Sri Lankan CEOs report 2018 business well below expectations

05 February 2019 Consultancy.asia

Business for Sri Lankan executives was well below expectations in 2018 according to a new survey report from local management consultancy MTI Consulting.

Now into its eighth year, MTI Consulting’s annual Sri Lankan CEO survey has revealed 2018 to be the worst year so far in terms of failing to live up to business expectations. Just four percent of the 100 or so cross-sector CEOs questioned reported business performance in 2018 to have exceeded expectations, while a massive 75 percent stated performance was below what was expected – a record high since the survey’s inception.

The 75 percent figure is 15 points up on last year’s review of 2017, and more than doubles the 32 percent of businesses which recorded below par performance just five years ago in 2013 – a year in which 36 percent of businesses outperformed expectations. Only one fifth of respondents meanwhile were accurate in their 2018 forecasts – also the lowest recorded number, slipping from a high of 45 percent in 2013.Business performance below expectations for Sri Lanka CEOs in 2018In terms of economic projections for this year, 45 percent of the CEOs surveyed are expecting a decline in the Sri Lankan economy in 2019 – again, the highest survey figure recorded, and by some margin, with the 31 percent forecast for decline in 2016 the previous high. And while approximately half of the CEOs predict a stabilisation of the local economy this year, just seven percent are envisioning an acceleration, compared to 16 percent last year.

The down-beat mood follows from both domestic concerns – such as, following the country’s constitutional crisis toward the end of last year, the 60 percent of execs who cited political instability as a major concern – and a gloomy outlook for the global economy, with a paltry 2 percent of local business leaders predicting the economy will take-off in 2019 and only 27 percent expecting a recovery. Six out of ten meanwhile believe it will remain depressed.

This general negativity for the short-term global economy mirrors the mood from PwC’s recent global CEO survey of more than 1,350 leaders (with ASEAN CEOs found to be the most pessimistic for the year ahead), but far exceeds the worldwide numbers, which, while taking the biggest year-on-year hit for positive growth expectations, still remained at 42 percent.

Sri Lankan CEOs expect rocky 2019 for local economy

Perhaps naturally, the below-expected 2018 performance coupled with a particularly unfavourable global economic outlook has impacted responses as to business performance expectations for this year. Although only four percent reported performance above expectations in 2018, a quarter of the Sri Lankan business leaders surveyed still expect growth for their organisations this year. This figure however is balanced by roughly the same number who expect negative growth, and marks a drastic decline from the around 45 percent range for growth expectations recorded in the past two surveys.

“The long term trend (since 2012) of the businesses environment performing below expectations recorded its highest peak this year, with 75% of the CEOs expressing dissatisfaction on the performance of their industry in 2018, a result surpassing the previous peak of 61% recorded in 2016. The lackluster performance was no doubt on the back of a weak economy and a turbulent political environment, notably the constitutional crisis and sharp decline in the external value of the rupee that erupted in the latter part of 2018,” the report concludes.

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Economic boom will see 500 million Indians enter middle-class within a decade

18 April 2019 Consultancy.asia

India’s economy is projected to grow at a base rate of 7.5% annually to 2030 according to an analysis from Bain & Company, with 500 million people moving into the middle- and high-income bracket over the period.

India has boomed in recent years, buoyed by a growing population and rapid economic development. Today the country is the world’s second largest in terms of population and sixth largest in respect to economic clout – with its economy still growing as one of the world’s fastest, at 7.5% in 2017. As incomes have risen, millions of citizens have moved up into new consumer categories.

An analysis from Bain & Company for the World Economic Forum shows that the future is also bright for the country according to long-term fundamentals, with a growing GDP of which around 60% is domestic private consumption, insulating it to a degree. There is also a healthy savings rate, at around 22% of income, and a large working age population, with a median age of 28 years.Evolution of household income in IndiaThe Indian economy is projected to enjoy strong growth in both the low and high case scenarios considered in the analysis. The base case will see economic growth stable at 7.5% on average until 2030, with just a 1% degree shift either side of this figure for the lower and the higher case scenarios. The effect of growth for the base case is an additional 500 million middle- and high-income earners added to the economy to 2030, with 50 million fewer in the low case scenario – pushing the share of upper-middle and high-income earners to 48% of the total population.

The firm’s projection of income growth would see consumption spending increase from $1.5 trillion to a massive $5.7 trillion by 2030. The growth is largely driven by a huge increase in the country’s middle class households, which are set to expand by 140 million, while the high-income earners are set to grow by 21 million – together a 51% increase on 2018. The middle class will see its share of total consumption increase from 30% to 47%, while around 25 million people will be rise out of poverty, with total poverty decreasing from 15% to 5% of the population.Indian population statisticsUnlike much of the developing world, India is ageing slowly, with a current median working population age of 28 which is set to rise only slightly, to 31, by 2030. The effect is that by 2030 the country will have the largest working age population at the youngest relative age. The rural population has also shrunk considerably since 2005, falling from 59% of the population to 51%.

The developed rural population has grown slowly over the same period, from 13% to 15%. The urban population meanwhile has increased from 28% of the population to 34%. Urbanisation is also set to continue. By 2030, the rural population is projected to decrease further, to 44%, with developed rural only growing by 1% in the period. Urban development is projected to hit around 40% by 2030.

The ongoing urbanisation and rising incomes will lead to further consumer shifts. With considerable changes to income distribution across India, growth in the middle class segment is expected to see around $2 trillion in incremental spending on affordable mid-priced offerings, while a further $2 trillion will be shifted to more premium product lines as consumers trade up.Consumer spending shifts in IndiaBain notes that buying behaviour will shift in line with both trading up as well as in new category spending. In food for instance, around 25% incremental spending will shift towards more premium goods, while around 32% will shift into health and organic food stuffs.  Personal care meanwhile is set to see considerable premiumisation, at 59% of incremental spending, as well as a broadening of product categories.

“India will continue on its path as one of the world’s most dynamic consumption environments, propelled by five major drivers: income growth; steady and dispersed urbanisation; favourable demographics; technology and innovation; and evolving consumer attitudes,” states the report. “As these drivers move India forward, many stakeholders have the potential to shape the country’s positive consumption future.”

It concludes: “The time is ripe for these stakeholders to come together and address head-on the most pressing societal challenges facing India today – skilling and job creation, socio-economic inclusion of rural India, and building a healthy and sustainable future for its citizens. Collaborative efforts to address these challenges will unlock the full potential of a young, connected and thriving nation, and establish India as a model for fast-growing consumer markets of the world.”