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1. Economic Capsule
December 2019
276th
Issue
Research & Development Unit
Economic Capsule
April 2021
291st Issue

2. C O N T E N T S
BANKING & FINANCE
 ComBank wins 4 at Best Corporate Citizen Sustainability Awards
 Double win for ComBank from Asiamoney magazine
 ComBank becomes Sri Lanka’s first carbon-neutral bank
ECONOMY & BUSINESS
 IMF revises SL’s 2021 economic growth forecast to 4%
 Sri Lanka welcomes over 9,500 tourists in 1Q
 Sri Lanka’s unemployment rate down to 5.2% 4Q-2020
 Sri Lanka’s Manufacturing PMI - Mar 2021
 Sri Lanka’s Services PMI – Mar 2021
 20 land plots to come into market to drive up demand
 External sector performance- Jan to Feb 2021 (USD Mn)
 Economic News Snippets
INTERNATIONAL
 China’s Q1 GDP grows at record pace as recovery speeds up
 China’s Growth Set to Drive World Economy in Post-Pandemic Years
 Citigroup to exit consumer banking in 13 markets
 Reluctant Emerging Asia Could Delay Rate Hikes Until 2022
 Renewables could displace fossil fuels to power the world by 2050, report claims
 India reports more than 2,500 COVID-19 deaths in single day

3. Banking & Finance

4. Research & Development Unit
ComBank wins 4 at Best Corporate Citizen
Sustainability Awards
The Commercial Bank of Ceylon’s commitment to
the betterment of the environment, society, and the
economy was recognized when the Bank was
presented four awards including the award for the
second runner-up overall at the Best Corporate
Citizen Sustainability Awards presented by the
Ceylon Chamber of Commerce.
The Bank won the Sector Award for Best
Performance in the Financial Sector, the category
award for Best Performance in Governance, and was
presented an award for being among the Top 10 Best
Corporate Citizens in Sri Lanka, in addition to its
second runner-up award.

5. Research & Development Unit
Double win for ComBank from Asiamoney
magazine
The Commercial Bank of Ceylon has won the awards of ‘Best Bank for Small and
Medium Enterprises’ and ‘Best Bank for Corporate Social Responsibility’ for the second
year in a row from Asiamoney Magazine, the top-ranking publication and authority on
banking and capital markets in Asia.
The award for ‘Best Bank for SMEs’ recognizes Commercial Bank’s efforts in identifying
the importance of small and medium enterprises to the economy of the country and
the products and services put in place to empower this segment, while the ‘Best Bank
for Corporate Social Responsibility’ award is a tribute to the Bank’s nationally-
significant contributions via its CSR Trust, to the spheres of education, healthcare,
environment and community development.

6. Research & Development Unit
ComBank becomes Sri Lanka’s first carbon-neutral
bank
The Commercial Bank of Ceylon has become the first Sri
Lankan bank to achieve carbon neutrality for the
entirety of its operations, encompassing all 268
branches and its head office – a monumental milestone
in the Bank’s commitment to the environment.
Becoming a net-zero carbon company was one of
Commercial Bank’s Green Goals, to be achieved by the
close of its centenary year in 2020.
The Bank’s carbon neutral status has been affirmed by Climate Smart Initiatives (Pvt) Ltd., which executed the
quantification of the Bank’s carbon footprint in accordance with the ISO 14064‐1‐2018 standard. A total of 13
emission sources covering both direct and indirect emission sources of the Bank were considered for this analysis.
Additionally, the Sri Lanka Climate Fund operating under the Ministry of Environment performed an independent
third-party verification in accordance with the ISO 14064-3-2018 guidelines and awarded the prestigious ISO
14064 certificate to the Bank.

7. Economy &
Business

8. Research & Development Unit
IMF revises SL’s 2021 economic growth
forecast to 4%
• The International Monetary Fund (IMF) in its latest World Economic Outlook
report has slashed Sri Lanka’s economic growth rate forecast for this year to 4%
from 5.3% it forecasted in October, 2020.
• The revision is similar to that of the forecast of the Asian Development Bank
(ADB), which expects Sri Lanka to grow by 4.1% this year.
• However, the Central Bank of Sri Lanka (CBSL) has a more optimistic economic
growth prediction, expecting the country to grow by 6% in 2021.
• In 2020, due to the impacts stemming from COVID-19 pandemic, the economy
recorded a negative growth rate of 3.6%.

9. Sri Lanka welcomes over 9,500 tourists in 1Q
Research & Development Unit
• Sri Lanka is witnessing a slow yet steady
increase in the number of international
visitors entering the country, as the month
of March welcomed 4,581 tourists,
bringing the total number of arrivals for
the first quarter to 9,629.
• While the arrivals increased by 36% from
February, a decline of 93.6% is witnessed
when compared with the number of
visitors who entered the country during
the corresponding month of the previous
year.

10. Sri Lanka’s unemployment rate down to 5.2%
4Q-2020
Research & Development Unit
• Sri Lanka’s unemployment fell to 5.2%
in the fourth quarter of 2020 from an
11 year high of 5.8% in the third
quarter as the country recovered from
a steep downturn from Coronavirus
lockdowns.
• The total employed population was
8.03 mn in the fourth quarter of 2020,
still down from 8.18 mn in 2019 with
the total unemployed at 441,997, data
from the state statistics office said.

11. Sri Lanka’s Manufacturing PMI - Mar 2021
Research & Development Unit
Indicating a strong revival in manufacturing activities in the country, the
manufacturing PMI reached a 9-month high at 67.0 in March 2021. This
was largely attributable to the increases observed in Production, New
Orders, and Stock of Purchases sub-indices.
The significant increases in New Orders and Production subindices, particularly in the manufacture of food & beverages and textile
& wearing apparel sectors, have mainly contributed to the improvement in the overall index.
Many respondents in the manufacture of food & beverages sector highlighted that they experienced higher levels of sales and
production during March 2021 ahead of the New Year festival season.
Further, respondents from the textile & wearing apparel sector mentioned that they increased production during the month to
cover-up seasonal holidays. Meanwhile, the Stock of Purchases sub-index increased in line with the expansion in New Orders and
Production. Employment sub-index also expanded at a higher rate.

12. Sri Lanka’s Services PMI – Mar 2021
Research & Development Unit
Services PMI rose to 62.1 in March 2021, indicating an expansion of the
services sector for the fourth straight month. This increase was
underpinned by the expansions observed in new businesses, business
activities, employment and expectations for activity
The Index
PMI is calculated as a ‘Diffusion Index’, where it takes values between 0 and 100.
PMI = 50 - sector remained neutral on month-on-month basis
PMI > 50 - sector is generally expanding on month-on-month basis
PMI < 50 - sector is generally declining on month-on-month basis

13. 20 land plots to come into market to drive up
demand
Research & Development Unit
• With the Colombo Port City Commission
Bill reaching the final stages of the
legislation process, the project company of
Colombo Port City (CPC) eyes to release
20 land plots located adjacent to Colombo
Business District (CBD) as pilot
development projects, to drive investor
demand attracting over USD 5bn within
next five years.
• In a five-year strategic plot roll out, CHEC Port City plans to release a land bank of 60
hectares, which would require a minimum USD 5bn investment requirement for
development activities, covering different real estate segments.

14. Research & Development Unit
External sector performance- Jan to Feb 2021
(USD Mn)
Source: CBSL
Category Jan-Feb 2020 Jan –Feb 2021 Growth %
Merchandise Imports 3,297.7 3,115.2 -5.5
•Consumer Goods 699.0 618.3 -11.5
•Intermediate Goods 1,846.0 1,846.0 0.8
•Investment Goods 747.0 633.8 -15.2
•Unclassified 5.7 2.3 59.5
Merchandise Exports 1,993.4 1,888.4 -5.3
•Industrial Exports 1,602.7 1,472.6 8.1
•Agricultural exports 383.8 406.5 5.9
•Mineral exports 3.9 7.1 84.0
•Unclassified 3.0 2.2 -26.7
Trade Balance -1,304 -1,227 5.9
Tourism 586 7 -98.8
Worker’s Remittance 1,108 1,255 13.2
Gross FDI 232 148 -56.8
• The increase in exports to the pre-pandemic levels,
the notable increase in workers’ remittances and the
relative stability in the domestic foreign exchange
market supported Sri Lanka’s external sector in
February 2021.
• The trade deficit in February 2021 broadly remained
unchanged at the level reported a year ago. In the
financial account, both foreign investment in the
government securities market and the Colombo
Stock Exchange (CSE) recorded net outflows in
February 2021.
• The SAARCFINANCE swap facility of USD 400mn
obtained from the Reserve Bank of India in July 2020
was repaid in February 2021 upon maturity.
• Net inflows to the domestic foreign exchange market
eased the pressure on the exchange rate during the
month and the regulatory measures enabled the
Central Bank to absorb foreign exchange on a net
basis, to build up gross official reserves.

15. Research & Development Unit
Manufacturing sector reports highest non-
performing loans in 2020
While the overall asset quality in the banking sector
improved sharply, despite the worst predictions and
pandemic-related headwinds, the loans to the manufacturing
sector reported the highest non-performing loans (NPLs)
compared to the other key sectors of the economy.
According to the preliminary data coming from the licensed
commercial banks on their asset quality— identified based
on various economic sectors to where they channeled
loans—the manufacturing sector came on top, with an 8.7%
non-performing loans ratio, indicating nearly 9.0% of loans
into the sector were in arrears for 90 days or more by end-
2020.
The licensed commercial banking sector overall reported a
gross non-performing loans ratio of 4.7% by end-2020, a tad
weaker from 4.6% a year ago but much improved from 5.3%
when the problem reached a peak in June 2020, the quarter
which was mostly damaged by the pandemic.
Source: Daily Mirror
Economic News Snippets
ICRA Lanka expects strong private credit
growth in March
ICRA Lanka Limited said private sector credit is likely to
have expanded at similar pace or faster in March, after
a spurt in private credit in February, which defied its
earlier expectations.
Releasing its latest regular publication on the economy,
the rating agency turned upbeat about the prospects of
the economy as seen from the recent high-frequency
data, showing continued expansion in domestic
economic activity.
However, it cautioned of the signs of rising inflation and
the external position of the country as potential
caveats.

16. International

17. China’s Q1 GDP grows at record pace as
recovery speeds up
Research & Development Unit
• China's economic recovery
quickened sharply in the first
quarter to record growth of
18.3% from last year's deep
coronavirus slump, propelled
by stronger demand at home
and abroad and continued
government support for
smaller firms.
Source: Reuters/CNBC
• But the brisk expansion, heavily skewed by the plunge in activity a year earlier, is expected to
moderate later this year as the government turns its attention to reining in financial risks in
overheating parts of the economy.

18. China’s growth set to drive world economy in
post-pandemic years
Source: Bloomberg
Research & Development Unit
• China will drive global economic
growth in the coming years as the
world recovers from an pandemic,
the International Monetary Fund
predicts.
• China will contribute more than one-
fifth of the total increase in the
world’s gross domestic product in the
five years through 2026, according to
Bloomberg calculations based on IMF
forecasts published.
• Global GDP is expected to rise by more than USD 28tn to USD 122tn over that period, after falling USD 2.8tn
last year in the biggest peacetime shock to output since the Great Depression.
• The U.S. and India will be the second and third-biggest contributors to global growth in the period, according
to the IMF, with Japan and Germany rounding out the top five.

19. Research & Development Unit
Citigroup to exit consumer banking in 13
markets
• Citigroup is closing its consumer banking operations
in 13 markets across Asia, Europe and the Middle
East.
• The US banking group will instead run these
operations from four hubs in Singapore, Hong Kong,
the United Arab Emirates and London.
• It will continue to offer products to larger clients and
institutions in these markets.
• Its chief executive Jane Fraser said it "does not have
the scale" to compete in these 13 markets.
• Citigroup will shut down consumer banking
operations in Australia, Bahrain, China, India,
Indonesia, South Korea, Malaysia, The Philippines,
Poland, Russia, Taiwan, Thailand and Vietnam.
Source: BBC

20. Research & Development Unit
Reluctant Emerging Asia Could Delay Rate Hikes
Until 2022
• Emerging Asia’s central banks are expected to
opt for supporting their economic recoveries
rather than tackling volatile price swings this
year.
• All eight emerging Asian economies, including
India and Indonesia, are seen holding
benchmark interest rates steady through 2021,
according to the forecasts from Bloomberg
surveys of economists.
• “To support economic recoveries, Asian central banks are expected to maintain their
accommodative stance and avoid hinting at future rate hikes,” said Duncan Tan, rates strategist at
DBS Banking Group Ltd.
Source: Bloomberg

21. Research & Development Unit
Re-newables could displace fossil fuels to power
the world by 2050, report claims
• Solar and wind energy could replace fossil
fuels entirely to become the world’s
power source by 2050, a new report has
claimed.
• The report from think tank Carbon Tracker
also predicted that if wind and solar
power continued on their current growth
trajectory, they would push fossil fuels out
of the electricity sector by the mid-2030s.
Source: CNBC

22. Research & Development Unit
India reports more than 2,500 COVID-19 deaths in
single day
• India reported more than 2,500 deaths from
COVID-19 on 25th April , the highest single-day
tally for the country so far, health ministry data
showed.
• Coronavirus infections also rose by a record,
increasing by 354,531. Total deaths reached
195,116.
• India's overall case tally is now at 17.3 million,
second only to the United States, which has over
32.8 million infections. (As of 25th April 2020)

23. The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the information,
it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise, suffered in consequence
of using such information for whatever purpose.
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