Economic Capsule - December 2021

Economic Capsule
December 2019
276th
Issue
Research & Development Unit
Economic Capsule
December 2021
299th Issue

C O N T E N T S
BANKING & FINANCE
 ComBank opens banking counter at Dept. of Immigration and Emigration
 ComBank first Sri Lankan bank to win IFC’s CAFI Climate Impact Awards
 ComBank wins its 16th Gold for Best Annual Report in Banking sector with
three more awards
 ComBank remains highest-ranked bank in Business Today’s ‘Top 40’
 ComBank wins Daraz award for ‘Best Engaging Overall Cards Base’
ECONOMY & BUSINESS
 Provincial Gross Domestic Product -(PGDP)- 2020
 NCPI - Year on Year Inflation reaches double digit levels
 Fitch downgrades SL to ‘CC’ on heightened default concerns
 CSE makes constituent changes to S&P Sri Lanka 20 Index
 External sector performance Jan-Oct 2021 (USD Mn)
 Tourist arrivals to Sri Lanka top 150 ,000 this year
ECONOMY & BUSINESS (Cont.)
 Nine more sites handpicked to be transformed into sustainable tourist
destinations
 Sri Lanka’s Manufacturing PMI – Nov 2021
 Sri Lanka’s Services PMI – Nov 2021
 Raga’ branded ‘kithul’ toddy to be produced for local, global markets
 News Snippets
INTERNATIONAL
 Europe considers new curbs as Omicron sweeps world
 Fitch says inflation is prompting global monetary policy normalization
 Fitch says Asia Pacific Sovereigns to make headway on policy normalization
in 2022
 Leftist Gabriel Boric to become Chile's youngest ever president
 Global Economic indicators - 2021

ComBank opens banking counter at Dept. of
Immigration and Emigration
The Commercial Bank of Ceylon has
opened a banking counter at the
Department of Immigration and
Emigration for the convenience of
visitors and staff.
Besides providing routine banking services,
the counter will provide advice on foreign
currency accounts, remittance services and other products offered by
Commercial Bank.

ComBank first Sri Lankan bank to win IFC’s
CAFI Climate Impact Awards
Sri Lanka’s first fully carbon neutral Bank, the
Commercial Bank of Ceylon has emerged as one
of the top banks – and the only Sri Lankan bank –
to win two Climate Assessment for Financial
Institutions (CAFI) awards from the International
Finance Corporation (IFC).
These ground-breaking climate impact awards were conferred on
Commercial Bank in acknowledgement of the Bank’s estimated
greenhouse gas (GHG) reduction and for completing the highest
number of climate finance transactions in South Asia in 2020.
Commercial Bank’s climate finance achievement included the reduction of 208,400 tonnes of carbon dioxide
equivalent (tCO2e) of greenhouse gas which is equivalent to removing more than 40,000 cars from the roads, and
the disbursement of 416 green loans or climate finance transactions that meet the CAFI criteria.

ComBank wins its 16th Gold for Best Annual
Report in Banking sector with three more awards
The Commercial Bank of Ceylon
won four awards for its 2020
Annual Report at the CA Sri
Lanka awards, including two
Gold Awards – the Bank’s 16th
Edmund J. Cooray Memorial
Trophy for the Best Annual
Report among Banking
Institutions since 2001, and the
Gold for Corporate Governance
Disclosure.
Reaffirming the Bank’s consistency in financial reporting excellence, the report – themed ‘A century of experience. A
year of reinvention’– was also recognized for ‘Overall Excellence in Annual Financial Reporting’ with a Bronze
award and won the Bronze for ‘Integrated Reporting: Best Disclosure on Capital Management.’ Incidentally, this is
also the 16th occasion that Commercial Bank has been ranked among the top three companies overall for financial
reporting since 2001.

ComBank remains highest-ranked bank in
BusinessToday’s ‘Top 40’
The Commercial Bank of Ceylon has retained its long-
established status as the highest-ranked bank in the ‘Business
Today’ ranking of Sri Lanka’s best-performing companies in
2020-21 and is placed third in the overall ranking this year,
which for the first time comprises of 40 entities.
This is the 13th consecutive year that the Bank has been ranked
among the top five companies in the country by Business Today,
which assigned Commercial Bank a total score of 33.05 on a
scorecard that ranged from 7.35 for the 40th ranked company to 37.25 for the
company placed first in this latest edition of the ranking, released in December 2021.

ComBank wins Daraz award for ‘Best Engaging
Overall Cards Base’
The Commercial Bank of Ceylon was
presented the award for ‘The Best Engaging
Overall Cards Base’ at the recent ‘Payment
Partner Performance Awards 2021’ of Daraz,
South Asia’s premier online shopping
marketplace.
The Bank was awarded this title for empowering the Daraz
platform by generating the highest number of transactions by
both credit and debit card bases and the highest number of
unique buyers’ engagement during the financial year 2020-
21.
This is the second consecutive year that the Bank was honored with this award.

Provincial Gross Domestic Product
(PGDP)- 2020
Amidst outbreak of the COVID-19 pandemic, Western province continued to be the nerve center of
the economy whilst its share declined, contributing to an overall contraction
Western province secured the largest share (38%) of the country’s
nominal GDP. However, due to slow down in economic activities
due to the pandemic situation, the share declined by 1% from 2019.
Central (11.3%) and North Western (11.0 %) provinces were ranked
at second and third positions, respectively.
PGDP shares increased in North Western, Southern,
Sabaragamuwa, and North Central provinces while in
Western and Northern provinces, share decreases
could be observed year-on-year.
Source: CBSL

Provincial Gross Domestic Product
(PGDP)- 2020 (Cont..)
All the provinces have contributed fairly in terms of the Agricultural activities
ranging from 7.7% to 17.6% whereas North Western, Southern and Central
provinces were the top contributors to the Agricultural activities of the country.
Western province has pioneered in the Industry activities with a contribution of
44.6% while Central and North Western provinces became second and third
largest contributors.
In terms of Services activities, Western province recorded the highest
contribution of 39.3% while Central and Southern provinces had the second and
third highest contributions.
Compared to the previous year, only Sabaragamuwa
province has increased its shares across the three activities.
On contrary, Western province shares in all the activities
have declined from the previous year while other provinces
have shown a mixed performance

NCPI -Year onYear Inflation reaches double
digit levels
Headline inflation, as measured by the year-
on-year (Y-o-Y) change in the National
Consumer Price Index (NCPI, 2013=100),
increased to 11.1% in November 2021 from
8.3% in October 2021, the highest value since
the index was introduced.
Inflation was driven by monthly increases of prices of items in
both Food and Non-food categories.
Subsequently, Food inflation (Y-o-Y) increased to 16.9% in November 2021 from 11.7% in October 2021, while
Non-Food inflation (Y-o-Y) also increased to 6.2% in November 2021 from 5.4 % in October 2021.
Source: CBSL

Fitch downgrades SL to ‘CC’ on heightened
default concerns
Fitch Ratings joined the list of global rating
agencies to downgrade Sri Lanka’s sovereign rating
for the second time in an year on the mounting
concerns of a debt default in the coming months
due to razor-thin external reserve buffers, which
depleted faster than what the rating agency had
anticipated a year ago.
Fitch Ratings cut Sri Lanka’s Long-Term Issuer Foreign Currency Issuer
Default Ratings (IDR) to ‘CC’ from ‘CCC,’ adding that they do not
assign Outlooks or amplify modifiers for sovereigns at or below ‘CCC’
rating.
“The downgrade reflects our view of an increased probability of a default event in coming months in light of Sri Lanka’s
worsening external liquidity position, underscored by a drop in foreign-exchange reserves set against high external debt
payments and limited financing inflows. The severity of financial stress is illustrated by elevated government-bond yields and
downward pressure on the currency,” – Fitch Ratings.

CSE makes constituent changes to S&P Sri
Lanka 20 Index
The Colombo Stock Exchange (CSE) has announced the annual changes in S&P Sri Lanka 20 index
constituents made by S&P Dow Jones Indices at the 2021 year-end index rebalance.
The exclusions and inclusions as announced by S&P Dow Jones Indices, effective from 20 December
(after the market close of 17 December) are presented below in alphabetical order.
Updated S&P SL 20 List
Source: CSE

External sector performance Jan-Oct 2021
(USD Mn)
Source: CBSL
Category Jan-Oct 2020 Jan -Oct 2021 Growth %
Merchandise Imports 13,145 16,632 26.5
•Consumer Goods 2,818 3,124 10.8
•Intermediate Goods 7,393 9,923 34.2
•Investment Goods 2,921 3,576 22.4
•Unclassified 12 9 -30.0
Merchandise Exports 8,299 10,134 22.1
•Industrial Exports 6,319 7,853 24.3
•Agricultural exports 1,950 2,228 14.3
•Mineral exports 18 36 98.5
•Unclassified 12 17 36.7
Trade Balance -4,846 -6,498 -34.1
Tourism 682 82 -88.0
Worker’s Remittance 5,680 4,895 -13.8
Gross FDI (Jan – Jun) 351 398 13.4
Merchandise exports during the first ten months of
2021 ended with a growth of 22.1% compared with
the corresponding period of 2020*, while
merchandise imports grew by 26.5% for the same
period amid continuation of restrictions on non-
essential imports.
*However, Merchandise exports recorded its highest
monthly exports value in history in October 2021, as
the export earnings were recorded at USD 1.2bn, up
40.4% year-on-year (YoY), which also marked the
fifth consecutive month of above USD 1bn of export
earnings.
Overall, the trade deficit expanded significantly by
34.1% during Jan-Oct 2021 period compared to the
corresponding period in 2020.
Worker’s Remittances for the month of
October 2021 was USD 317Mn down by
49.7% YoY.

External sector performance Jan-Oct 2021
(USD Mn) – Cont.
Source: CBSL
Highest growth % in Merchandise Exports
Category Jan-Oct
2020
Jan -Oct
2021
Growth %
Transport
Equipment
58.7 126.5 115.5
Mineral Products 18.1 36.0 98.5
Ceramic Products 18.2 31.0 70.3
Highest growth % in Merchandise Imports
Category Jan-Oct
2020
Jan -Oct
2021
Growth %
Other Investment
goods
2.6 4.7 78.7
Rubber and articles
thereof
182.7 323.4 77.0
Base Metals 385.4 655.8 70.2
Category Jan-Oct
2020
Jan -Oct
2021
Growth
%
Textile &
garments
3,645.0 4,403.9 20.8
Tea 1,031.8 1,096.1 6.2
Rubber products 644.8 861.3 33.6
Highest Contributors Merchandise Exports
Category Jan-Oct
2020
Jan -Oct
2021
Growth
%
Fuel 1,905.2 2,596.8 36.3
Textile & textile
articles
1,581.7 2,049.4 29.6
Machinery &
equipment
1,665.5 2,205.9 32.4
Highest Contributors Merchandise Imports

Tourist arrivals to Sri Lanka top 150,000 this
year
Sri Lanka welcomed a total of 47,120
tourists in the first 20 days of December,
already surpassing November’s arrival
figures, which were the highest for the
year.
With the increase in tourist arrivals witnessed in
December, the number of international visitors entering
the country this year has crossed the 150,000 mark.
In an effort to increase the month-on-month growth rate of tourist arrivals, a joint promotion will be
implemented by the Tourism Ministry and national carrier SriLankan Airlines.
“These promotions will be implemented through social media and it has been decided to implement
these integrated promotions at international conferences, conferences and exhibitions in the field of
tourism and aviation in foreign countries,” Tourism minister said in a statement to the media.
Source: SLTDA

Nine more sites handpicked to be transformed
into sustainable tourist destinations
The Tourism Ministry has selected nine more sites to be transformed and developed into
sustainable tourist destinations, which will be done with the support extended by the
United Nations Development Programme (UNDP).
The nine destinations that will receive a fresh facelift are Sigiriya, Pilikuttuwa Forest Monastery,
Wanathawilluwa Gangewadiya, Ellawala -Ella, Waulpane Limestone Cave, Delft Island, Madunagala
Hot Springs, Panama Village and Mihintale.
The Minneriya and Yala National Parks have already been promoted as the first eco-friendly sustainable
tourist destinations – free of the use of plastics, according to the ministry.
The financing for the conversion of the selected tourist sites will come from the UNDP fund for
Biodiversity Financing.

Sri Lanka’s Manufacturing PMI – Nov 2021
Benefitting from the normalising of economic activities in the country,
the Manufacturing PMI continued to expand in November 2021 and
recorded an index value of 61.9. The significant increases in Production,
New Orders, and Stock of Purchases sub-indices were mainly
contributed to this improvement in the PMI
A significant increase was observed in New Orders, particularly in the manufacture of food & beverages sector Many respondents in this sector mentioned that they secured more orders
in November 2021 than the previous month, for the upcoming festive season. Further, Production, especially in the manufacture of textile and wearing apparel sector increased during the
month. Many respondents in this sector highlighted that their production levels were able to increase in November 2021 catering to the seasonal demands. Meanwhile, Employment
expanded at a slower rate compared to the previous month.
The Stock of Purchases increased in line with the improvement in New Orders and Production, and some respondents in the manufacture of textile and wearing apparel sector highlighted
that they increased purchases, anticipating supply-side disruptions due to upcoming Chinese new year holidays. Meanwhile, Suppliers' Delivery Time lengthened at a slower rate in
November 2021. The continuous increase in the cost of imported raw materials, mainly due to rising global commodity prices, has been highlighted as a major concern by most of the
respondents in all sub-sectors. In the next three months, expectations for manufacturing activities remain at higher levels anticipating further improvements in economic condition locally
and globally

Sri Lanka’s Services PMI – Nov 2021
Services sector PMI registered an index value of 62.1 indicating a
further solid performance in November 2021. This increase was
underpinned by the increases observed in New Businesses, Business
Activities, Employment and Expectations for Activity sub-indices.
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

‘Raga’ branded ‘kithul’ toddy to be produced
for local, global markets
Industries minister has declared open the Agri Deshiya
Ltd. factory in Kuruwita.
The factory manufactures canned toddy and ‘kithul’
related products for both local and global markets.
The factory manufactures canned toddy with the brand
name ‘Raga,’ while it also promotes ‘Kithul Ra’ and other
related products.

Cabinet extends grace period for tourist
accommodations to settle electricity
bills
The hard-hit tourism industry will receive the much sought
after relief in the payment of utility bills with the Cabinet of
Ministers having approved a concession scheme put forward
by the Tourism Ministry.
In an effort to help the tourism sector revive from the dual
impacts of the 21/4 attack and the COVID-19 pandemic, the
Cabinet decided to extend grace period provided to tourist
accommodation providers to pay their utility bills.
News Snippets
CSE Developments
New CSE Listings
Kapruka.com
Co-operative Insurance Company Ltd
LOLC General Insurance Ltd
First Capital Treasuries PLC
Myland Development Ltd
Hsenid Business Solutions Ltd
Sarvodaya Development Finance Ltd
Meanwhile The Colombo Stock Exchange has formally approved the initial public offering
(IPO) of Hela Apparel Holdings Limited, the holding company of Hela Clothing Group,
with the offer set to open on Wednesday, January 12, 2022. This highly anticipated IPO,
by one of Sri Lanka’s leading social-capital-focused apparel supply chain solution
providers, will see 267,108,998 new ordinary voting shares offered to the public at a per-
share price of Rs.15.00.
Also a leading pest control company Exterminators announced its plans to list on the
Colombo Stock Exchange, subject to obtaining relevant regulatory approvals in the near
future.
Fuel price hike to result in 3% acceleration in inflation
Based on Central Bank projections, the government expects this week’s fuel price hike to
add to 3% acceleration to inflation given its multiplier effect on key sectors of the
economy.
SL’s first cable car project to reach
completion in 18 months: SLTDA
Sri Lanka’s first cable car project is gearing up to kick off soon
and will reach completion within 18 months from the date of
receiving all approvals, the Sri Lanka Tourism Development
Authority (SLTDA) said.
The Cable Car Project, which is an initiative of Outdoor
Engineering Lanka (Pvt.) Ltd and facilitated by the SLTDA, will
allow Sri Lankans to offer cable car experiences for the
first time.

Europe considers new curbs as Omicron sweeps
world
Source: economic times
Countries across Europe were considering new curbs
on movement, with German scientists urging
maximum and immediate restrictions on social
contacts as the Omicron variant swept the world days
before the second Christmas of the pandemic.
Omicron infections are multiplying across Europe, the United States and Asia, including in Japan, where a single
cluster at a military base has grown to at least 180 cases.
Germany, Ireland, the Netherlands and South Korea are among countries to have re-imposed partial or full
lockdowns or other social distancing measures, in recent days.
British Prime Minister Boris Johnson said on Monday he was looking at all kinds of measures to keep Omicron
under control.
Sweden will urge all employees to work from home if possible and impose tighter rules for social distancing. In
neighboring Denmark, Omicron is now the predominant variant, Health Minister Magnus Heunicke said.

Fitch says inflation is prompting global
monetary policy normalization
The scale and longevity of the global inflation shock has taken most forecasters and central banks by
surprise and is bringing forward the start of global monetary policy normalization, says Fitch Ratings in
its latest Global Economic Outlook (GEO).
A strong recovery in global aggregate demand in nominal terms over the past year has not been
matched by an equal recovery in output. Supply bottlenecks resulted in real GDP expanding by less than
expected in 3Q21, with prices increasing by more than anticipated.
Fitch has cut its 2021 growth forecasts for the US, Germany and Japan, reflecting recent supply-chain-
related disruptions to industrial production.
Global growth forecast for 2022 has also been cut, to 4.2% from 4.4%, but this primarily reflects a more
intense slowdown in China

Fitch says Asia Pacific Sovereigns to make headway
on policy normalization in 2022
Fitch Ratings projects fiscal deficits to
narrow in nearly all APAC sovereigns in
2022, as relief measures unwind and
revenue ratios rise with the recovery of
domestic demand.
It said the narrowing of deficits would
generally be modest, however, as
governments exercise caution in
withdrawing support in view of fragile
recoveries and risks to the outlook.
Consolidation strategies were delayed in APAC emerging markets in 2021, as authorities grappled with further
outbreaks of COVID-19. For example, Malaysia (BBB+/Stable) rolled out a series of fiscal support packages in 2021.
Indonesia (BBB/Stable) relaxed budget targets for 2021 and 2022, even though the authorities aim to bring the
deficit back to within their 3% of GDP ceiling by 2023.
Fitch said consolidation efforts were proceeding more steadily in developed markets, where fiscal relief packages
were larger relative to GDP than in emerging markets and where vaccine rollouts were more advanced.

Leftist Gabriel Boric to become Chile's youngest
ever president
Source: BBC
Leftist candidate Gabriel Boric has won Chile's presidential
election to become the country's youngest ever leader.
In what was expected to be a tight race, the 35-year-old
former student protest leader defeated his far-right rival
José Antonio Kast with a majority of 55.87%.
Mr Boric told supporters he would look after democracy, promising
curbs on Chile's neoliberal free market economy. He will lead a
country that has been rocked in recent years by mass protests
against inequality and corruption.

Global Economic indicators - 2021
Source: Economist
Country GDP - 2021 Q3
(YoY%)
Consumer Prices –
Nov (YoY %)
Unemployment (%) Currency Units
(Per USD) as @
Dec 15
United States 4.9 6.8 4.2 (Nov) -
China 4.9 2.3 5.0 (Nov) 6.36
Japan 1.2 0.1( Oct) 2.7 (Oct) 114
Euro Area 3.9 4.9 7.3 (Oct) 0.89
Britain 6.6 5.1 4.2 (Sep) 0.76
Germany 2.6 5.2 3.3 (Oct) 0.89
India 8.4 4.9 7.0 (Nov) 76.2

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.
< Research & Development Unit >

Economic Capsule - December 2021

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