From Left: Asia Securities Research Manager Mangalee Goonetilleke, Singer Sri Lanka PLC Managing Director Asoka Pieris, Nielsen Sri Lanka Managing Director Sharang Pant, John Keells Holdings PLC Consumer Foods Sector President Jitendra Gunaratne and Hemas Manufacturing (Pvt.) Ltd Managing Director Roy Joseph
Pic by Nisal Baduge

By Chandeepa Wettasinghe
The private sector recently called on the government to increase the efficiency of propaganda on its economic policies in order to boost consumer confidence, since consumer spending appears to be taking a hit due to successful opposition propaganda.

“The VAT (value-added tax) increase is not a huge number but it’s a huge monster in the minds of the people because of the inefficiency of government propaganda mechanisms and the efficiency of opposition propaganda mechanisms,” Singer Sri Lanka PLC Managing Director Asoka Pieris said.
Speaking at an Asia Securities (Pvt.) Ltd insights seminar on consumer retail, he further added that the rupee devaluation in 2015 had forced retailers to increase prices by 10 percent, compared to a 4 percent increase in VAT.  
Massive government subsidies, wage increases and other election goodies given away during the January 2015 interim budget had helped keep consumption high during 2015. “The retail companies are trying to make consumers happy, which is what the government should be doing,” Pieris added. Asia Securities Research Manager Mangalee Goonetilleke noted that though some retailers increased prices during the VAT hike from May-July, more products will see price increases in the coming months since the bill is now firmly in place. Meanwhile, the lead up to the 2017 budget had also caused a slowdown in consumption, according to John Keells Holdings PLC Consumer Foods Sector President Jitendra Gunaratne. “It’s the feel good factor that was mainly affected. In the last several months there was a bit of a crunch in the market. The people were scared of things happening,” he said.

Hemas Manufacturing (Pvt.) Ltd Managing Director Roy Joseph warned that a repeat of the past budget—of which many proposals were changed several times this year—may also create a lull in consumer confidence in the coming year. If the government is able to create positive messages linked to its VAT and budget policies, consumer spending would increase in 2017, Nielsen Sri Lanka Managing Director Sharang Pant added.