First Capital expects possible easing of political uncertainty post elections

Oct 10, 2019 (LBO) – The completion of Sri Lanka’s election cycle is most probably likely to resolve political uncertainty in the local front, the First Capital Research said.

Releasing the First Capital’s mid-year economic outlook, the research arm said they believe that immediately following the Presidential Election a new Prime Minister being appointed, though remote, maybe a possibility depending on the developments.

“New faces have emerged as candidates for Presidential Elections which is likely to be held on the 16th Nov 2019,” Head of Research, Dimantha Mathew said.

“The Parliament could be dissolved by 17th Feb 2020 giving leeway to hold Parliamentary elections by Mar 2020. 2Q2020 is most likely to provide the opportunity to hold PC Council elections which will complete the election cycle for the next 5 years.”

Most probably a Hung Parliament:

First Capital Research said with the current electoral system, no single party is likely to obtain a majority to form a Government.

In history, a majority Government has been formed by a single party only on a couple of rare occasions where there has been extreme popularity.

“In such a situation, similar to previous occasions we are most likely to see multiple political parties getting together to form a Government. Though multi-party government usually leads to slow decision making,” Mathew said.

“We are most likely to see President, Government and Provincial Councils controlled by a single party or single party together with minority parties which may provide some stability.”

GDP growth to pick towards 4Q2019:

With CBSL continuing to adopt a loose monetary policy stance, the research firm expects improvement in economic activity and GDP growth towards 4Q2019.

Election during 4Q2019 is likely to provide an added boost to the economy amidst island-wide election campaigning.

1H2020 growth to show strong recovery:

With the election in 4Q2019, the pick in consumer demand may continue in the 1H2020 in an accelerated manner boosting GDP growth and consumer credit.

First Capital Research expects a significant recovery in GDP growth supported by the lower interest rate environment.