LBR LBO Debrief – “Economic Outlook 2015” – Tuesday 9th December 2014

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Samiran Chakraborty Head of South Asia Macro Research/Standard Chartered Bank In a world of increasing economic interconnections and integration, no business executive can afford not to have a finger on the pulse of the economy. Fortunes of Sri Lankan economy during the next 12 months will be closely linked to that of global economy as well as to the economic policy and the impact of the budget proposals. IMF expects the world economy to grow at 3.8 percent in 2015. But growth is expected to be uneven and still weak overall and will remain susceptible to many down- side risks. And over the medium term, protracted weak demand in advanced economies could result in lower growth everywhere.(“Legacies, Clouds, Uncertainties” IMF WORLD ECONOMIC OUTLOOK 2014) Whilst continue to exploit opportunities in traditional markets, Sri Lanka must also turn to the Orient for future growth prospects, as the bulk of world GDP growth is expected to come from Pacific rim and India. However, the Chinese economy is also likely to shift gears in coming years. After 30 years of breakneck, double-digit economic expansion that lifted millions of Chinese from abject poverty but also polluted the nation's air, land and waterways, China wants to retool its economy to generate slower but better-quality growth. The Modi factor has already shown positive impact in India.S&P, having raised outlook in India to “stable” has noted that the new government has both the willingness and capacity to implement reforms necessary to restore some of India's lost growth potential, consolidate its fiscal accounts, and permit the Reserve Bank of India to carry out effective monetary policy". Nishan de Mel PhD Executive Director of Verité Research will discuss how the Sri Lankan economy is likely to unfold during the next 12 months. With respect to US economy, IMF noted that the recovery would continue. However, many downside risks, from both domestic and external sources, remain relevant. And the monetary policy normalization in US may havespillovers on Sri Lankan economy. The European commission has slashed its forecasts for Eurozone growth of 2014 and 2015 and has warned there would be no magic bullet to turn around its fortunes. The EC cut its forecast for growth and expects growth in 2015 to be 1.1%. Waning confidence, heightened geopolitical risks, weak investment, and a deteriorating outlook for the global economy were weighing on the single currency bloc, EC has stated. (The Guardian, Tuesday 4 November 2014) Conflicting signals have been observed in the recent past in Sri Lankan economy. GDP growth has not necessarily impacted consumer consumption positively, as indicated by the volume challenge some of the industries faced recently. Similarly, the low interest rates have not helped to boost the banking assets. There are conflicting views on likely impact of the populist budget proposals. The challenge corporate executives facing are; how to make sense from the present day economic volatility and identify what probable impact the evolving economy will have on their respective sectors. With this in mind, Samiran Chakraborty, Head of South Asia Macro Research will critically examine the outlook of world economy, the state of play of key economies and what one can expect in Sri Lankan economy in the year 2015 at LBR LBO Debrief on “2015 Economic Outlook” on Tuesday 9th December from 8.50 am to 1 pm.

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