1. Economic Capsule
March 2019
267th Issue
Research & Development Unit

2. CONTENTS  ComBank wins its 19th Global Finance ‘Best Bank in Sri Lanka’ award
 Combank results for the year ended 31st December 2019 (Bank)
 ComBank’s premium Visa Cardholders granted access to over 1000 airport lounges with LoungeKey
ECONOMY & BUSINESS
 IMF Reaches Staff-Level Agreement on the Fifth Review of Sri Lanka’s Extended Fund Facility
 CB raises USD 2.4bn in ISB offering
 Infrastructure Developments
 Land Price Index – Second Half of 2018
 Italy’s Noberasco to invest in Sri Lankan fruit, vegetable businesses
 LAUGFS expects its new storage facility to propel a regional gas hub strategy
INTERNATIONAL
 Fed now sees no rate hikes in 2019
 China’s exports fall more than 20% in February; overall trade data come in much weaker
 Turkey falls into recession as lira crisis takes long-lasting toll
 Three cities have been jointly named as the world’s most expensive in 2019
 Asia’s billionaire population will top 1,000 within five years, report projects
BANKING & FINANCE

3. Banking & Finance

4. ComBank wins its 19th Global Finance ‘Best Bank
in Sri Lanka’ award
Research & Development Unit
The Commercial Bank of Ceylon has been adjudged Sri Lanka’s Best Bank in 2019
by the USA-based Global Finance magazine, giving the Bank its 19th such accolade
from this entity alone.
“The winners of this year’s awards are those banks that attended carefully to
their customers’ needs in difficult markets and accomplished better results while
laying the foundations for future success.” Global finance said.
Objective criteria considered encompassed multiple indicators under the
headings of Key financials, Key capabilities and services offered, Geographic
range, Planned significant developments, Customer service and Deployment of
leading-edge technology, and included growth in assets, profitability, market
share and return on equity; strategic relationships, new business development
and innovation in products.
Subjective criteria included the opinions of equity analysts, credit rating analysts,
banking consultants and others involved in the industry.

5. Combank Results for the year ended 31st December
2018 (Bank)
Research & Development Unit
(Cont..)

6. Combank Results for the year ended 31st December
2018 (Bank)
Research & Development Unit

7. ComBank’s premium Visa Cardholders granted
access to over 1000 airport lounges with
LoungeKey
Research & Development Unit
Access to more than 1,000 airport lounges in more than 130 countries
is now granted to holders of Visa premium segment Credit Cards issued
by the Commercial Bank of Ceylon.
No enrolment is required for this exclusive travel privilege, as
complimentary LoungeKey membership comes with Visa Infinite and
Visa Signature Credit Cards, and a simple swipe of the card provides
access to global airport lounges across the world
This LoungeKey membership includes two or one complimentary visits
per year to overseas lounges for ComBank Visa Infinite and Signature
Cardholders respectively, regardless of airline or class of travel. Any
additional visits and guest visits are charged at USD 27 per person per
visit.
Cardholders simply have to present their Visa card and boarding pass at a participating lounge and identify
themselves as a LoungeKey customer to enjoy the facilities provided by the lounges

8. Economy & Business

9. IMF Reaches Staff-Level Agreement on the Fifth
Review of Sri Lanka’s Extended Fund Facility
Research & Development Unit
Source: IMF
• At the recent talks with the International Monetary Fund (IMF) the government had reportedly
requested the IMF to extend its USD 1.5Bn loan to the government by another year. The loan is crucial
for Sri Lanka, which plans to sell up to USD 3Bn of bonds in early March, 2019 and needs the IMF
program to ensure continuity of more attractive borrowing terms.
• The latest discussions between the government and the IMF were focused on the budget deficit and
expenditure numbers according to informed sources.
• A staff team from the IMF led by Manuela Goretti visited Colombo during February 14-28, 2019 to
resume discussions on the fifth review under Sri Lanka’s economic reform program supported by a
three-year Extended Fund Facility (EFF) arrangement.
• The team reached understandings at the staff level with the Sri Lankan authorities on the fifth review
and their request to extend the EFF arrangement for an additional year with the remaining
disbursements being evenly spread over this period to allow more time for the completion of the
economic reform agenda.

10. IMF Reaches Staff-Level Agreement on the Fifth
Review of Sri Lanka’s Extended Fund Facility (cont)
Research & Development Unit
Source: IMF
• Subject to the planned submission to Parliament of the 2019 budget consistent with the EFF-
supported program, the Board is expected to consider Sri Lanka’s request for completion of the fifth
review in May 2019. The authorities are taking steps to complete all the pending actions and structural
benchmarks for this review over the next few weeks.
• The team welcomed the authorities’ commitment to put the high public debt on a downward path,
bringing the fiscal deficit to 3.5 percent of GDP in 2020, in line with the reform program objectives,
and 2 percent of GDP over the medium term, by adopting a sound fiscal rule and launching a new
medium-term debt strategy (IMF).

11. CB raises USD 2.4bn in ISB offering
Research & Development Unit
• This marks Sri Lanka’s thirteenth USD benchmark offering in the
international bond markets since 2007, reflecting the
international investor community’s continued support for Sri
Lanka through the years. BOC International, Citigroup, Deutsche
Bank, HSBC, J.P. Morgan, SMBC Nikko and Standard Chartered
Bank acted as the Joint Lead Managers and Bookrunners on the
successful transaction.
• In a first for Sri Lanka, the Bonds are also expected to be listed on
the London Stock Exchange (LSE), to be admitted to the LSE’s
International Securities Market (ISM), in addition to the listing on
the Singapore Exchange Securities Trading Limited (the SGXST),
for the listing and quotation of the Bonds on the SGXST.
The Central Bank said it has successfully raised USD 2.4bn after launching its first
International Sovereign Bond (ISB) for 2019, which will be largely used for debt repayments
and bolstering reserves.
Amount
(USD Bn)
Tenor (Years) Rate
(%)
1.0 5 6.85
1.4 10 7.85
Details of the two tranches
Source: CBSL

12. Research & Development Unit
Source: Daily Mirror, Sunday Times
Infrastructure Developments - Malabe – Fort LRT project
• The Sri Lankan government signed a
concessionary loan agreement with the Japan
International Cooperation Agency (JICA) to
borrow USD 1.85Bn for engineering services and
construction of a light rail transit (LRT) line
between Malabe and Colombo Fort.
•
JICA statement said the project loan is provided
under special terms for economic partnership,
with an interest rate of 0.1% per annum for civil
works and equipment cost and 0.01% per annum
for engineering services cost.
• The proposed LRT line has a total length of
approximately 16 kilometres, with 16 stations.
The stations are placed at frequently accessed
locations and include Malabe-IT Park,
Battaramulla, Rajagiriya, Cotta Road Railway
Station and National Hospital, up to the current
Fort/Pettah railway station.

13. Research & Development Unit
• Land Price Index (LPI) for Colombo District, compiled by the Central
Bank of Sri Lanka (CBSL), reached 125.9 during the 2nd half of 2018,
recording an increase of 18% compared to the 2nd half of 2017.
The three sub-indices of LPI, namely residential, commercial and
industrial have contributed to this increase.
• LPI is compiled covering all Divisional Secretariat (DS) divisions of
Colombo District using per perch bare land prices collected from
the Government Valuation Department in order to monitor the
developments in the real estate sector.
• To maintain homogeneity, three separate sub-indices for
residential, commercial and industrial lands are computed,
considering the diverse nature of the land use, and the overall LPI
is calculated by taking the average of these three sub-indices.
Land Price Index – Second Half of 2018
Source: CBSL

14. Research & Development Unit
• Sri Lankan fruit and vegetable businesses are set to boost exports following a new
partnership with the dried fruits and nuts company Noberasco. The Lanka Fruit and
Vegetable Producers, Processors and Exporters Association (LFVPPEA) signed a
memorandum of understanding with Italy-based Noberasco .
• The goal of this partnership is to help Sri Lankan fruit and vegetable producers and exporters
to comply with international food quality and safety requirements, enabling them to sell
their products to Europe so they can do more business and earn higher incomes.
• Fruit and vegetable products are a priority within the food and beverage sector, identified
for its growth potential in the National Export Strategy, which was developed with ITC
(International Trade Centre) support. Study tours taken to Italy under this project helped Sri
Lankan businesses to identify niche markets for natural and organic dehydrated fruits.
Italy’s Noberasco to invest in Sri Lankan fruit,
vegetable businesses
Source: Sunday Times

15. LAUGFS expects its new storage facility to
propel a regional gas hub strategy
Research & Development Unit
• Laugfs Gas has commissioned an USD 80mn LP gas
storage and distribution facility at the Hambantota
Port. The company says that it can hold up to 30,000
metric tonnes of gas in its storage, which will then be
distributed locally or re-exported
• In addition to operations in Sri Lanka, Laugfs Gas
distributes LPG in Bangladesh. With its new facility
now fully functional, it’s also exploring new bulk
export deals to elsewhere in Asia and Africa.
2.5KM -Length of the pipeline from the port terminal to the storage facility
65,000 Metric Tonnes- Volume of Laugfs’ Bangladeshi unit’s annual LPG imports
USD 1BN - Projected annual gas re-export value from the new facility
Source: Echelon – February 2019

16. International

17. Fed now sees no rate hikes in 2019
Research & Development Unit
• The Federal
Reserve said it
expects the
benchmark rate to
stay near 2.4% by
the end of
2019, slashing its
forecast from 2
hikes for the year
to zero.
Source: CNBC
• The Fed said its benchmark rate will approach 2.6% in 2020 and remain at that level
through 2021. In the longer run, the central bank expects rates to rise to 2.8%.

18. China’s exports fall more than 20% in February;
overall trade data come in much weaker
Research & Development Unit
• China, reported worse than expected trade data for
the month of February.
• Customs data showed that amid Beijing’s trade
dispute with the US, dollar-denominated exports had
plunged by 20.7% in February from a year ago.
January exports had risen by 9.1% from a year ago.
• Dollar-denominated imports fell by 5.2% in February
from a year ago. January imports had fallen by 1.5%
year-on-year.
• China’s February trade surplus was also significantly
weaker than expected at USD 4.12bn.
Source: CNBC

19. Turkey falls into recession as lira crisis takes long-
lasting toll
Research & Development Unit
• Turkish economic growth contracted by 2.4% in
the fourth quarter of 2018 compared with the
previous quarter, when it fell by 1.6%, according
to official figures.
• The figures were worse than expected. As a
result, Turkey’s economy grew at 2.6% for the
whole of last year, from 7.4 % in 2017.
• The last time Turkey faced a recession - defined
as two consecutive quarterly drops in gross
domestic product - was in 2008 and 2009 in the
wake of the US subprime mortgage crisis.
Source: FT.com

20. Three cities have been jointly named as the
world’s most expensive in 2019
Research & Development Unit
Source: CNBC
• Paris, Singapore and Hong Kong have jointly
been named as the world’s most expensive
cities in 2019.
• The annual analysis, published by *The
Economist Intelligence Unit (EIU), compared
the price of more than 150 items in 133 cities
around the world.
• Asia and Europe dominated the top of the
ranking, with Swiss cities Geneva and Zurich
and Danish capital Copenhagen also listed
among the world’s harshest places to open
your wallet.
City Rank
Singapore 1
Paris 1
Hong Kong 1
Zurich 4
Geneva 5
Osaka 5
World’s most expensive cities 2019
*The Economic Intelligence Unit - The Economist Intelligence Unit is a British business within the
Economist Group providing forecasting and advisory services through research and analysis

21. Asia’s billionaire population will top 1,000
within five years
Research & Development Unit
• Asia is already the world’s top region for billionaires. It’s set to extend that lead
even more in coming years.
• A report compiled by a London based real estate agency and consultancy ‘Knight
Frank’ found that the number of billionaires in Asia is set to rise above 1,000 in the
next five years.
• By 2023, the world’s billionaire population is expected to reach 2,696 — with Asia
accounting for a third of that figure.
• Asia had 787 billionaires in 2018. That easily exceeded the 452 in Europe and 631
in North America, according to the data.
Source: CNBC

22. 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.
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John Wooden