Analysts expect CBSL to keep monetary policy unchanged

The Island | 2017-12-27

By First Capital Research

First Capital Research analysts stated Tuesday that they believe the Central Bank of Sri Lanka (CBSL) would determine that the current monetary policy is appropriate and no change would be required.

FC Capital Research further said.”Despite inflation remains high, GDP growth and Credit growth are below our expectation, considering the macroeconomic environment, we believe it would be determined by the CBSL that current monetary policy is appropriate for continuation.

“GDP growth for 3Q2017 was lower than expected. It grew by 3.3%YoY with  overall agricultural activities reporting a negative growth  mainly due to the unfavourable weather conditions that prevailed during the last two years in many districts of the country”,

“FC Research August 2017 forecast private sector credit growth for 2017E to edge up to 16% from 14% amidst a possible pickup towards year-end”.

“Private sector credit figure saw deceleration to LKR 50bn in September 2017  despite a slowdown in the credit in August, we believe overall credit is likely to continue to remain under check”.

“We forecast Dec 2017 CCPI headline inflation to be at 7.2%. We believe inflation will be under control over the next 2-3 months while there could be some upward pressure towards 2Q2018 E”.

“Sri Lanka’s forex reserves assets dropped by USD 171Mn to USD 7.32Bn in November which was equivalent to about 4.5 months of imports from USD 6.0Bn reserve at end 2016”.

“The Central Bank of Sri Lanka (CBSL) had net purchased USD 1.46Bn on a net basis from currency markets so far this year. FC Research believes Foreign Reserves are now at comfortable levels and likely to end the year around the USD 7.5Bn mark”.

“During last three months CBSL bought down it’s holding in Government Securities from LKR 60Bn to below LKR 1Bn as at 22nd Dec 2017”, the analysts said.

Meanwhile, the CBSL is to hold a press conference today to brief its Monetary Policy Review No.8 of 2017, chaired by the governor of the Central Bank of Sri Lanka.

 

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

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