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Frontier Economic Monthly - February 2017

​Key Takeaways

• -Foreign investors continue to sell out of government securities. However, a reversal in investor sentiment toward emerging market investments in general and the credit outlook upgrade by Fitch could see a reversal of these outflows.
• -The planned sovereign bond issue and the syndicated loan could help shore up foreign reserves and improve external finances.
• -LKR will likely be under pressure until foreign outflows recede and/or foreign funds are raised. However, overall depreciation in the LKR will likely be limited this year – in line with our end 2017 views.
• Focus – The Department of Census and Statistics (DCS) revised the base year of the Colombo Consumer Price Index (CCPI) to 2013, from the previous base of 2006/07. This focus discusses the key changes made under the revision and the implications of the changes to overall inflation. It also provides our updated inflation forecast for 2017.