Govt revenue collections broadly par projections – First Capital Research

On Aug 22, 2024

First Capital Research says that the Government revenue collections are broadly with their projections and this is praise worthy.

“First Capital Research expects Govt. Revenue to reach 12.3% of GDP in 2024E at Rs 3.5 trillion (growth of 17%). For the first 5 months, January to May 2024, Government Revenue is up by 44% at LKR 1.6 trillion achieving 47% of our target.”

After a year of persistent declines driven by elevated interest rates, private credit is showing signs of recovery as rates have begun to drop in early 2024. Private Credit grew by 2% on target to achieve 7.5% for 2024. (LKR Bn). LMD Business confidence was at a 12-month high in June 2024 and surpassed the 100 threshold. All three PMI indices bumped up and crossed the neutral threshold of 50 for the 1 st time in 2024.

Tourist arrival may reach 2.1 million for 2024 end while exceeding the 2018 peak only in 2025 with potentially 2.5 million arrivals while tourism earnings are expected to reach over USD 3 Billion for 2024 end and USD 4 billion for 2025. Balance of Payments is expected to register a surplus of USD 1.9 billion amidst the continued tight trade restrictions (gradual relaxation) during 2024 while the restarting of debt repayments may push down the surplus below USD 1.0 billion in 2025 end.

Despite the better-than-expected recovery and growth in 1Q 2024, the uncertainty and higher base effect is expected to slow down growth in 2H 2024.

“Thereby, GDP growth expectation is maintained from +2.0% – +3.0%. Election period is usually a period of uncertainty with most investors preferring to avoid any investment related decision. The primary reason is the long-term policy uncertainty that gets created through elections.”

During the coming elections a clear message from most leading political parties is that they are willing to take the IMF program forward. “We also believe that no party may have the guts to face any of the elections without fulfilling the conditions of the IMF which means the IMF program is likely to be on track for at least the next 1-Year period which is a big positive and may clear out some of the uncertainty for investment decisions.”

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