‘Brandix Cluster casts long shadow over faster economic recovery’ | Daily News

‘Brandix Cluster casts long shadow over faster economic recovery’

The GoSL was expected to pay down over USD 990 Mn of forex debt in September which may have been primarily financed via the CBSL reserves.
The GoSL was expected to pay down over USD 990 Mn of forex debt in September which may have been primarily financed via the CBSL reserves.

‘Minuwangoda cluster casts long shadow over prospects of faster recovery ‘

Recent string of infections related to the Minuwangoda (Brandix) cluster and other pockets around the country has cast a long shadow over prospects of faster recovery, ICRA Lanka in their ‘September Economy at a glance’ review said.

It also poses a bleaker outlook for industrial exports, which is the need of the hour to accumulate reserves and protect the value of the currency.

The activities in the industrial and services sector seemed to have flattened out and operating with a slack, as seen from leveled demand for power. Money market operated with thin volumes amid rate volatility. Excess liquidity was high but likely to be asymmetrically distributed among banks. Pressure for treasury yields to rise resulted in several sloppy auctions. The CBSL injected more liquidity via reverse repos and T-bill purchases to normalize the liquidity dip.

Moody’s downgrade has pushed up the yields and widened the bid-ask spreads of treasuries and ISBs. AWPR is downward sloping but due to pressure on yields, rose by~20 bps during the latter part of the month.

Over Rs 1.2 billion foreign capital flew back to G-secs on the 2nd and 3rd weeks of September on the back of improved risk appetite of the investors due to optimistic US and China economic recovery.

Exports and remittances marked USD 947 million (-8.3%, Y-o-Y) and USD 664 million (28.2%, Y-o-Y) correspondingly in August. Import restrictions helped to keep the trade deficit in check. In September, exports bounced back surpassing USD 1 billion(5.16%, Y-o-Y) with apparels and commercial crops leading, while Europe and US being the top markets.

Tea prices remained buoyant in September; however the quantity sold was on the decline while Rubber prices rally continued in September on the back of demand for protective equipment.

CCPI Headline inflation slipped to 4.0% (Y-o-Y) in September driven by the mild non-food inflation which is under 1%. Food inflation declined but remains at double digits. Domestic equity investors were upbeat in September and the record performance of ASPI lifted it back to the pre-crisis level. Nevertheless, the enthusiasm of domestic investors was not shared by the foreign investors, who sold down over Rs 10 bilion stocks.