The presidential election has cast a cloud over the budget making it less important to investors and the private sector in general. The presidential election has cast a cloud over the budget making it less important to investors and the private sector in general. Uncertainty as to what policies may be implemented or amended after the election is yet to be seen.
However analysts say the market is expecting a subsidy laden budget which might not directly impact Colombo’s listed companies.
A budget preceding the presidential election; Will it reflect the economic policies of the next President?
If the President elect is from the same ruling party implementation should not be a problem.
But if he is from the opposition, he may have to review the budget to incorporate his economic policies.
“The timing of the budget is not ideal given the presidential election and the current president is not running for election. Having the budget before the election does not allow the budget to reflect the economic policies of candidates. To some extent this budget may be seen as a budget of a lame duck President so to speak. It might become a complication when the wining candidate later want to implement their policies in the budget,” says Amal Sanderatne, CEO, Frontier Research.
“This budget is not really attracting attention among the private sector because the private sector is not sure whether this is really going to be a policy that will be followed,” he says.
It is this uncertainty that has kept investors and the private sector away from focusing on the budget.
“So there is an uncertainty as to how important actual budget speech. It will be relative to action vis-a-vis policies followed through afterwards,” he says.
However, according to analysts, the impact of the impending budget on the market may not be tangible, as many expect it to be a continuation of the previous budget.
“We might see more of a continuation of the previous budget. And it could be populist to some extend, but may be not to an extend to be feared by market
However, they expect the budget to bring benefits to the agriculture and export sectors,” says Sanderatne.
The zero tax revision on animal feed and fertilizer of the last budget benefited companies like Hayleys and Bairaha Farms.
Analysts however, expect revisions on the motor vehicle market this time as well.
“In the motor sector we might see the government looking to dampen the high use of vehicles to better absorb the oil shocks,” says Shehani Gomes, Bartleet Mallory Stockbrokers.
Tensions mounting on the Ceasefire Agreement and the stagnant peace process would also trigger a rise in the defense spend.
Analysts say an ideal budget would look at balancing the budget deficit and incentivising potential growth areas so that investment can be attracted.
-LBR Newsdesk: LBOEmail@vanguardlk.com