No consumption boom this year: Singer Chairman

Sri Lanka will not experience a consumption boom this year similar to that of the previous year, the head of a leading consumer durables company in the country said. Singer (Sri Lanka) Chairman Dr.Saman Kelegama, who is also a reputed economist in the country, said, Sri Lanka would have to face tighter economic conditions and austerity measures this year due to the consumption boom prevailed in 2015. The purchasing power of the people was increased with the change in government in January 2015 as the new government increased the public sector salaries, slashed fuel prices and taxes on some of the essential goods.

On top of this, the government maintained a relaxed monetary policy, taking boom in consumption even higher. However, in the latter part of the year, the economy showed signs of overheating, signalling balance of payment problems and depletion of foreign reserves. The rupee also depreciated sharply. This pushed the Central Bank to revisit its relaxed monetary policy and recently it increased the policy rates by 50 basis points.

The Governor during a recent press conference didn’t rule out another rate hike, provided foreign investors continued to sell Lankan government securities. The government has now approached the International Monetary Fund (IMF) for a balance of payment support package of US $ 1-1.5 billion. With this, Dr. Kelegama expects tighter economic conditions and austerity measures will come into effect in 2016. “This means that Sri Lanka will not experience a consumption boom in 2016 similar to the previous year,” Dr.Kelegama told the shareholders in Singer (Sri Lanka) PLC’s latest annual report. In fact, the government on Tuesday brought upward reforms to some of the tax proposals to the November budget and resorted to reintroduce capital gain taxes after a lapse of 29 years.

However, Dr.Kelegama remains optimistic given Singer’s strong brand name and marketing acumen to maintaining growth, which however will be lower than 2015. Meanwhile, Dr.Kelegama praised the government for pursuing bilateral trade pacts with countries like China, Japan and Singapore, as Sri Lanka’s key export markets – the US and EU –are in recession. He also welcomed the government’s move to enter into an Economic and Technology Cooperation Agreement (ETCA) with India. However, Dr.Kelegama stressed the need to safeguard some of the well-established local industries that have been catering to the local market as trade pacts do not give market access to Sri Lanka only but also to our partners. “Therefore, the free trade agreements (FTAs) should be prepared in a way they don’t adversely affect the well-functioning domestic import substitution industries, especially the items that have been making a name in this country,” he remarked