Services sector to increase growth

The services sector will show good profits this year, especially in segments such as telecommunications, transportation and banking and will contribute significantly to the GDP growth, according to stock market analysts.

Vajira Premawardhana, Executive Director, Lanka Securities Company (Pvt) Ltd noted that the telecommunication firms will rule the roost this year in the services sector.

“Telcos will post good profits this year, because mobile connectivity is fast growing and the CDMA penetration is also fast growing,” he explained. He said that increasing competition in the mobile telecommunications with the entry of the fifth operator, Airtel will drive down the prices where the services will be more affordable to consumers.

Premawardhana said that transportation sector will also see a high growth contributing to the services sector growth in turn. “Ports, freight forwarding and related services will show a good growth backed by the efficiency increase of the port operations. Explaining further, he said that the number of containers processed in SAGT and Sri Lanka Ports Authority (SLPA) terminals has been improved and this together with the value of transhipment containers increase will add to transportation sector growth.

S. Umasudhan, Senior Research Analyst, S.C. Securities pointed out that the economies of scale and advancement of technologies has brought down the cost of handsets and call charges. “Mobile penetration rate in Sri Lanka stands at 19 to 20 percent at present, which is a figure expected to climb up to 40 percent by 2010,” he added.

He said the growth in the banking sector will also contribute to the service sector growth.

“The Commercial Banks pass on the increase in lending rates to the borrowers immediately, while the increase in deposit rates is low. This will propel its growth in the short term,” he said.

Premawardhana said that the overseas operations of banks such as Sampath Bank and Commercial Bank post good profits, which will increase the banking sector growth. “Many of the banks are moving into the small and medium enterprises (SME) sector which is also growing fast. As such the banking sector will show good profits this year,” he explained.