Economic Capsule - March 2016

1. Economic Capsule
March 2016
Research & Development Unit
231st Issue

2. C O N T E N T S
BANKING AND FINANCE 
 Global Finance(USA) names Commercial Bank ‘Best Bank in Sri Lanka’ for 17th time
 Commercial Bank Introduces e-passbook on Mobile Phone
 Commercial Bank opens Agriculture & Micro Finance Unit in Neluwa
ECONOMY & BUSINESS 
 Port City gets Approval
 Sri Lanka Economy Grows by 4.8% in 2015
 Sri Lanka – Rating Actions
 Rising Capital Outflows
 US Federal Reserve holds interest rates
 Bank holds UK interest rates at 0.5%
 "Brexit“
 Oil Prices
 World Happiness Index 2016

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

4. 4< Research & Development Unit >
Global Finance(USA) names Commercial
Bank ‘Best Bank in Sri Lanka’ for 17th time
 One of the world’s leading financial magazines has rated
Commercial Bank the Best Bank in Sri Lanka, reaffirming
the Bank’s status as the leader in its field for an emphatic
17th year.
 Global Finance’s 2016 list of the world’s 25 Best Emerging
Markets Banks in Africa, Asia-Pacific, Central & Eastern
Europe, Latin America and the Middle East, names
Commercial Bank alongside some of the leading banks in
these regions.
 Criteria for choosing the winners included growth in assets,
profitability, strategic relationships, customer service,
competitive pricing, and innovative products. In addition, a
poll of Global Finance’s corporate readership was
conducted in order to increase the accuracy and reliability
of the results, according to the magazine.

5. 5< Research & Development Unit >
Commercial Bank Introduces e-Passbook
on Mobile Phone
Learn more
 A breakthrough digital virtual mobile application offered free by the
country’s largest private bank enables account holders to have a real-
time view of transactions of the past 30 days on their mobile phones
or tabs anytime, anywhere.
 The e-Passbook is able to display account history as in a standard
savings passbook or a current account statement. It offers users real-
time tracking of account transactions of the last 30 days, and can be
used as a single repository for multiple accounts enrolled by an
account holder for the facility, with the capability to view each
account separately.
Commercial Bank has broken new ground in technology-enabled
convenience by becoming the first bank in Sri Lanka to offer customers an
e-Passbook that provides access to details of savings, current, NRFC and
RFC accounts on Android and iOS powered mobile devices.

6. 6
Commercial Bank opens Agriculture &
Micro Finance Unit in Neluwa
< Research & Development Unit >
Commercial Bank opened its 14th Agriculture &
Micro Finance Unit (AMFU) at Neluwa in the Galle
District to facilitate the Bank’s efforts to support
micro, small and medium entrepreneurs in the area
including commercial scale agriculture
entrepreneurs.
Commercial Bank’s Agriculture & Micro Finance Units play a key role in helping the Bank
identify specific needs of people who require assistance to develop either their agricultural
activities or small businesses, and are dedicated to promoting agriculture related lending
and micro finance and resolving difficulties. These units also conduct programmes to
enhance domain knowledge and financial literacy among entrepreneurs in the target
segments.

7. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
Economy & Business

8. 8< Research & Development Unit >
Port City gets Approval
 Sri Lanka's cabinet had granted approval for
China Communication Construction
Company (CCCC) to resume the biggest
foreign direct investment project in the
country after suspending it in March 2015.
 According to CHEC Port City Colombo (Pvt)
Ltd, which handles the project for CCCC , the
suspension had resulted in significant losses.
CCCC had estimated in March last year that
the shutdown would result in losses of more
than $380,000 a day.
 The original deal involved 269 hectares of
land being reclaimed, including 108 hectares
assigned to the Chinese investor, of which 20
hectares was granted on a freehold basis.
Source: Reuters

9. 9< Research & Development Unit >
Sri Lanka Economy Grows by 4.8% in 2015
GDP and Sector Growth Rates [at constant (2010)
market prices]
2011 2012 2013 2014 2015
Agriculture 8.2 7.8 7.8 7.8 7.9
Industries 26.9 26.8 27.0 26.7 26.2
Services 54.9 55.9 56.2 56.3 56.6
Percentage Shares of GDP [at constant (2010)
market prices]
Sri Lanka gross domestic product grew 4.8 % in 2015 slowing from 4.9 % from 2014, with the fourth
quarter growing by 2.5 %. This 4th quarter growth rate follows quarterly growth rates of 4.4%, 7% and
5.6% recorded for the 1st, 2nd and 3rd quarters respectively in 2015. The fastest growth sectors for
2015 were finance and information technology.
Source: Department of Censes and Statistics
Cont..
Source: Department of Census and Statistics

10. Sector Growth Rates [at constant (2010) market
prices, 2011 to 2015]
< Research & Development Unit >
Cont..
Source: Department of Census and Statistics

11. Percentage Shares of GDP at current market
prices, 2010 to 2015
< Research & Development Unit >
Source: Department of Census and Statistics

12. 12< Research & Development Unit >
Sri Lanka – Rating Actions
Present Previous
Rating Outlook Rating Outlook
Fitch B+ Negative BB- Stable
S&P
B+
(No Change)
Negative B+ Stable
Source: Fitch, S&P
Cont..

13. 13< Research & Development Unit >
Sri Lanka: Concerns Raised by Rating
Agencies
Fitch S&P Moody’s
 Increasing refinancing risks
 Significant debt maturities
 Weaker public finances
 Decline in foreign-exchange
reserves
 Foreign-currency debt
portion remains high
 Rising pressure on Sri
Lanka's external liquidity
 Short-term capital outflows
that have eroded the
country’s reserve buffers.
 Country's weakened public
finances.
 Sri Lanka rising non-
resident deposits and
foreign debt has increased
the country’s external
vulnerability to above
similarly rated countries
 The country’s low revenue
base is a key constraint on
fiscal consolidation.
Source: Fitch, S&P and Moody’s

14. 14< Research & Development Unit >
Rising Capital Outflows
Government Securities held by Foreigners
 Foreign investors have sold about USD 200mn
worth of rupee denominated Treasury bills
over the past two weeks, accelerating sales
which slowed for a few weeks.
 Foreign investor holdings of Sri Lanka rupee
bonds which were at Rs 267.8 bn on March
02, down from Rs 268.8 bn a week earlier, fell
to Rs 247 bn on March 09 and to Rs 237 bn on
March 16.
 Since the beginning of the year foreign
investors have sold about USD 450mn worth
of bonds.
 Meanwhile, foreign investors were net sellers
of USD 1.8mn worth of equities so far this
year (up to 11th March, 2016).
Cont..
Source: Central Bank of Sri Lanka

15. 15< Research & Development Unit >
Rising Capital Outflows (cont..)
 Meanwhile, emerging markets had net
capital outflows of $735 bn in 2015, up
from $111 bn in 2014 and more than
previously forecast, and are expected to
see $448 bn of outflows including errors
and omissions in 2016, according to IIF.
 The Washington-based group, an
authoritative source of data on
investment flows to and from the
developing world, stated that heavy
outflows from China, which reflect
currency and growth worries, were the
driving factor behind the losses in 2015.
China had $676 bn in outflows in 2015,
according to IIF.

16. Condominium Industry
in Sri Lanka
October, 2014
Global Economic Update

17. US Federal Reserve holds interest rates
 The US Federal Reserve has decided to keep
interest rates at between 0.25% and 0.5%.
 According to the central bank the labour market
was strengthening, but it was still looking for
inflation to reach its 2% target and expected the
US economy to continue to "expand at a
moderate pace"
 The US central bank last raised rates in
December, saying it expected to raise rates four
times in 2016.
 It now says it expects to raise rates just twice this
year.
 In a statement, the Fed's Open Market
Committee - which decides the level of interest
rates – stated that while the US economy was
seeing some improvement, weaker global
markets were having a dampening effect.
Bank holds UK interest rates at 0.5%
 UK interest rates have been held at 0.5%
once again by the Bank of England.
 All nine members of the Bank's Monetary
Policy Committee (MPC) voted to keep
rates at their record low, where they have
now been for seven years.
 The decision to freeze rates comes amid
worries about global growth and
uncertainty ahead of the EU referendum.
 The Bank stated that uncertainty in the run-
up to the referendum on EU membership -
to be held on 23 June - had hit the sterling,
and that UK economic growth could slow.
17

18. 18< Research & Development Unit >
On February 20th David Cameron, Britain's Prime Minister, set
June 23rd as the date for a referendum on the country’s
membership of the European Union.
The move immediately prompted government ministers to
declare their backing for either the “remain” or “leave”
campaigns. Mr Cameron strongly believes in the benefits of
continued EU membership, but a handful of high-profile MPs,
have pledged support for the “out” campaigners.
In early 2015 the chances of ”Brexit”— Britain departing from
the European Union—seemed remote. Today, largely because
of Europe’s migration crisis and the interminable euro mess,
the polls have narrowed. Some recent surveys even find a
majority of Britons wanting to leave.
"Brexit"
Source: The Economist

19. 19< Research & Development Unit >
“Brexit” (Cont…)
 A UK exit from the EU would cause a "serious economic shock", potentially costing
the country £100bn and nearly one million jobs, according to a report
commissioned by the CBI (The Confederation of British Industry).
 According to the business lobby group a study found that a vote to leave would
have "negative echoes" lasting many years.
 It said the cost could be as much as 5% of GDP and 950,000 jobs by 2020.

20. 20< Research & Development Unit >
Source: The Economist
 Crude prices got a heady start after Qatari
oil minister Mohammed Bin Saleh Al-Sada
stated that producers from within and
outside the Organization of the
Petroleum Exporting Countries will meet
in Doha on April 17 to discuss output
freeze plans.
 Around 15 OPEC and non-OPEC
producers, accounting for about 73 % of
global oil output, support the initiative,
according to the minister.
 Since the freeze was first proposed in
February, prices have recovered about
50 % from decade-low levels but been
volatile without a firm meeting date.
Oil Prices

21. 21< Research & Development Unit >
World Happiness Index 2016
 Denmark overtook Switzerland as the world's happiest
place, according to World Happiness Report 2016 that urge
nations regardless of wealth to tackle inequality and
protect the environment.
 The report, prepared by the Sustainable Development
Solutions Network (SDSN) and the Earth Institute at
Columbia University, showed Syria, Afghanistan and eight
sub-Saharan countries as the 10 least happy places on
earth to live.
 The report found that inequality was strongly associated
with unhappiness - a stark finding for rich countries like the
United States, where rising disparities in income, wealth,
health and well-being have fueled political discontent.
Sri Lanka has climbed
15 places to rank at
117 position (out of
157 countries) in the
World Happiness
Report. Sri Lanka was
ranked at No. 132 in
the report published in
2015.

22. 22< Research & Development Unit >
World Happiness Index 2016 (cont..)
Source: World Happiness Report 2016

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. < Research & Development Unit >