Better business performance expected in 2020-MTI survey
View(s):Nearly 3/4th of Sri Lanka Chief Executives interviewed in a new survey on business performance in 2019 were of the opinion that their businesses performed below expectations last year. In contrast, only 5 per cent of the surveyed CEOs felt that their businesses performed above expectations, indicating a similar trend as in 2018. However a better business performance is expected in 2020.
These results are contained in a MTI CEO Business Outlook Study conducted for the 9th consecutive year by MTI Consulting in partnership with Daily FT, Daily Mirror and the Sunday Times.
The annual survey collated and analysed the perceptions of over 100 Sri Lankan business leaders with regard to their business’ past and expected performance, their predictions regarding the state of the local and global economy in 2020, and the main challenges that they believe Sri Lanka and Sri Lankan companies will face in 2020. According to the survey:
“On average, business leaders in Sri Lanka expect that the global economy will remain subdued in 2020. While nearly half of the surveyed CEOs have noted a negative sentiment towards global economic growth in 2020, 46 per cent of the surveyed CEOs have taken an optimistic view that the global economy is expected to recover or take off in 2020.
The survey results reveal a growing confidence among business leaders for the Sri Lankan economy in 2020 as the statistics supporting acceleration of the Sri Lankan economy is at its highest when analysing survey results with the past years. This is further confirmed with the dramatic drop (from 45 per cent to 7 per cent) in the number of surveyed CEOs who have cited that they expect a decline in the local economy.
More than half of the surveyed CEOs expect the local economy to stabilise in 2020, indicating an overall optimistic view in terms of the Sri Lankan economy in 2020.
72 per cent of the surveyed CEOs have identified that economic policies will be the biggest challenge to their businesses in 2020, followed by political, legal and governance issues – which were a concern for 21 per cent of the respondents.
Other issues cited as business challenges in 2020 were human capital, cost of living and international factors which amounted to 7 per cent of the overall challenges.
Debt repayment and budget deficit were cited as key economic challenges in 2020 as the overall budget deficit was financed largely through domestic sources leading to a significant increase in government debt stock in 2019.
Exchange rate stability and attracting FDI are seen as the 3rd and 4th most challenging economic factors for 2020 respectively. This is mainly attributable to the depreciation of the Rupee and the adverse impact from the Easter Sunday Attacks in April 2019.
Economic stability and growth is the next most concerning economic factor with the effect of recovery in tourism sector. Monetary policy and business confidence were less cited economic challenges for businesses in 2020.
Concern for the lack of political stability, corruption and good governance are the key political challenges that were cited by CEOs for 2020, on the back of key political events such as the Presidential Election which took place in the latter part of 2019 and the upcoming Parliamentary Election in 2020.
Corruption and good governance accounted for 1/4th of the overall challenges highlighted by CEOs, signifying the importance of regenerating business confidence.
A record high of 61 per cent of the surveyed CEOs believe that their businesses will perform better in 2020 compared to 2019. Meanwhile, 36 per cent of the CEOs believed that their business will achieve the same level of growth in 2020 as in 2019.
Only 3 per cent of the business leaders are expecting a lower growth in their business for 2020, indicating the lowest negative outlook since the initial survey in 2012. As a whole, there appears to be a positive outlook for business performance with the expectancy for the recovery in global economy as well as in the local economy in 2020.
The main external challenge cited by the CEOs was economic challenges where many CEOs expressed concern over currency depreciation and inconsistencies in taxation that would lead to a rise in import costs and thus increased costs of living.
Political and regulatory concerns was another key external challenge that was identified due to inconsistent government policies that have been implemented in 2019, the effects of which is expected to continue on to 2020.
The main internal challenge that CEOs expect to face in 2020 is productivity and cost optimisation, especially considering the challenge of keeping costs of operations at a feasible level with the rising cost of imports.
Since the launch of the MTI CEO Business Outlook Survey in 2012, 2020 marks the year in which the most number of surveyed CEOs expressed a more positive outlook in terms of the Sri Lankan economy for 2020.”