Better accessibility to credit, liberalizing capital account controls and positive macro factors will see a surge in post conflict corporate earnings in Sri Lanka, according to analysts.
Sarath Rajapakse, Director Capital Trust said that a third of the country hitherto not available for development and investment being opened up, will see a rise in Gross Domestic Product (GDP) in the country.
“Also a flood of international aid and investments will start flowing in to develop these areas rapidly and we can naturally expect a big rise in Real GDP growth in the coming quarters in Sri Lanka. Thus despite the prevailing global economic recession Sri Lanka's economy will grow significantly in 2010. This rapid growth will be reflected in fattening bottom lines of listed companies,” he said.
He also noted that the government is progressively easing credit and liberalizing capital account controls. “They are likely to implement more market friendly policies if they are to achieve their growth targets in earnest. That is why we felt that this market will outperform all others in 2010,” he said.
Some analysts also noted that post conflict earnings are expected to improve due to increased tourist arrivals in Sri Lanka even though tourism worldwide may be down due to the recession in the West. “This will improve earnings in the leisure and diversified sectors,” Nalin Karunatileka, Vice President Corporate Finance, Acuity Partners said.
He noted that it is also expected that there will be a general increase in economic activity due to the opening up of the North and East. The reduction in interest rates will also help. “In terms of the global scenario there are signs that the situation is improving in western export markets. Tea and rubber prices have improved since the sharp declines in September 2008. Once the global recovery takes holds tourism will improve worldwide, and Sri Lanka will also benefit,” he added.