The state of Sri Lanka’s economy has become the clear major concern for citizens between the ages of 20 and 45 over the next six months, according to the results of a poll conducted by Nielsen Sri Lanka.
The poll showed that an overwhelming 46 percent of those surveyed during the fourth quarter of 2012 stated that the economy would be their major concern, as compared with just 22 percent during the same quarter of 2011.
Additionally, 57 percent of those surveyed stated that the economy would be either their first or second concern, whilst in the age-group of 36-45, 67 percent of citizens surveyed expressed concern over the state of the country’s economy.
Nielsen’s research also found that the fast moving consumer goods (FMCG) sector remained stagnant over 2012 showing just 1 percent growth, against 15 percent in 2011, likely a result of sudden price increases over the last year, with the devaluation of the rupee and increased energy costs which in turn created inflationary pressure.
Whilst the official Colombo Consumer Price Index compiled by the Department of Census and Statistics put inflation at approximately 9 percent over the latter half of last year and carrying on into 2013, an Urban Price Index created by Capital Alliance Research based on a different basket of goods, found that key essential expenses for urban middle-class households in Sri Lanka rose by over 20 percent, a figure which would appear to be more cohesive with the drastic slowdown in the FMCG sector.
Another poll carried out by Nielsen also found that 40 percent of 20 to 45-year-olds had put their spare cash into savings against 37 percent in the previous year, whilst another 41 percent of citizens polled stated that they had no spare cash as compared with 39 percent in 2011.
Sri Lanka’s post-war economic boom has been hailed by many both locally and internationally as a success story, particularly in 2011 when the country posted a record over 8 percent growth at a time when many of its primary export markets were experiencing severe economic instability.
Nevertheless, concerns have been raised as to the fundamentals of the island’s economy. Despite the constant highlighting of increasing per capita GDP, which more recently carried the country into the category of middle-income nations, surveys carried out by the World Food Programme found that approximately 50 percent of households in the Northern Province live on less than US$ 1 per day.
Per capita GDP is derived by calculating the total national income and dividing it by the population of the country. Many analysts have pointed out that whilst the per capita income may be on the rise, the figure itself may not reflect a growing disparity in income levels.
Additionally, a study from the private research firm, Verite found that Sri Lanka has been experiencing a phenomenon of ‘Jobless Growth’ where job growth in the country from 2006 to the second quarter of 2012 was merely 1 percent, despite a 40 percent increase in the GDP over the same period.
Sri Lanka is currently classified as a lower-middle income country with a per capita income of US$ 1,006-3,975. However, the government has stated that the island will move into the upper-middle income category of US$ 3,976-12,272 by 2015.
The country’s exports fell by 7.4 percent year-onyear (YoY) to US$ 9.4 billion, while imports dipped 5.8 percent YoY to US$ 19 billion in 2012. Whilst exports slowed over the year, fuel prices continued to increase, most recently in February when petrol prices increased by Rs.3, whilst Auto Diesel increased by Rs.6 per liter.
More recently, China is reported to have refused Sri Lanka a loan for US$ 500 million, which the government had sought out for the purposes of purchasing petroleum products. The rejection from China followed a rejection from the International Monetary Fund for a US$ 1 billion loan to help cover the budget deficit in 2013.