Business conditions improve to highest levels in 4Q23 since 1Q22: CB

Sri Lanka’s business conditions improved to the highest levels in the fourth quarter of last year, since the first quarter of 2022, according to the Central Bank’s (CB) Business Outlook Survey for 4Q 2023.
However, the index remained below 100, at 93, reflecting the subdued business conditions.
In the quarter, demand and sales revenue is expected to have improved in 4Q 2023, while capacity utilisation and investment has also increased.
In terms of input-output prices, the respondents experiencing increases in input prices were higher than those experiencing increases in the output prices. This reflects the businesses have no option but to absorb part of the rising input cost to retain clients. 

Demand for credit also increased in the quarter, although access to credit is rated to have remained tight during the period.
In terms of outlook for the current quarter, the CB expects the business conditions to stay below the threshold.
In particular, most respondents were concerned about the impact of the Value Added Tax increase, as it affects both prices and consumer demand. Furthermore, they are faced with significant challenges to restore consumer demand and recover sales volume, due to the weakened consumer spending in the market. (NF)