Transcription
LKR Competitiveness analysis09th October 2014150, St. Joseph’s Street, Colombo 00140, Sri Lanka.Tel: 94 112490900, Email: jbs@jb.lk, www.jbs.lk
LKR losing competitiveness .10514013510013095125Click to edit Master title style1209011585110LKR80105NEER (Sep ‘14 – 93.13)E100EREER (Sep ‘14 – 103.27)E – estimated figuresSep 14Aug 14Jul 14Jun 14May 14Apr 14Mar 14Feb 14Jan 14Dec 13Nov 13Oct 13Sep 13Aug 13Jul 13Jun 13May 13Apr 13Mar 13Feb 13Jan 13Dec 12Nov 12Oct 12Sep 12Aug 12Jul 12Jun 12May 12Apr 12Mar 12Feb 1295Jan 1275Source: forexpros.com, Central Bank of Sri Lanka, JBS ResearchPage 2
REER back to the level in Jan 2012 before the large fall in the currency.120115110REER back to the point before thelarge depreciation105Clickto edit Master title r-14REERMay-14LKRJul-14Sep-14Source: forexpros.com, Central Bank of Sri Lanka, JBS ResearchPage 3
Loss in competitiveness is on the back of higher relative 7Other CountriesREER2014 September5.401.1892.17Click to edit Master title styleREER2012 AprilChange in NEERUSAHigher inflation in IndiaIndiaUKChina(Exchange rate effect)Weighted Inflation differential effect1 Logarithmic analysis scaled proportionatelySource: CBSL, JBS Research AnalysisPage 4
Monthly exchange rate movement for 24 countriesTrade 9%Japan3.63%Hong Kong1002.36%MalaysiaClick to edit Master title ya1151101059590858075201220132014Page 70Sri Lanka
Monthly CPIs for 24 countriesTrade Weightage130125120Clickto edit Master title style115110105100201220132014Page y4.99%Japan4.83%Italy4.45%Belgium3.63%Hong ea0.97%Australia0.36%Bangladesh0.10%KenyaSri Lanka
AppendixNEERNEER is the weighted geometric average of the bilateral nominal exchange rates of the domestic currency in terms of a basket of foreign currencies.NEER 24𝑖 1𝑒( )𝑤𝑖𝑒𝑖where e : Exchange rate of the Sri Lankan rupee against the US dollar (US dollars per rupee in indexed form)ei : Exchange rates of currency i against the US dollar (US dollars per currency i in indexed form)wi : Weights attached to the country/currency i in the indexREERClick to edit Master title styleREER is the inflation adjusted NEER.REER 24𝑖 1𝑒𝑃𝑒𝑖𝑃𝑖( )( )𝑤𝑖where P : Consumer Price Index (CPI) of Sri Lanka compared to the base period indexPi : CPI of country iLogarithmic Transformation of REER24𝑙𝑜𝑔10 𝑅𝐸𝐸𝑅 log 10 𝑁𝐸𝐸𝑅 𝑤𝑖 𝑙𝑜𝑔10( P/Pi)𝑖 1ReferencesCentral Bank of Sri Lanka, Annual Report (2010), External sector developments and policies, page 126Page 7
Copyright 2014, JB Securities (Pvt) Ltd, All rights reserved.Click to edit Master title styleFor further information contact:Murtaza Jafferjee CFA 94 11 2490900murtaza.jaff@jb.lkRomesh Fernandoromeshf@jb.lk150, St. Joseph’s Street, Colombo 01400, Sri Lanka.Tel: 94 112490900, Email: info.securities@jb.lk, www.jbs.lkPage 8
150, St. Joseph's Street, Colombo 00140, Sri Lanka. Tel: 94 112490900, Email: jbs@jb.lk, www.jbs.lk 09th October 2014 LKR Competitiveness analysis
