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ECONOMIC CAPSULE




                   July 2012

                               < Research & Development Unit >
CONTENTS

ECONOMIC & BUSINESS NEWS                                                             ANALYSIS & FORECAST
     External Sector Performance – Jan-May 2012                                           IMF Latest Projections on World Economy

     Sri Lanka: Selected Economic Indicators                                              Roubini Predicts a Perfect Storm in 2013...

     Fitch Affirms Sri Lanka at 'BB -'; Outlook Stable



FINANCIAL SECTOR NEWS 
     Commercial Bank Wins Euromoney’s “Best Bank in Sri Lanka” Award

     Commercial Bank Wins Finance Asia’s “Sri Lanka’s Best Bank” Award

     Commercial Bank Among the Top 1000 Banks in the World Again…

     RAM & Fitch affirms CBC ratings…

     New operational measures for transfers between Non-Resident Foreign Currency (NRFC) and Resident Foreign Currency (RFC) Accounts




< Research & Development Unit >
ECONOMIC & BUSINESS NEWS
External Sector Performance – Jan-May 2012
                                       A Summary of External Sector Performance (Jan-May)                                          2011                   2012   Growth
   Gross Official Reserves (GOR)                                                                                              USD mn                 USD mn          %
    amounted to USD 5,815 mn by        Exports                                                                                  4,255.5                4,023.9      -5.4
    end May 2012.                      Agricultural                                                                             1,012.7                  893.7     -11.8
                                         of which, tea                                                                            594.3                  530.1     -10.8
   In terms of months of imports,     Industrial                                                                               3,225.0                3,011.2      -6.6
    GOR were equivalent to 3.4           of which, Textiles and garments                                                        1,683.3                1,601.2      -4.9
    months of imports by end May       Mineral                                                                                      14.1                  25.9      83.9
    2012.                              Imports                                                                                  7,611.5                8,208.1       7.8
                                       Consumer Goods                                                                           1,481.3                1,383.5      -6.6
   It is estimated that with the      Intermediate Goods                                                                       4,632.9                4,821.0       4.1
                                         of which, Petroleum                                                                    1,802.8                2,168.1      20.3
    receipt of the final tranche of
                                         Textile and textile articles                                                             954.6                  903.8      -5.3
    USD 414 mn under the Stand-
                                       Investment Goods                                                                         1,477.6                1,989.2      34.6
    by Arrangement (SBA) facility      Balance of Trade                                                                        -3,356.0               -4,184.2     -24.7
    and the proceeds of the fifth      Workers’ Remittances                                                                     2,103.0                2,475.2      17.7
    international sovereign bond       FDI (c)                                                                                                           437.0
    of USD 1 bn, GOR to have           Portfolio Investments (Net) (d)                                                              -66.8                186.5    379.2
    risen to around US dollars 7.1     Commercial Banks’ Long-term FC Borrowings (e)                                                                     927.5
    billion by end July 2012, which    Earnings from Tourism                                                                       318.1                 397.1      24.9
    is equivalent to an import         Inflows to the Government                                                                   952.9               1,746.1      83.2
    cover of 4.2 months               (c)Estimated FDI inflows to major projects (including loans) are for the period January-May 2012. This
                                      estimate may be revised based on the survey conducted by the BOI.
                                      (d)Net Portfolio investments are recorded for June and cumulative figures are for January- June of respective
                                      years.
< Research & Development Unit >       (e)Commercial Banks’ Long-term Foreign Currency Borrowings during the period January- June 2012.
Sri Lanka: Selected Economic Indicators
GDP and inflation (in percent)                    2010      2011     2012 P     2013 P
Real GDP growth                                    8.0        8.3        6.8        6.7
Inflation (end-of-period)                          6.8        4.9        9.5        7.0
Core inflation (end-of-period)                     8.9        5.3        7.2        6.5
Public finances (as a % of GDP)
Total revenue (including grants)                  14.9      14.5       14.3        14.7
Expenditure                                       22.8      21.4       20.5        20.5
Budget deficit                                    -8.0      -6.9       -6.2        -5.8
Govt. debt (domestic and external)                81.9      78.5       80.9        79.4
Money and credit (% chg. end of period)
Reserve money                                     18.8      21.9       17.8        20.0
Broad money                                       14.9      20.1       17.8        18.1
Private sector credit                             24.7      34.5       20.3        14.8
Balance of payments (in USD Mn)
Exports                                          8,626    10,559     10,482      11,010
  Textiles & garments                            3,356      4,191      4,100      4,160
  Tea                                            1,440      1,492      1,401      1,437
Imports                                       -13,450     -20,213    -20,199    -21,292
  Oil imports                                    3,019      4,686      4,732      5,012
Current account balance                         -1,076     -4,543     -3,201     -3,053
Current account balance (in percent of GDP)        -2.2       -7.7       -5.4       -4.7
FDI Inflows (USD Mn)                                435        900     1,449      1,870
Gross official reserves (end of period)
In millions of U.S. dollars                      6,410     5,734      6,680       7,206
In months of imports                                3.5       3.1        3.4        3.4    < Research & Development Unit >
Fitch Affirms Sri Lanka at 'BB -'; Outlook Stable

   Fitch Ratings has affirmed Sri Lanka's Foreign- and Local-Currency IDRs at 'BB-'. The
    Outlook for both ratings is Stable. The Country Ceiling has also been affirmed at 'BB-', and
    the Short-Term Foreign Currency IDR at 'B'.
   According to Fitch's ratings, authorities have taken appropriate action to correct recent
    pressure on the balance of payments and place it on a more sustainable trajectory.
   Given the weakened state of Sri Lanka's external finances and a heavy external debt
    refinancing schedule through to 2013, the authorities' ability to persist with policies that
    address existing macroeconomic imbalances and improving external liquidity is crucial.
   Although Sri Lanka was able to record real GDP growth over 8% for the second
    consecutive year in 2011, such economic performance, coupled with policy missteps,
    resulted in the current account deficit rapidly widening to 7.8% of GDP from 2.2% in 2010.
    This, in conjunction with deterioration in the external economic environment and limited
    currency flexibility, led to balance of payment pressures and in turn a sharp depletion of
    foreign exchange (FX) reserves to USD 5.8 bn (3.4 months of imports) in January 2012 from
    USD 8.1 bn (equivalent to 5.7 months of imports) in July 2011.
   The pace of deterioration in external buffers, rather than their level, is Fitch's main focus.
    The level of FX reserves meets with international conventions and does not indicate an
    immediate risk of substantial balance of payments stress. However, Fitch believes the
    rapid depletion of FX reserves in H211 has heightened the vulnerability of the Sri Lankan
    sovereign credit profile to a spike in global risk aversion.


< Research & Development Unit >
Fitch Affirms Sri Lanka at 'BB -'; Outlook Stable (cont…)


                                   Therefore, the resumption of IMF tranche disbursements following the implementation of
                                    policy measures aimed at macroeconomic rebalancing is a positive development.

                                   More importantly, measures implemented by the Central Bank of Sri Lanka and the
                                    government since February 2012 have tightened monetary conditions and could help Sri
                                    Lanka to return to a more sustainable GDP growth trajectory over the long-term.

                                   In the near-term, certain policy measures have resulted in adverse risks to both growth and
                                    inflation that have the potential to impact policy consistency. Due to the authorities' pro-
                                    growth bias and the fragile balance of payments, Fitch believes developments in the coming
                                    months warrant close monitoring.

                                   Fitch notes that the government has been able to rationalise expenditure and continue
                                    consolidation efforts despite lower-than-expected fiscal revenues. As a result, the fiscal deficit
                                    (including grants) narrowed to 6.9% of GDP in 2011 from 8% in 2010 and public debt declined
                                    to 78.5% of GDP from 81.9%.

                                   Further simplification of the tax system could bolster measures announced in previous
                                    budgets and aid in the attraction of greater foreign direct investment inflows.




< Research & Development Unit >
FINANCIAL SECTOR NEWS
Commercial Bank Wins Euromoney’s “Best Bank in Sri Lanka” Award



                                             Euromoney, a leading international
                                              financial magazine, has adjudged the
                                              Commercial Bank “The Best Bank in Sri
                                              Lanka”, for 2012.
                                             The selection criteria for these awards
                                              involves an in-depth analysis by
                                              Euromoney editors based on qualitative
                                              and quantitative criteria such as market
                                              position, volume of business
                                              transacted, new product development,
                                              management system, credit ratings,
                                              efficiency ratios and annual key
                                              performance indicators.



< Research & Development Unit >
Commercial Bank Wins Finance Asia’s “Sri Lanka’s Best Bank” Award



          Euromoney, a leading international
           financial magazine, has adjudged the
           Commercial Bank “The Best Bank in Sri
           Lanka”, for 2012.

          The selection criteria for these awards
           involves an in-depth analysis by
           Euromoney editors based on qualitative
           and quantitative criteria such as market
           position, volume of business transacted,
           new product development, management
           system, credit ratings, efficiency ratios
           and annual key performance indicators.




< Research & Development Unit >
Commercial Bank Among the Top 1000 Banks in the World Again…



                                             Sri Lanka is once again
                                              represented in the top 1,000
                                              banks in the world, with the
                                              inclusion of the Commercial
                                              Bank to this prestigious annual
                                              ranking by the UK based ‘The
                                              Banker’ magazine.
                                             Commercial Bank is ranked 963
                                              in the Top 1000, 2012 ranking,
                                              rising from 986 in 2011.




< Research & Development Unit >
RAM & Fitch affirms CBC ratings…


         RAM Confirms Commercial Bank’s AA+ Rating
         RAM Ratings Lanka has reaffirmed Commercial Bank ’s long- and short-term financial
         institution ratings at AA+ and P1, respectively; the long-term rating has a stable outlook.
         The ratings are premised on the Group’s strong market position as Sri Lanka’s largest
         privately owned licensed commercial bank (LCB) and third-largest overall LCB. The ratings also
         reflect the Bank’s strong franchise and healthy financial performance, funding and liquidity, as
         well as good capitalisation levels.



         Fitch Affirms Commercial Bank of Ceylon at 'AA(lka)'/Stable
         Fitch Ratings Lanka has affirmed Commercial Bank of Ceylon PLC's (CBC) National Long-
         Term rating at 'AA(lka)' with a Stable Outlook.
         The agency has also affirmed CBC's subordinated debentures at 'AA-(lka)'.


< Research & Development Unit >
New operational measures for transfers between Non-Resident Foreign Currency (NRFC) and
Resident Foreign Currency (RFC) Accounts

       i.   New operational measures for transfers between Non-Resident Foreign Currency (NRFC) and Resident Foreign 
           Currency (RFC) Accounts:

            a. The following transactions in relation to NRFC and RFC accounts held in the same bank or different banks irrespective of
                     the holder of account or currency type in which accounts are maintained, will be permitted:

       i. Fund transfers between NRFC accounts.

       ii. Fund transfers between RFC accounts.

       iii. Fund transfers from NRFC accounts to RFC accounts.

            b. Opening of NRFC/RFC accounts by minors will be permitted through the credit of inward remittances received from their
                    guardians/parents who are non-residents, or through the transfer of funds from existing NRFC accounts of such
                    guardians/parents.

            c. Debits to NRFC accounts are freely allowed.

            d. In respect of fund transfers between NRFC/RFC accounts, the bank which transfers funds should issue a confirmation to
                     the receiving bank that the funds so transferred were originated from NRFC/RFC accounts.
                                                                                                                                    Cont.…



< Research & Development Unit >
New operational measures for transfers between Non-Resident Foreign Currency (NRFC) and Resident
Foreign Currency (RFC) Accounts (cont…)

       ii. New operational measures for “Foreign Exchange Earners’ Accounts” (FEEA):

        A single foreign currency account, unifying several existing foreign currency accounts maintained in the banking system by
         foreign exchange earners will be introduced.

        Such new account, titled “Foreign Exchange Earners’ Account” (FEEA) will replace the following:
            a. Exporters’ Foreign Currency (EFC) Account;
            b. Indirect Exporters’ Foreign Currency Account (IEFCA);
            c. Foreign Currency Account for Suppliers of Inputs (FCASI);
            d. Foreign Currency Account for Professional Services Providers (FCAPS);
            e. Non Resident Foreign Currency Accounts for Foreign Employment Agencies;
            f.    Foreign Currency Account for Gem and Jewellery dealers, and temporary/ special foreign currency accounts authorized
                  by the Controller of Exchange.


        Accordingly, exporters, indirect exporters, suppliers of inputs, professional services providers, entrepot traders, 
        gem and jewellery dealers, insurers, insurance brokers, travel agents, hoteliers, bunker suppliers and other 
        residents who undertake foreign projects would be permitted to execute their current international transactions 
        through this new FEEA.


< Research & Development Unit >
ANALYSIS & FORECAST
IMF Latest Projections on World Economy

                                   According to IMF, an already sluggish global recovery shows signs of
                                    further weakness, mainly because of continuing financial problems in
                                    Europe and slower-than-expected growth in emerging economies.

                                   The latest IMF Outlook projects that the global economy will grow 3.5 %
                                    this year, down 0.1 % points from the April forecast, and 3.9 % in 2013,
                                    0.2 percentage points lower.

                                   These forecasts, however, are predicated on two important assumptions:
                                    that there will be sufficient policy action to allow financial conditions in
                                    the euro area periphery to ease gradually and that recent policy easing in
                                    emerging market economies will gain traction.

                                   Growth momentum has also slowed in various emerging market
                                    economies, notably Brazil, China, and India. This partly reflects a weaker
                                    external environment, but domestic demand has also decelerated sharply
                                    in response to capacity constraints and policy tightening over the past
                                    year. Many emerging market economies have also been hit by increases in
                                    investor risk aversion and perceived growth uncertainty, which have led
                                    not only to equity price declines, but also to capital outflows and currency
                                    depreciation.

                                                                     < Research & Development Unit >
Roubini Predicts a Perfect Storm in 2013...

  A Perfect Storm in 2013...
   Nouriel Roubini, the New York University professor dubbed "Dr Doom", stated a
    number of unpleasant factors would combine to derail the global economy in
    2013.
      Escalation of the eurozone crisis.
       Further tax increases and spending cuts in the US that may drive the world's
        largest economy into recession;
       A hard landing for China's economy;
       A further slowdown in emerging markets;
      War with Iran.
   "Next year is the time when the can becomes too big to kick it down [the
    road]...then we have a global perfect storm”.


                                                                      < Research & Development Unit >
“The greatest failure is the failure to try…”
                                                                                                                   - William Arthur Ward




The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the
information, it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise,
suffered in consequence of using such information for whatever purpose.


Research & Development Unit

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Economic Capsule July 2012

  • 1. ECONOMIC CAPSULE July 2012 < Research & Development Unit >
  • 2. CONTENTS ECONOMIC & BUSINESS NEWS   ANALYSIS & FORECAST  External Sector Performance – Jan-May 2012  IMF Latest Projections on World Economy  Sri Lanka: Selected Economic Indicators  Roubini Predicts a Perfect Storm in 2013...  Fitch Affirms Sri Lanka at 'BB -'; Outlook Stable FINANCIAL SECTOR NEWS   Commercial Bank Wins Euromoney’s “Best Bank in Sri Lanka” Award  Commercial Bank Wins Finance Asia’s “Sri Lanka’s Best Bank” Award  Commercial Bank Among the Top 1000 Banks in the World Again…  RAM & Fitch affirms CBC ratings…  New operational measures for transfers between Non-Resident Foreign Currency (NRFC) and Resident Foreign Currency (RFC) Accounts < Research & Development Unit >
  • 4. External Sector Performance – Jan-May 2012 A Summary of External Sector Performance (Jan-May) 2011 2012 Growth  Gross Official Reserves (GOR) USD mn USD mn % amounted to USD 5,815 mn by Exports 4,255.5 4,023.9 -5.4 end May 2012. Agricultural 1,012.7 893.7 -11.8 of which, tea 594.3 530.1 -10.8  In terms of months of imports, Industrial 3,225.0 3,011.2 -6.6 GOR were equivalent to 3.4 of which, Textiles and garments 1,683.3 1,601.2 -4.9 months of imports by end May Mineral 14.1 25.9 83.9 2012. Imports 7,611.5 8,208.1 7.8 Consumer Goods 1,481.3 1,383.5 -6.6  It is estimated that with the Intermediate Goods 4,632.9 4,821.0 4.1 of which, Petroleum 1,802.8 2,168.1 20.3 receipt of the final tranche of Textile and textile articles 954.6 903.8 -5.3 USD 414 mn under the Stand- Investment Goods 1,477.6 1,989.2 34.6 by Arrangement (SBA) facility Balance of Trade -3,356.0 -4,184.2 -24.7 and the proceeds of the fifth Workers’ Remittances 2,103.0 2,475.2 17.7 international sovereign bond FDI (c) 437.0 of USD 1 bn, GOR to have Portfolio Investments (Net) (d) -66.8 186.5 379.2 risen to around US dollars 7.1 Commercial Banks’ Long-term FC Borrowings (e) 927.5 billion by end July 2012, which Earnings from Tourism 318.1 397.1 24.9 is equivalent to an import Inflows to the Government 952.9 1,746.1 83.2 cover of 4.2 months (c)Estimated FDI inflows to major projects (including loans) are for the period January-May 2012. This estimate may be revised based on the survey conducted by the BOI. (d)Net Portfolio investments are recorded for June and cumulative figures are for January- June of respective years. < Research & Development Unit > (e)Commercial Banks’ Long-term Foreign Currency Borrowings during the period January- June 2012.
  • 5. Sri Lanka: Selected Economic Indicators GDP and inflation (in percent) 2010 2011 2012 P 2013 P Real GDP growth 8.0 8.3 6.8 6.7 Inflation (end-of-period) 6.8 4.9 9.5 7.0 Core inflation (end-of-period) 8.9 5.3 7.2 6.5 Public finances (as a % of GDP) Total revenue (including grants) 14.9 14.5 14.3 14.7 Expenditure 22.8 21.4 20.5 20.5 Budget deficit -8.0 -6.9 -6.2 -5.8 Govt. debt (domestic and external) 81.9 78.5 80.9 79.4 Money and credit (% chg. end of period) Reserve money 18.8 21.9 17.8 20.0 Broad money 14.9 20.1 17.8 18.1 Private sector credit 24.7 34.5 20.3 14.8 Balance of payments (in USD Mn) Exports 8,626 10,559 10,482 11,010 Textiles & garments 3,356 4,191 4,100 4,160 Tea 1,440 1,492 1,401 1,437 Imports -13,450 -20,213 -20,199 -21,292 Oil imports 3,019 4,686 4,732 5,012 Current account balance -1,076 -4,543 -3,201 -3,053 Current account balance (in percent of GDP) -2.2 -7.7 -5.4 -4.7 FDI Inflows (USD Mn) 435 900 1,449 1,870 Gross official reserves (end of period) In millions of U.S. dollars 6,410 5,734 6,680 7,206 In months of imports 3.5 3.1 3.4 3.4 < Research & Development Unit >
  • 6. Fitch Affirms Sri Lanka at 'BB -'; Outlook Stable  Fitch Ratings has affirmed Sri Lanka's Foreign- and Local-Currency IDRs at 'BB-'. The Outlook for both ratings is Stable. The Country Ceiling has also been affirmed at 'BB-', and the Short-Term Foreign Currency IDR at 'B'.  According to Fitch's ratings, authorities have taken appropriate action to correct recent pressure on the balance of payments and place it on a more sustainable trajectory.  Given the weakened state of Sri Lanka's external finances and a heavy external debt refinancing schedule through to 2013, the authorities' ability to persist with policies that address existing macroeconomic imbalances and improving external liquidity is crucial.  Although Sri Lanka was able to record real GDP growth over 8% for the second consecutive year in 2011, such economic performance, coupled with policy missteps, resulted in the current account deficit rapidly widening to 7.8% of GDP from 2.2% in 2010. This, in conjunction with deterioration in the external economic environment and limited currency flexibility, led to balance of payment pressures and in turn a sharp depletion of foreign exchange (FX) reserves to USD 5.8 bn (3.4 months of imports) in January 2012 from USD 8.1 bn (equivalent to 5.7 months of imports) in July 2011.  The pace of deterioration in external buffers, rather than their level, is Fitch's main focus. The level of FX reserves meets with international conventions and does not indicate an immediate risk of substantial balance of payments stress. However, Fitch believes the rapid depletion of FX reserves in H211 has heightened the vulnerability of the Sri Lankan sovereign credit profile to a spike in global risk aversion. < Research & Development Unit >
  • 7. Fitch Affirms Sri Lanka at 'BB -'; Outlook Stable (cont…)  Therefore, the resumption of IMF tranche disbursements following the implementation of policy measures aimed at macroeconomic rebalancing is a positive development.  More importantly, measures implemented by the Central Bank of Sri Lanka and the government since February 2012 have tightened monetary conditions and could help Sri Lanka to return to a more sustainable GDP growth trajectory over the long-term.  In the near-term, certain policy measures have resulted in adverse risks to both growth and inflation that have the potential to impact policy consistency. Due to the authorities' pro- growth bias and the fragile balance of payments, Fitch believes developments in the coming months warrant close monitoring.  Fitch notes that the government has been able to rationalise expenditure and continue consolidation efforts despite lower-than-expected fiscal revenues. As a result, the fiscal deficit (including grants) narrowed to 6.9% of GDP in 2011 from 8% in 2010 and public debt declined to 78.5% of GDP from 81.9%.  Further simplification of the tax system could bolster measures announced in previous budgets and aid in the attraction of greater foreign direct investment inflows. < Research & Development Unit >
  • 9. Commercial Bank Wins Euromoney’s “Best Bank in Sri Lanka” Award  Euromoney, a leading international financial magazine, has adjudged the Commercial Bank “The Best Bank in Sri Lanka”, for 2012.  The selection criteria for these awards involves an in-depth analysis by Euromoney editors based on qualitative and quantitative criteria such as market position, volume of business transacted, new product development, management system, credit ratings, efficiency ratios and annual key performance indicators. < Research & Development Unit >
  • 10. Commercial Bank Wins Finance Asia’s “Sri Lanka’s Best Bank” Award  Euromoney, a leading international financial magazine, has adjudged the Commercial Bank “The Best Bank in Sri Lanka”, for 2012.  The selection criteria for these awards involves an in-depth analysis by Euromoney editors based on qualitative and quantitative criteria such as market position, volume of business transacted, new product development, management system, credit ratings, efficiency ratios and annual key performance indicators. < Research & Development Unit >
  • 11. Commercial Bank Among the Top 1000 Banks in the World Again…  Sri Lanka is once again represented in the top 1,000 banks in the world, with the inclusion of the Commercial Bank to this prestigious annual ranking by the UK based ‘The Banker’ magazine.  Commercial Bank is ranked 963 in the Top 1000, 2012 ranking, rising from 986 in 2011. < Research & Development Unit >
  • 12. RAM & Fitch affirms CBC ratings… RAM Confirms Commercial Bank’s AA+ Rating RAM Ratings Lanka has reaffirmed Commercial Bank ’s long- and short-term financial institution ratings at AA+ and P1, respectively; the long-term rating has a stable outlook. The ratings are premised on the Group’s strong market position as Sri Lanka’s largest privately owned licensed commercial bank (LCB) and third-largest overall LCB. The ratings also reflect the Bank’s strong franchise and healthy financial performance, funding and liquidity, as well as good capitalisation levels. Fitch Affirms Commercial Bank of Ceylon at 'AA(lka)'/Stable Fitch Ratings Lanka has affirmed Commercial Bank of Ceylon PLC's (CBC) National Long- Term rating at 'AA(lka)' with a Stable Outlook. The agency has also affirmed CBC's subordinated debentures at 'AA-(lka)'. < Research & Development Unit >
  • 13. New operational measures for transfers between Non-Resident Foreign Currency (NRFC) and Resident Foreign Currency (RFC) Accounts i.   New operational measures for transfers between Non-Resident Foreign Currency (NRFC) and Resident Foreign  Currency (RFC) Accounts: a. The following transactions in relation to NRFC and RFC accounts held in the same bank or different banks irrespective of the holder of account or currency type in which accounts are maintained, will be permitted: i. Fund transfers between NRFC accounts. ii. Fund transfers between RFC accounts. iii. Fund transfers from NRFC accounts to RFC accounts. b. Opening of NRFC/RFC accounts by minors will be permitted through the credit of inward remittances received from their guardians/parents who are non-residents, or through the transfer of funds from existing NRFC accounts of such guardians/parents. c. Debits to NRFC accounts are freely allowed. d. In respect of fund transfers between NRFC/RFC accounts, the bank which transfers funds should issue a confirmation to the receiving bank that the funds so transferred were originated from NRFC/RFC accounts. Cont.… < Research & Development Unit >
  • 14. New operational measures for transfers between Non-Resident Foreign Currency (NRFC) and Resident Foreign Currency (RFC) Accounts (cont…) ii. New operational measures for “Foreign Exchange Earners’ Accounts” (FEEA):  A single foreign currency account, unifying several existing foreign currency accounts maintained in the banking system by foreign exchange earners will be introduced.  Such new account, titled “Foreign Exchange Earners’ Account” (FEEA) will replace the following: a. Exporters’ Foreign Currency (EFC) Account; b. Indirect Exporters’ Foreign Currency Account (IEFCA); c. Foreign Currency Account for Suppliers of Inputs (FCASI); d. Foreign Currency Account for Professional Services Providers (FCAPS); e. Non Resident Foreign Currency Accounts for Foreign Employment Agencies; f. Foreign Currency Account for Gem and Jewellery dealers, and temporary/ special foreign currency accounts authorized by the Controller of Exchange. Accordingly, exporters, indirect exporters, suppliers of inputs, professional services providers, entrepot traders,  gem and jewellery dealers, insurers, insurance brokers, travel agents, hoteliers, bunker suppliers and other  residents who undertake foreign projects would be permitted to execute their current international transactions  through this new FEEA. < Research & Development Unit >
  • 16. IMF Latest Projections on World Economy  According to IMF, an already sluggish global recovery shows signs of further weakness, mainly because of continuing financial problems in Europe and slower-than-expected growth in emerging economies.  The latest IMF Outlook projects that the global economy will grow 3.5 % this year, down 0.1 % points from the April forecast, and 3.9 % in 2013, 0.2 percentage points lower.  These forecasts, however, are predicated on two important assumptions: that there will be sufficient policy action to allow financial conditions in the euro area periphery to ease gradually and that recent policy easing in emerging market economies will gain traction.  Growth momentum has also slowed in various emerging market economies, notably Brazil, China, and India. This partly reflects a weaker external environment, but domestic demand has also decelerated sharply in response to capacity constraints and policy tightening over the past year. Many emerging market economies have also been hit by increases in investor risk aversion and perceived growth uncertainty, which have led not only to equity price declines, but also to capital outflows and currency depreciation. < Research & Development Unit >
  • 17. Roubini Predicts a Perfect Storm in 2013... A Perfect Storm in 2013...  Nouriel Roubini, the New York University professor dubbed "Dr Doom", stated a number of unpleasant factors would combine to derail the global economy in 2013.  Escalation of the eurozone crisis.  Further tax increases and spending cuts in the US that may drive the world's largest economy into recession;  A hard landing for China's economy;  A further slowdown in emerging markets;  War with Iran.  "Next year is the time when the can becomes too big to kick it down [the road]...then we have a global perfect storm”. < Research & Development Unit >
  • 18. “The greatest failure is the failure to try…” - William Arthur Ward The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the information, it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise, suffered in consequence of using such information for whatever purpose. Research & Development Unit