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1. Economic Capsule
November 2019
275th Issue
Research & Development Unit

2. C O N T E N T S
BANKING & FINANCE
 ComBank Results (Bank) – 30 09 2019
 ComBank opens Automated Banking Centre at One Galle Face mall
 ComBank receives Best Bank award from Global Finance for 19th time
ECONOMY & BUSINESS
 Biz confidence climbs to 8-month high
 Improving Sri Lanka exports will help repay debt: Fitch
 External Sector – Jan to Sep 19
 BOI aims for USD1.5bn FDI for 2019
 Deal signed for strategic investment in petroleum refinery
 New 5-star hotel project to be developed in Tangalle
 Apparel industry eyes textile fabric park
 One Galle Face mall opens
INTERNATIONAL
 Moody’s cuts global sovereign rating outlook to ‘negative’ for 2020
 Global debt surged to a record USD 250tn in the first half of 2019, led by the
US and China
 China and France sign deals worth USD 15bn
 China is building up its ‘shadow reserves’ to counter its reliance on the US
dollar
 Hong Kong confirms economy fell into recession amid protests, trade war

3. Banking &
Finance

4. ComBank Results (Bank) – 30 09 2019
Research & Development Unit

5. Research & Development Unit
ComBank Results (Bank) – 30 09 2019
cont.

6. ComBank opens Automated Banking
Centre at One Galle Face mall
Research & Development Unit
The Commercial Bank of Ceylon has
commissioned a state-of-the-art Automated
Banking Centre (ABC)at the One Galle Face
mall, offering visitors 24-hour access to the
Bank’s services. Conveniently located on the
ground floor at Beira Lake entrance to the
mall, the Centre is comprised of an
Automated Teller Machine (ATM), a Cash
Recycler Machine (CRM), an Automated
Cheque Deposit Machine and a Digital Panel
that provides a link to the Bank’s digital
banking services.

7. ComBank receives Best Bank award
from Global Finance for 19th time
Research & Development Unit
The Commercial Bank of Ceylon was
recently presented the award for ‘Sri
Lanka’s Best Bank in 2019’ by the USA-
based Global Finance magazine at the
26th Annual Best Bank Awards Ceremony.
The awards recognize banks that
attended carefully to their customers’
needs in difficult markets and
accomplished better results while laying
the foundations for future success.

8. Economy &
Business

9. Biz confidence climbs to 8-month high
Research & Development Unit
The LMD-Nielsen Business Confidence Index
(BCI) recorded an increase of 12 basis points to
register 102 in October. The magazine notes
that this represents the highest the index
has been since February.
“Impacted by the Easter Sunday bombings, Sri
Lanka’s GDP recorded a growth rate of 1.6% –
the lowest in 21 quarters. However, micro and
macro indicators have steadily improved since
then” LMD said.
LMD reports that the economy and politics are
among the major national concerns at this time,
while taxes, policies and inflation are cited as
prime concerns in business circles.

10. Improving Sri Lanka exports will
help repay debt:Fitch
Research & Development Unit
• Improving export performance would help Sri Lanka meet heavy external loan
payments while the island’s policy environment has improved and tourism recovered
faster than expected after April’s bombings, Fitch Ratings said.
• However, it warned that Sri Lanka’s exports as a share of its Gross Domestic Product
fell compared with an increase in a country like Vietnam’s whose economic expansion
has been driven by strong foreign direct investment, mostly into the manufacturing
sector, and steady export growth.
• Improving export performance would help Sri Lanka meet their heavy external debt
service commitments, although it is unclear how far they will be able to follow
Vietnam’s lead by enhancing competitiveness and attracting FDI.
• Sri Lanka lags Vietnam in the World Bank’s ease of doing business ranking as well.

11. External sector – Jan to Sep 19
Research & Development Unit
Source: CBSL
Jan-Sep
2018
Composition
as a % of total
exports/imports
Jan-Sep
2019
Composition
as a % of total
exports/imports
YoY
Growth%
Total Exports 8,897.6 8,983.2 1.0
Industrial exports 6,899.6 77.5% 7,076.9 78.8% 2.6
Textiles and garments 3,927.9 44.1% 4,186.8 46.6% 6.6
Agricultural exports 1,957.7 22.0% 1,868.9 20.8% -4.5
Tea 1,092.8 12.3% 1,025.3 44.4% -6.2
Mineral and other 40.3 0.5% 37.4 0.4% -7.2
Total Imports 16,851.1 14,596.1 -13.4
Consumer goods 3,820.6 22.7% 2,812.0 19.3% -26.4
Food and beverages 1,239.2 7.4% 1,009.3 6.9% -18.6
Non-food consumer goods 2,581.4 15.3% 1,802.7 12.4% -30.2
Vehicles 1,230.6 7.3% 566.5 3.9% -54.0
Intermediate goods 9,412.8 55.9% 8,380.5 57.4% -11.0
Fuel 3,165.1 18.8% 2,930.5 20.1% -7.4
Textiles and textile articles 2,091.6 12.4% 2,127.1 14.6% 1.7
Investment goods 3,544.6 21.0% 3,398.4 23.3% -4.1
Unclassified imports 73.0 0.4% 5.2 0.0% -92.9
Trade Balance (7,953.0) (5,613.0) 29.4

12. BOI aims for USD1.5bn FDI for 2019
Research & Development Unit
• In 2019, the largest number of 65 projects were from the manufacturing sector, including 24
projects in the apparel sector.
• From 2016 to 2019, the BOI approved 465 projects, with 205 projects or 44% coming from
expansions of existing businesses.
• There are also six projects in utilities, which include two petroleum refineries, one of which
has already been approved by the government and a second that the BOI signed.
The estimated investment of these projects was USD 36.4bn with about 94,000 jobs
envisaged. This high number is however due to the two refinery projects and without them
the amount reduces to USD 8.53bn.
The Board of Investment (BoI) is aiming to end the year with USD 1.5bn in
Foreign Direct Investment (FDI), a top official said, with plans to tap into
the bunkering and petrochemical industry, which could potentially earn
Sri Lanka billions in fresh investment over the next five years.

13. Deal signed for strategic
investment in petroleum refinery
Research & Development Unit
Source: Daily FT
The Board of Investment has signed the agreement for Foreign Direct Investment worth
USD 24bn by Hambantota Oil Refinery Ltd.
• The proposed investment is to set up a petroleum refinery with a 420,000 barrels/day
capacity for export markets at Hambantota, which amounts to approximately USD 24 Bn,
over a period of 60 months, making this the largest Foreign Direct Investment (FDI) project to
date.
• The initial phase will involve the commissioning of the petroleum refinery with plans for
development of a petrochemical complex in subsequent phases. Export revenue envisaged
upon commissioning of the refinery is expected to be around USD 8-9 Bn annually

14. New 5-star hotel project to be
developed in Tangalle
Research & Development Unit
The Board of Investment of Sri Lanka has signed an
agreement with LA’ MORE Hotel Ltd. to set up,
conduct and operate a 176 key five-star hotel
project in Tangalle.
The project represents an investment of USD 35mn
and will employ a staff of 355 members at the
property.

15. Apparel industry eyes textile fabric
park
Research & Development Unit
• Sri Lanka Apparel Exporters Association (SLAEA) Chairman Rehan Lakhany told that the industry is
working together with the Board of Investment (BOI) to select land from either Bingiriya or Eravur to
establish a zone or park dedicated for manufacturing and processing of textiles.
• A minimum of five investors will set up at the production plant initially as weaving is not available in Sri
Lanka and it is a requirement in the manufacture of garments.
• The SLAEA chairman also explained that Sri Lanka currently has a few large manufacturers involved in
knitting but at least 70-80% of the fabric continues to remain an imported product.
Sri Lanka’s apparel industry has plans to attract Chinese, Indian investors to establish a
textile processing park as 80% of fabric is today imported in making garments for
exports.

16. One Galle Face mall opens
Research & Development Unit
Shangri-La ceremoniously opened Sri Lanka’s first
internationally developed and managed mixed-use
project- One Galle Face Mall.
The USD 608mn seven-storey mall is home to over
200 tenants of international and local brands which
is also the Group’s biggest venture in South Asia.

17. International

18. Research & Development Unit
Moody’s cuts global sovereign rating
outlook to ‘negative’ for 2020
Source: Reuters
Rating agency Moody’s cut its global sovereign outlook for 2020 to ‘negative’ from ‘stable’,
saying disruptive and unpredictable world politics would slow growth and increase the risk of
economic or financial shocks.
Moody’s, which has already slapped downgrade warnings on Britain, South Africa, India,
Mexico, Turkey and Hong Kong, said there were three main drivers behind the move.
Unpredictable politics and trade wars such as that between the United States and China would
weaken open and commodity-exporting economies.
The increasingly antagonistic environment was also likely to damage global and national
institutions, which together with lower growth, raises the probability of crises but reduces the
capacity to deal with them.

19. Research & Development Unit
Global debt surged to a record USD 250tn
in the first half of 2019, led by the US and
China
Source: CNBC
China and the U.S. accounted for over 60% of the increase. Similarly, Emerging Market debt also hit a
new record of USD 71.4tn (220% of GDP).
Global debt hit a record high of over USD 250tn in
the first half of this year, led by a surge in
borrowings in the U.S. and China, according to a
new report.
The report, released by the International Institute
of Finance (IIF), showed that global debt surged by
USD 7.5tn in the first six months of 2019. The IIF
said the overall number hit USD 250.9tn at the end
of this period, and will exceed USD 255tn by the
end of 2019.

20. China and France sign deals worth USD
15bn
Research & Development Unit
China and France signed contracts totaling
USD 15bn during a visit by President
Emmanuel Macron, a Chinese government
official said.
The two countries also agreed to reach an
agreement by the end of January 2020 on the
cost and location of a nuclear fuel
reprocessing facility to be built by Orano,
formerly known as Areva.
Source: Reuters

21. China is building up its ‘shadow reserves’
to counter its reliance on the US dollar
Research & Development Unit
China is heavily exposed to the U.S. dollar, but now, with the risk of “decoupling,” Beijing is
silently diversifying its reserves to reduce its dependence on the world’s largest reserve
currency, analysts say.
Ongoing trade tensions with the U.S. has “increased the risk of a financial decoupling” between
the two largest economies. The White House reportedly considered some curbs on U.S.
investments in China such as delisting Chinese stocks in the U.S.
Beijing will therefore manage its risk by diversifying its foreign exchange reserves into other
currencies, as well as build up its “shadow reserves.”
As of July, total Chinese foreign exchange reserves stood at around USD 3.1tn.
Source: CNBC

22. Hong Kong confirms economy fell into
recession amid protests, trade war
Source: DCS – Hong Kong, Reuters
Research & Development Unit
Hong Kong sank into *recession for the first
time in a decade in the third quarter,
government data confirmed, weighed down
by increasingly violent anti-Government
protests and the escalating US-China trade
war.
The economy shrank by 3.2% in July-
September from the previous quarter on a
seasonally adjusted basis, revised government
data showed.
With no end to the protests in sight, analysts
warn the financial and trading centre
potentially faces a longer and deeper slump
than during the global financial crisis in
2008/2009 and the SARS epidemic in 2003. * Recession - A recession is a macroeconomic term that refers to a significant decline in general economic activity in
a designated region. It is typically recognized after two consecutive quarters of economic decline, as reflected
by GDP in conjunction with monthly indicators like employment.

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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