Economy on High Alert – ICRA Lanka
Prevailing pandemic induced supply shocks together with import controls may further fuel inflation fears, ICRA Lanka, a fully owned credit rating subsidiary of ICRA Limited of India stated in its April ,economic update. It also stated that the investors may keep factoring this in the Treasury market leading to continued pressure on the yields in the near term.
Financial institutions may re-evaluate their risk appetite if the pandemic situation keeps escalating which could affect the credit growth. “Recovery in the major export market will help to keep the exports around USD 1 Bn mark. But rising commodity prices will make it difficult to keep a lid on the trade deficit,” it stated. Therefore, they emphasise that the top priority for the country at the moment is to get the pandemic situation under control. “Inoculation numbers, daily tests, daily infections and daily deaths are key indices to keep an eye on,” it stated. “The expansion in the services sector experienced lately is expected to be disrupted somewhat in May and beyond as diminished mobility and loss in consumer confidence will be impacting the revenues. Industrial sector, on the contrary, has shown resilience during the previous waves, and therefore expected to perform better than the services sector” ICRA Lanka said.