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1. Economic Capsule
December 2019
276th
Issue
Research & Development Unit
Economic Capsule
September 2021
296th Issue

2. C O N T E N T S
BANKING & FINANCE
 ‘Flash’ Digital Bank Account named ‘Digital Banking Initiative of the Year’
 ComBank introduces banking services via Viber to Sri Lanka
 Q+ Payment App upgraded with ‘Online Pay’ feature
 ComBank enables bill payments via Cash Recycler Machines
ECONOMY & BUSINESS
 Sri Lanka GDP grows 12.3% in June 2021 quarter
 CBSL decides to impose a 100% cash margin deposit requirement
 CB’s monetary stimulus since pandemic’s onset amounts to whopping Rs.2.7tn
 Tourism industry debt moratorium extended by nine months
 Sri Lanka off UK’s Red List from 22 Sep
 Renewable energy sector poised to receive USD 200mn inflows over next 6-8 months
 Sri Lanka’s Manufacturing PMI – Aug 2021
 Sri Lanka’s Services PMI – Aug 2021
 News Snippets
INTERNATIONAL
 Global Inflation Spike Seen Posing Near-Term Risks to Economy
 China’s embattled developer Evergrande is on the brink of
default
 UK energy firms seek state support to weather gas crisis

3. Banking & Finance

4. ‘Flash’ Digital Bank Account named ‘Digital
Banking Initiative of theYear’
Research & Development Unit
‘Flash’ – the Digital Bank account powered by
Commercial Bank of Ceylon, has been presented
the award for the ‘Digital Banking Initiative of the
Year’ in Sri Lanka at the 2021 Asian Banking and
Finance (ABF) Awards under the ‘Retail Banking
Awards – Supporting Projects’ category.
The award was bestowed in recognition of recent innovations to improve and develop
the ground-breaking Flash Account which enables customers to enjoy a complete suite
of financial services and wealth management tools in one seamless application.

5. ComBank introduces banking services viaViber
to Sri Lanka
Research & Development Unit
With the launch of this service, Viber users can benefit from
uninterrupted banking services any day of the week,
including on holidays, from wherever they are, the Bank said.
‘Bank with ComBank on Viber’ eliminates the need for
customers to visit a Commercial Bank branch for basic
banking services.
The Commercial Bank of Ceylon has become the first bank in
the country to launch a facility that enables the Bank’s
account holders and non-customers alike to seamlessly enjoy
real-time banking services delivered through an interactive
artificial intelligence (AI) chatbot on Viber.

6. Q+ Payment App upgraded with ‘Online Pay’
feature
Research & Development Unit
Commercial Bank has announced that it has enabled an
innovative payment experience for the Bank’s Q+ customers
called ‘Q+ online Pay’ in the Q+ Payment App, the fastest-
growing payment app in Sri Lanka.
This feature enables Q+ customers to pay for online purchases
by entering their mobile numbers in merchant websites and
apps that have ‘ComBank Q+’ as a payment option.
This state-of-the-art payment method allows users to keep their sensitive card and account details away from
merchant platforms. ComBank Q+ Payment App users are required only to enter a mobile number at the point of
purchase.
Once the customer concludes the transaction by entering the mobile number at the merchant website, a payment
notification immediately appears in the customer’s Q+ Mobile App. By clicking the notification, the customer is
directed to the Q+ ‘Online Pay’ tab, where the payment is confirmed by entering a 4-digit PIN. Once the payment is
confirmed by the customer, the merchant is notified whether the transaction is approved or not.

7. ComBank enables bill payments via Cash
Recycler Machines
Research & Development Unit
Commercial Bank in partnership with Sri Lanka’s leading utility companies, mobile
operators and insurance companies has launched a bill payment facility through its
state-of-the-art Cash Recycler Machine (CRM) network, enabling customers to make
their payments conveniently and securely.
The Bank said its 265 Cash Recycler Machines spread across the country are equipped
with many features that provide 24-hour super-convenient service to customers and
are the modern-day mini Banks that provide all kinds of day-to-day banking services to
its customers.
A simple to use three-step process ensures that a customer completes the bill payment
transaction seamlessly within a couple of minutes, the Bank said.

8. Economy &
Business

9. Research & Development Unit
Sri Lanka GDP grows 12.3% in June 2021
quarter
Sri Lanka’s gross domestic product grew 12.3 % in the June 2021
quarter from a low base in 2020, when the economy contracted
16.4% in the worst fall in recorded history amid a Coronavirus
lockdown, the state statistics office said.
Agriculture grew by 8.1% , industry grew by 22.1% and services
grew by 7.5%.
Source: DCS

10. CBSL decides to impose a 100% cash margin
deposit requirement
Research & Development Unit
The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 08
September 2021, decided to impose a 100% cash margin deposit requirement against
the importation of selected goods of non-essential/non-urgent nature made under
Letters of Credit and Documents against Acceptance terms with Licensed Commercial
Banks and National Savings Bank, with immediate effect.
The decision to impose the cash margin deposit requirement is expected to support
the ongoing efforts to preserve the stability of the exchange rate and foreign currency
market liquidity, particularly by discouraging excessive imports of speculative nature.
Source: CBSL
For more : https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_20210909_margin_deposit_requirement_of_importation_under_LC_e.pdf

11. CB’s monetary stimulus since pandemic’s onset
amounts to whopping Rs.2.7tn
Research & Development Unit
The Central Bank’s monetary easing measures have unleashed a whopping Rs.3.0tn worth of stimulus
into the broader economy since March 2020 through June 2021, with the objectives of alleviating the
full impact of the pandemic on the economy.
Although part of the stimulus programme was rolled back on August 19, the Central Bank said its various
easing actions and macro-prudential measures put in place to ensure the markets remain adequately
liquid and money supply is maintained at a healthy level, have resulted in an estimated Rs.2, 736bn
worth of direct benefits to the economy.
This full benefit was generated at Rs.1, 607bn in 2020 and Rs.1,129bn in the six months
through June 2021.

12. Tourism industry debt moratorium extended
by nine months
Research & Development Unit
The tourism sector impacted by the COVID-19 pandemic has been
given additional support with the Central Bank (CB) extending the debt
moratorium by a further nine months until June 2022.
The existing relief was to expire on 30 September. The latest extension
is longer by nine months as opposed to the previous move of six
months.
The Central Bank said the extension was provided with a view to
enabling the industry to meet the challenges faced by businesses and
individuals engaged in the tourism sector due to the ongoing COVID19
pandemic.
In 2019, tourist arrivals fell to 1.9mn from 2.3mn in 2018, while earnings dipped to USD 3.6bn from USD 4.4bn. In
2020, arrivals plunged to 508,000 and earnings to USD 682mn.
In the first eight months of 2021, there had been only 24,377 tourists, with arrivals in August rising to 5,040,
highest since the re-opening of borders.

13. Sri Lanka off UK’s Red List from 22 Sep
Research & Development Unit
Sri Lanka will be removed from the red list of the United
Kingdom (UK) with effect from next Wednesday (22), the
UK government said, in a move that is likely to see the
return of high spending tourists visiting the island
nation.
Sri Lanka has been in the red list since June 08, as part of
a group of countries the UK government has defined as
particularly high-risk for new and emerging strains of
SARS-CoV-2, the virus that causes COVID-19. British
passport holders visiting red list countries have to spend
more money and time on quarantine.
Sri Lanka, Turkey, Pakistan, the Maldives, Egypt, Oman, Bangladesh and Kenya will be removed from the red list
from September 22, before it switches to a simpler two-tiered travel system from the current three-tiered traffic
light system, allowing for fully-vaccinated persons to travel with simple and cheaper rules, it said.

14. Renewable energy sector poised to receive
USD 200mn inflows over next 6-8 months
Research & Development Unit
Sri Lanka’s renewable energy sector is likely to see USD 200mn worth of foreign inflows to the
sector, through the banking sector over the next six to eight-month horizon, as the government
moves to commit for 70% power generation through renewable energy sources by 2030.
The Cabinet of Ministers approved the country’s revised Nationally Determined Contributions
(NDCs) under the Paris Climate Agreement, recently. According to the revised NDCs, the country
commits for 70% power generation through renewable energy sources by 2030, with a long-term
target to achieve carbon neutrality for the power sector in 2050.
Under the new policy, the solar industry is given a target to increase its installed capacity to the
2700 MW target by 2030, from the current 400 MW. Consequently the industry to contribute to
save foreign exchange outflows worth of USD 540mn per annum, compared to the current USD
90mn per annum.

15. Sri Lanka’s Manufacturing PMI – Aug 2021
Research & Development Unit
The resurgence of the COVID-19 pandemic in August 2021 has slowed down the
manufacturing activities in the country. Accordingly, the manufacturing PMI
recorded an index value of 45.1 in August 2021 with a fall of 12.7 index points
from the previous month, mainly driven by the decrease in New Orders,
Production, Employment, and Stock of Purchases sub-indices.
The manufacturers cautioned that the uncertainty
over the COVID-19 pandemic would continuously
hinder the prospects of the manufacturing sector, yet,
overall expectations for manufacturing activities for
the next three months remained above the neutral
threshold.

16. Sri Lanka’s Services PMI – Aug 2021
Research & Development Unit
Services PMI dropped to an index value of 46.2 in August 2021 with the
restrictions imposed to contain the further spread of the COVID-19. New
Businesses, Business Activity, Employment and Expectations for Activity
sub-indices recorded declines.
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

17. Research & Development Unit
Prolonged ban on vehicle imports continues to
dampen finance and leasing company earnings
The prolonged restrictions on vehicle imports will continue to dampen the
growth and profits of the finance and leasing company (FLC) sector, which has
already been grappling with a multitude of challenges, including degrowth and
sour asset quality.
According to Fitch Ratings, vehicle leasing accounted for around 53 percent of
total loans of the FLC sector by the end of June 2021—down from 55 percent in
FYE 2019— but the actual exposure would be higher as a significant share of
term loans is also backed by vehicles as collateral.
“Restrictions on vehicle importation will continue to constrain the growth
prospects of Sri Lankan FLCs, dampening prospects for the sector’s earnings,”
the rating agency said in a note .
News Snippets
Central Bank removes maximum acceptable rate for
T-bills
The Central Bank (CB) has removed the maximum acceptable rate (364-day T-bills) at
the T-bill auction after one year, as it was not successful in attracting bids for the
auction, due to this restriction.
“The possible subscription of T-bills going forward with this removal, would likely
restrict the excessive money printing which otherwise contributed largely towards
growing inflation, forex depletion and reserve losses,” National Lanka Equities said in a
brief research note.
Sri Lanka Tourism comes up with ‘Couch Safari’
second edition
Sri Lanka Tourism is gearing to unveil the second edition of ‘Couch Safari’ by
live-streaming the Wilpattu National Park to the global audience.
A virtual tour of the Wilpattu National Park is scheduled for 24 and 26
September to promote the wildlife of the island nation while offering a glimpse
of the experience the destination has to offer once fully open for tourism.
ICTA launches 10,000 Ideas initiative to boost SL’s tech
ecosystem
Sri Lanka yesterday saw the launch of its first-ever national
‘technovation’ programme ‘10,000 Ideas’, an effort that is aimed at
connecting entrepreneurs to the larger entrepreneurship ecosystem.
Facilitated by the Information Communication Technology Agency (ICTA),
the 10,000 Ideas initiative is conceptualized to help entrepreneurs, youth
and students to take their innovative business ideas to next level.
The 10,000 Ideas will essentially help start-ups that have passed the
ideation phase and are looking to kick start their businesses.
The programme aims to cater to university and school students who are
keen to start their own businesses

18. International

19. Research & Development Unit
Global Inflation Spike Seen Posing Near-Term Risks
to Economy
Global central banks need to set out
clear strategies for coping with inflation
risks as the world economy experiences
faster-than-expected cost increases
amid an uneven recovery from the
pandemic, the OECD said.
While new restrictions to contain the
spread of the delta variant are weighing
on activity in some regions, supply-chain
difficulties and surging commodities
prompted the Paris-based organization
to raise its forecast for consumer-price
gains this year and next in every Group
of Seven country aside from Japan.
Source: CNBC

20. China’s embattled developer Evergrande is on
the brink of default
Research & Development Unit
Chinese property giant Evergrande is on the brink of
collapse, and analysts warn the potential fallout could
have far-reaching implications that spill outside China’s
borders.
“Evergrande’s collapse would be the biggest test that
China’s financial system has faced in years,” says Mark
Williams, chief Asia economist at Capital Economics.
Source: CNBC
After expanding rapidly for years and snapping up assets as
China’s economy boomed, Evergrande is now snowed under a
crushing debt of USD 300bn.
The world’s most indebted property developer has been
scrambling to pay its suppliers, and warned investors twice in
as many weeks that it could default on its debts.

21. UK energy firms seek state support to weather gas
crisis
Source: CNBC
Research & Development Unit
Britain's biggest energy companies have asked the government for support to help
cover the cost of taking on customers from firms that have gone bust due to soaring
wholesale gas prices, sources in the companies said, as fears of a food supply crunch
rise.
Wholesale gas prices have soared in recent months as economies reopen from
COVID-19 lockdowns and high demand for liquefied natural gas in Asia pushed down
supplies to Europe, leading a shortage of carbon dioxide (CO2) in the food industry.
The rise in prices has already forced four small energy suppliers to cease trading in
recent weeks

22. 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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