Lanka's Banking Crisis is Stalling Renewable Energy Ambitions of Local Stalwarts of Wind & Solar Power
by God Father Wed Jul 17, 2024 10:11 pm

» Banking Sector Analysis
by God Father Sat Jul 13, 2024 7:57 am

» Impact of Elections on Colombo Stock Market Sentiment
by Quibit Tue Jul 09, 2024 9:01 am

» LankaBIZ Unveils AI-Driven On-Demand Financial Research and Analysis Service
by Quibit Thu Jul 04, 2024 12:49 pm

» CDB Non voting
by Nandun Sun Jun 30, 2024 9:45 pm

» The Parsi Power Play: How a Small Community of Iranian Parsis are Controling Sri Lanka's US $ 85 billion Economy & 22 Million Population & Politics driving away FDIs
by MalakaDesmond Sun Jun 30, 2024 10:19 am

» Richard Pieris Group: Mismanaged?
by Walbaba Sat Jun 29, 2024 7:04 pm

» සොෆ්ට්ලොජික් හෝල්ඩිංග්ස් පීඑල්සී: අඳුරු අපේක්ෂාවන් සහිත ඉහළ අවදානම් ආයෝජනයක්
by D.G.Dayaratne Tue Jun 25, 2024 5:45 am

» සොෆ්ට්ලොජික් ප්‍රාග්ධනයට වන්දි ගෙවන Share BuyBack නිසා Softlogic ජීවිත රක්‍ෂණය බංකොලොත් වීමේ අවදානමක
by MalakaDesmond Tue Jun 25, 2024 1:49 am

» Softlogic Life insurance face Danger of Bankruptcy due to Share BuyBack that compensate Softlogic Capital
by MalakaDesmond Tue Jun 25, 2024 1:33 am

» Softlogic Holdings PLC: A High-Risk Investment with Bleak Prospects
by MalakaDesmond Tue Jun 25, 2024 12:52 am

by SL-INVESTOR Sat Jun 22, 2024 12:48 am

by ErangaDS Wed Jun 19, 2024 9:21 pm

» How will proposed Tax Reforms affect Sri Lankans in 2025
by Quibit Wed Jun 19, 2024 9:27 am

» Falsified accounts and financial misrepresentation at Arpico Insurance PLC (AINS)
by ChooBoy Tue Jun 18, 2024 11:31 pm

» Impact of IMF reforms to Sri Lanka Economy
by D.G.Dayaratne Mon Jun 17, 2024 6:36 pm

» Richard Pieris Finance Ltd continue to endanger the Depositors with negative performance
by ddindika Mon Jun 17, 2024 3:17 pm

» Richard Pieris Exports reports 97% decline in Net Profits
by Biggy Sat Jun 15, 2024 11:26 am

» Do your own Stock Market Research using AI Tools
by Quibit Fri Jun 14, 2024 10:50 am

» What will happen tomorrow?
by cheetah Thu Jun 13, 2024 12:07 pm

» Focus on Government controlled entities
by ErangaDS Mon Jun 10, 2024 4:15 pm


Submit Post
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


Send your suggestions and comments

* - required fields






You are not connected. Please login or register

Policy Rates on hold on the road to recovery

Go down  Message [Page 1 of 1]


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

CBSL to keep policy rates steady amid signs of recovery
Previous Pre-Policy report; CBSL maintains its policy rates
➢In the last policy meeting held in Dec 2019, CBSL maintained its accommodative monetary policy stance at current levels immediately following the tax revisions with the belief that it would support higher economic growth in the short term. Considering the recently provided tax revisions and other benefits, we were of the view that continuation of policy rates were appropriate at that economic juncture. However, we also assigned a 50% probability for a rate cut in Dec 2019 considering the urgency to improve the lending and the economic growth.

Domestic economic activities show signs of recovery
❑ Sri Lanka’s economy grew by 2.7% in the 3Q2019, higher than our expectation of 2.2%, indicating a gradual recovery relative to 2Q2019 growth of 1.6%. Private sector credit growth also recorded an increase of LKR 47.1Bn in Nov 2019, illustrating a positive credit growth for the 4th consecutive month with Jan-Nov 2019 growth at 3.5%, closing in, on our credit growth target of 5% for 2019E. Going forward, a steady revival of economic activity is envisaged, supported by potentially further improved political stability after the General election in 2020 and inline with the measures taken to stimulate the economy such as SME and extended tourism moratorium, tax benefits and Capital Adequacy relaxation on banks.

Extended giveaways!!!
❑ As an extension to the stimulus package previously granted, Govt. took measures to remove DRL imposed on banks and NBFIs and revise downwards the corporate tax rates across all sectors. We expect the additional support given with the above measures to further enhance the growth in the economy. However, government’s ability to bridge the revenue loss due to the recent tax revisions will be a concern leading to a risk in 2020. The stimulus package may potentially lead to fiscal slippage, reducing the possibility of further monetary easing in the near term.

Foreign inflows despite outlook downgrading for SL
❑ Following a similar path to Fitch, S&P recently revised its rating outlook on the Sri Lanka sovereign credit to negative from stable on the view that larger- than-expected fiscal deficit and concerns over indebtedness. Despite the negative rating outlook revision, in line with our expectations, SL’s government securities market witnessed a net inflow since the beginning of the year 2020 amounting to nearly LKR 5.5Bn and is expected to gradually improve during the 1Q2020 with the settling of the political uncertainty to a certain extent.

CBSL to keep policy rates steady amid signs of recovery
Inflation to remain at low single digit levels and stabilise within 4-6% while market lending rates are expected to reduce further
❑ Inflation, as measured by CCPI accelerated in December 2019 to 4.8%YoY driven by the food inflation. However, we expect a gradual acceleration in inflation to continue in the first half primarily driven by the supply side shortage relating to food due to the floods in November. However, the inflation is only likely to rise to around 6% mark as tax cuts are expected to partially offset the food inflation. Moreover, market lending rates are expected to continue to adjust downwards in response to monetary and regulatory measures taken by CBSL.

Considering the recent major Fiscal and Monetary policy changes, First Capital Research believes that current accommodative monetary policy stance is appropriate, and that there is ample space for market lending rates to reduce without further adjustment in policy rates. Already announced tax relief, and proposed moratorium on capital repayments of bank loans for the SME sector are likely to provide further impetus to the economy. Accordingly, we assign a 80% probability for no change in policy rates in the upcoming policy announcement and expect policy rates to hold in the 1Q2020. However, we assign a lower probability of 20% for a rate cut in Jan 2020 with the urgency to boost the revival of economic activities. We continue to maintain that SRR is likely to be remained at the current level.

Share this post on: reddit

No Comment.

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum