Revenue across Sri Lankan corporates portfolio could fall by almost LKR30 billion, or around 7% yoy, in the financial year ending March 2021 (FY21), based on the agency’s baseline coronavirus pandemic scenario, Fitch ratings announced on Monday.
This worsens to LKR 40 billion, or around 15% yoy, if the two large telecom companies, which are likely to stay resilient during the pandemic, are excluded. However, most corporates should recoup lost growth momentum by FY22 and generate higher revenue than in FY20.
"Our forecasts examine the effect of the March 2020 lockdown on revenue for the next 18-24 months. We also refine our expectation of recovery trajectories to reflect easing social-distancing requirements from May 2020 and a gradual recovery in economic activity. Key risks to our assumptions include a second wave of infections that lead to further lockdowns and a prolonged weak global economic and travel environment, which could depress Sri Lanka’s economy for longer than we expect," the agency said.
Sri Lanka GDP to contract in 2020
Fitch Ratings said that they expect Sri Lanka’s real GDP to contract by 1.3% in 2020 due to the pandemic, worsening from our 24 April 2020 forecast of a 1.0% contraction. This follows mid- to low-single-digit economic growth in the last five years. However, GDP growth should rebound to historical levels in 2021, with 4.0% growth. The weakened operating environment will continue to dampen demand and challenge the near-term operating performance and liquidity profiles of most of our rated corporates.