Sri Lankan companies have shown eagerness to borrow from banks for their operational functions, as the economy recovers from the coronavirus-induced shocks and the recently presented budget-signalled policy stability.
According to the regular bulletin of business outlook survey conducted by the Central Bank for the third quarter, the respondent firms had expressed willingness to borrow in the October-December quarter, after the third or the September quarter recorded a robust growth in private sector credit.
“The balance of opinion on demand for bank credit has increased in 3Q 2020, compared to 3Q 2019 and most of the firms expect to borrow in 4Q 2020 for operational purposes,” the bulletin said. Private sector credit recorded a robust growth in August and it continued into October, indicating reinvigorated activities in the economy, after the virus-related lockdowns that ended in mid-May.
According to banking sector data, during the 10 months, Sri Lanka’s licensed commercial banks have expanded their total outstanding private sector credit by Rs.258 billion to Rs.6.055 trillion. “A significant improvement from the second quarter was exhibited with the normalisation of the economy, following the relaxation of the restrictions on mobility imposed to contain COVID-19,” the survey said.
“However, the business condition remains below 100-threshold (the negative territory) during 3Q 2020, mainly due to the lingering effects of the first wave of the COVID-19 pandemic. It is expected that the business condition would deteriorate in 4Q 2020, anticipating adverse impacts from the second wave of the pandemic, which experienced since the beginning of October,” it added.