s 2004 drew to a close, the first weeks of December ushered in the festive season. If the tight squeeze of shop-pers in many of Colombo’s retail stores was any indica-tion, the retail business was a good one to be in. On a recent edition of BENCH-MARK, some popular retail stores and the smaller shops shared the spotlight in a bid to track consumerism in 2004.
Otara Chandiram, the Managing Director of retailer ODEL – recently relaunched as ‘Sri Lanka’s first shopping mall’ – was clearly upbeat about sales figures for the 2004 festive season. She said: “We were worried at first, but we did well throughout the year. Our sales have increased due to an increase in business travellers and Indian tourists.” Her main concern for the immediate future is the hike in duty rates, which would mean that this year the fashion icon would be compelled to consider raising prices, which might eventually affect sales, she explained.
Fouzul Hameed – Managing Director of the menswear specialist, Hameedia – admitted that business was good in 2004. “But the way things are going, I am afraid it is a bad sign for local industries. Local industries get no support from the government,” he pointed out.
On this edition, BENCHMARK hit the shopping trail to get an insight into the perspective of small retail shop owners. The general feeling was that the year had been good for business. A local goldsmith expressed concern about rising gold prices and said that the cost of living was affecting sales.
Economist Dr. Dushni Weerakoon – Fellow, Institute of Policy Studies of Sri Lanka – was asked to place the immediate economic future of the country in the right perspective. She felt that on the basis of economic performance – in terms of GDP growth and economic fundamentals – 2003 was better. “This was due to a host of affiliated factors such as domestic and external pressures, as well as events beyond government control. On the policy front, first we had the elections; and then there was a policy vacuum, as we waited for the budget. In a sense, the difficulty was the external shock of a huge oil bill,” she explained.
Commenting on consumerism, Weerakoon reflected that credit growth in the private and public sectors has been very high. “We have had steady interest rates – and thus, it is a temptation for consumers to borrow and spend. No doubt consumer spending has been robust,” she added. She noted that although many expected that the budget would be an interventionist one, it was rather market-friendly, providing incentives to both the public and the private sectors, and offering relief to consumers.
Touching on the stock exchange, Weerakoon observed that corporate earnings were high, benefiting from the current interest regime. “Certain sectors are doing very well. Export growth was 12 per cent – an increase since last year; tourism is doing well; and foreign remittances are coming in and have not levelled off..,” she observes.
Weerakoon felt the Central Bank has been able to hold interest rates because there has been an inflow of capital into the country. “I expect that the interest-rate structure would have to be reviewed,” she surmised.
Looking forward, Weerakoon feels that 2005 would see subdued GDP growth of about five to 5.5 per cent. “I don’t anticipate it will accelerate beyond this, for various reasons. The uncertainty regarding the upcoming presidential election will mean that investors will adopt a wait-and-watch approach,” she added. Macroeconomically, she said what will happen in 2005 will depend on how well the government can implement its budget proposals. “It has ambitious revenue targets of 1.6 per cent of GDP for 2005. If the government can’t meet those targets, this would mean our fiscal situation might not be as stable. On the external front, international oil prices – although they may seem stable now – will stabilise at fairly high levels eventually,” she said.