Economic Capsule - August 2015

1. Economic Capsule
August 2015
Research & Development Unit
224th
Issue

2. C O N T E N T S
BANKING SECTOR NEWS 
 Commercial
Bank Balangoda Branch Moves to New Eco-Friendly Building
 Commercial Bank Honored at Asia’s Best Employer Brand Awards
 Commercial Bank Rated Most Respected Bank in Sri Lanka for 11th Consecutive Year
 Withdraw eZ Cash at Selected Commercial Bank ATMs Island Wide
 Commercial Bank Launches Low Cost Insurance for Micro Borrowers
ECONOMIC & BUSINESS NEWS 
 SL’s Macroeconomic Challenges: Moody’s
 External Sector Performance – June 15
 Three Major Export Pacts Signed
 ADB to Lend USD 1 bn for SL Education
INTERNATIONAL NEWS 
 The Great Fall of China

3. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
Banking News

4. Commercial Bank Balangoda Branch
Moves to New Eco-Friendly Building
4< Research & Development Unit >
The two-storied custom-built
building has an eco-friendly
architectural design with energy
efficient ‘passive features’ such as
renewable energy from solar
panels and walls with more glazed
windows and fixed glass panels for
maximum utilisation of natural
light, as well as heat gain arresting
devices such as shades and fins
that facilitate power saving.
The Commercial Bank of Ceylon has developed a new eco-friendly model for
branches in buildings owned by the Bank, in yet another initiative to align its
operations with the needs of the planet.

5. Commercial Bank Honored at
Asia’s Best Employer Brand Awards
5< Research & Development Unit >
The bank received the award for Asia’s
Best Employer Brand and the award for
Talent Management at this gala event
hosted by the Employer Branding
Institute in association with the World
HRD Congress and the Stars of the
Industry Group, with endorsement from
the Asian Confederation of Businesses
Commercial Bank’s status as one of the best employers and HR
practitioners in Sri Lanka was reaffirmed recently with two prestigious
international awards at the sixth Asia Best Employer Brand Awards in
Singapore.

6. Commercial Bank Rated Most Respected
Bank in Sri Lanka for 11th Consecutive Year
6< Research & Development Unit >
 The Commercial Bank of Ceylon has been rated the most respected bank in
Sri Lanka for the 11th consecutive year and the second ‘Most Respected’
corporate entity in the country overall for the fifth successive year in the 2015
LMD rankings of the Most Respected Entities in Sri Lanka.
 The Bank has also been ranked No 1 in Sri Lanka for ‘Honesty’ for the third
consecutive year, No 1 in Financial Performance and in the top five in several other
areas of evaluation.
 The only bank among the top five Most Respected entities in Sri Lanka in 2015,
Commercial Bank has been ranked second overall in Management Profile, third
overall in Quality Consciousness, fourth overall in Innovation, Corporate Culture
and Vision and fifth among all entities in Dynamism and CSR.

7. Withdraw eZ Cash at Selected Commercial Bank
ATMs Island Wide
7< Research & Development Unit >
 Sri Lanka’s largest private sector bank, Commercial Bank of Ceylon PLC, has
opened up 40 selected ATMs island wide to the eZ Cash mobile money
network, enabling mobile wallet holders to withdraw money at any time.
The service will be extended to all ATMs of Commercial Bank in the near
future.
With this facility, eZ Cash account holders can withdraw cash from their
mobile wallets at any Commercial Bank card-less ATMs, to a minimum value
of Rs. 100 rupees and a maximum of Rs. 5,000 in a single transaction.
Commercial Bank Launches Low Cost Insurance for Micro Borrowers
 A low cost insurance scheme that will protect micro borrowers has
been launched by Commercial Bank of Ceylon in association with
two insurance companies,Ceylinco Insurance and BIMA.
 The policy will cover the borrowers against accidental death or
permanent disability, compensate for loss of income due to
hospitalisation and also contribute towards funeral expenses.

8. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
Economic & Business
News

9. 9 < Research & Development Unit >
 In an environment of slowing global growth, political gridlock in the first
half of this year dampened business confidence, leading to a reversal of
capital flows, according to Moody‘s.
 As a small economy with a current account deficit, a continued decline in
capital inflows would have hurt Sri Lanka’s balance of payments position
with the potential to negatively affect domestic growth as well.
 Net portfolio investment into Sri Lanka declined in the first quarter of
2015, partly reflecting market pessimism about the direction of
policymaking and its effect on Sri Lanka’s macroeconomic prospects.
 Sri Lanka’s growth, was robust compared to peers but debt was high.
SL’s Macroeconomic Challenges: Moody’s
Cont..

10. 10 < Research & Development Unit >
SL’s Macroeconomic Challenges: Moody’s (cont…)
Cont..

11. 11 < Research & Development Unit >
 Government policies are increasingly important in addressing
Sri Lanka’s macroeconomic challenges, which stem from high
government debt, subdued international trade, and the potential for
capital outflows from emerging markets ahead of an increase in
interest rates by the US Federal Reserve and China’s slowing economy.
 Sri Lanka has a high current account deficit largely due to net financial
inflows.
 Analysts have pointed out that every few years, the country is driven
to balance of payments crises by large and continued injections of
liquidity into the banking system by the Central Bank which widens
the current account deficit to over and above inflows.
SL’s Macroeconomic Challenges: Moody’s (cont…)

12. External Sector Performance – June 15
12 < Research & Development Unit >
May 14
USD Mn
May 15
USD Mn
Growth
%
Jan-May 14
USD Mn
Jan-May 15
USD Mn
Growth
%
Total Exports 985.7 944.1 (4.2) 5,449.9 5,415.5 (0.6)
Textiles and garments 446.2 424.3 (4.9) 2,412.9 2,405.4 (0.3)
Transport equipment 5.9 30.0 411.1 62.0 208.0 235.3
Tea 152.6 121.9 (20.1) 797.0 682.9 (14.3)
Total Imports 1,439.4 1,633.3 13.5 8,985.0 9,501.3 5.7
Vehicles 56.4 118.5 110.1 302.9 596.5 97.0
Fuel 412.4 241.9 (41.3) 2,460.7 1,427.9 (42.0)
Trade Balance -453.7 -689.2 51.9 -3,535.2 -4,085.8 15.6
Weaker demand for tea in
main markets Russia
(29%) Middle East
(24%)
Increase due to
export of a cruise ship
to India
Decrease due to
Decline in oil prices in
international markets.
Increased due to higher
importation of motor cars and
motor cycles, and vehicle
imports for business purposes
Cont..
Source: CBSL

13. External Sector Performance – June 15’ (cont…)
13 < Research & Development Unit >
 Exports: Earnings from exports in June 2015 amounted to USD 944 mn, recording a
decline of 4.2 % (y-o-y).
Despite the significant improvement in earnings from exports of transport
equipment, petroleum products and spices, lower earnings from tea, textiles and
garments, rubber products and seafood exports contributed to this decline.
 Imports: Expenditure on imports in June 2015 increased by 13.5 % (y-o-y), to USD
1,633 mn.
This growth was led by vehicle imports for personal usage categorised under
consumer goods, which increased by 110.1 % due to higher importation of motor
cars and motor cycles, and vehicle imports for business purposes categorised under
investment goods, which increased by 238.6 % due to higher importation of auto
trishaws and other motor vehicles.
Cont..

14. External Sector Performance – June 15’ (cont…)
14 < Research & Development Unit >
 Overall BOP Position: the overall BOP is estimated to have recorded a deficit of
USD 791.7 mn during the first six months of 2015 in comparison to a surplus of
USD 1,954 mn recorded during the corresponding period of 2014.
 International Reserves: Sri Lanka’s gross official reserves stood at USD 7.5 bn as at
end June 2015, equivalent to 4.5 months of imports, which included proceeds from
the latest International Sovereign Bond and Sri Lanka Development Bond
issuances. However, gross official reserves are estimated at USD 6.9 bn as at end
July 2015.

15. Three Major Export Pacts Signed
15 < Research & Development Unit >
 The Export Development Board has signed three Asian
cooperation pacts with with Hong Kong's HKTDC, Korea's
KOTRA and Thailand's DITP in Colombo advancing further on
its market diversification efforts on Asia.
 The three MoUs have almost the same outlook and promote
cooperation between companies, economic and trade
institutions of both countries, sharing of information on
important economic, trade and legal issues, provision of
information on business opportunities and related regulations,
exchanging trade missions between representatives of
relevant industries, conducting business matchmaking (B2B)
and supporting trade, industrial fairs, business seminars,
forums, and conferences for the partnering TPO.

16. ADB to Lend USD 1 bn for SL Education
16 < Research & Development Unit >
 Lending for education will be more than tripled to
USD 1 billion for the next five years.
 Lending for education will include support for skills
development for which the ADB will give USD 300
mn, higher education which will get USD 300 mn, and
secondary education which will get USD 400 mn.
 The Asian Development Bank (ADB) will triple lending to modernise
Sri Lanka’s education sector to support the government commitment
to focus on human capital development and improve economic
competitiveness.

17. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
International News

18. The Great Fall of China
18 < Research & Development Unit >
 Stomachs are churning again after
China’s stockmarket endured its
biggest one-day fall since 2007;
even Chinese state media called
August 24th “Black Monday”.
 From the rand to the ringgit,
emerging-market currencies
slumped. Commodity prices fell into
territory not seen since 1999.
 The contagion infected Western markets, too. Germany’s DAX index fell to
more than 20% below its peak. American stocks whipsawed: General
Electric was at one point down by more than 20%.
Cont..

19. The Great Fall of China (cont…)
19 < Research & Development Unit >
 Rich-world markets have regained some of their poise. But three fears
remain: that China’s economy is in deep trouble; that emerging
markets are vulnerable to a full-blown crisis; and that the long rally in
rich-world markets is over. Some aspects of these worries are
overplayed and others are misplaced.
 Around $5 trillion has been wiped off global equity markets since the
yuan devalued earlier this month.
 That shift, allied to a string of bad economic numbers and a botched
official attempt to halt the slide in Chinese bourses, has fuelled fears
that the world’s second-largest economy is heading for a hard landing.
 Exports have been falling. The stockmarket has lost more than 40%
since peaking in June. Cont..

20. The Great Fall of China (cont…)
20 < Research & Development Unit >
 The property market is far more important to China’s economy
than the equity market is. Property fuels up to a quarter of GDP
and its value underpins the banking system; in the past few months
prices and transactions have both been healthier.
 China’s future lies with its shoppers, not its exporters, and services,
incomes and consumption are resilient. After a cut in interest rates
this week, the one-year rate still stands at 4.6%.
 China is not in crisis. However, its ability to evolve smoothly from a
command to a market economy is in question as never before.
Source: The Economist

21. 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 >
Take pride in what you do,
don't be afraid to lose when you
are searching for a win.
Kumar Sangakkara