SL business confidence stays subdued, LMD reports

Business confidence in Sri Lanka remained subdued in May, with the corporate sector maintaining a cautious outlook amid rising fuel and electricity prices, increasing living costs, geopolitical uncertainty, and mounting economic pressures on households.

According to the latest LMD–PEPPERCUBE Business Confidence Index (BCI) survey, conducted during the first week of May, sentiment on the economy showed modest signs of improvement, reversing some of the pessimism recorded in April.

More than a quarter of respondents (28%) said they expect the economy to improve over the next 12 months, reflecting a four-percentage-point increase from April. Meanwhile, 56 percent believe economic conditions will remain unchanged, marking a notable 17-point increase compared to the previous month.

At the same time, only 16 percent expect conditions to worsen, a sharp decline of 21 percentage points from April.

Expectations for sales volumes softened slightly, with 38 percent of respondents anticipating growth over the next year, down from 43 percent in April.

However, a majority (54%) expect sales to remain unchanged, up 11 percentage points from the previous month, while only eight percent believe sales volumes will decline, six points lower than in April.

Compared to the same period last year, 46 percent of businesses reported increased sales volumes, down slightly from the previous month, while 43 percent said sales remained unchanged. Eleven percent reported lower sales.

Looking ahead to the next three months, businesses appeared cautiously optimistic. Nearly four in 10 respondents (39%) expect sales volumes to improve, up nine percentage points from April.

A further 51 percent anticipate no change in sales, while only 10 percent expect conditions to worsen over the short term — a significant 12-point drop from the previous month.

Confidence in the investment climate weakened in May, with only one percent of respondents describing conditions as “very good,” down from six percent in April.

Still, the proportion of respondents who rated the outlook as “good” rose sharply by 15 percentage points to 39 percent. Meanwhile, 42 percent described the investment climate as “fair,” a five-point decline from the previous month.

Those viewing the investment environment as “poor” or “very poor” fell to 18 percent, down four percentage points from April.

Employment expectations also reflected caution, with only 20 percent of surveyed businesses planning to increase staff numbers over the next six months, a four-point decline from April.

Meanwhile, 69 percent said they intend to maintain current workforce levels, while 11 percent expect to reduce staffing — unchanged from the previous month.