Sri Lanka’s already fragile business sentiment has weakened sharply in December, with confidence indicators deteriorating in the aftermath of Cyclone Ditwah, as firms reassessed growth prospects amid mounting economic and climate-related pressures.
The latest LMD–PEPPERCUBE Business Confidence Index (BCI) has fallen by 25 points month-on-month to 164 in December, down from 189 in November, marking its lowest level in the past 12 months. The decline follows a year marked by volatile sentiment and comes as the economy absorbs the aftershocks of the most severe natural disaster to affect the country since the 2004 tsunami.
Officials have estimated post-cyclone reconstruction costs at up to $ 7 billion, while analysts expect economic growth to slow to around 3% in 2026, even under relatively favourable conditions. The damage has raised concerns that recent signs of macroeconomic stabilisation could be delayed.
United Nations Development Programme (UNDP) Resident Representative in Sri Lanka, Azusa Kubota has warned that the cyclone struck regions already weakened by years of economic strain, cautioning that recovery efforts will be slower and more costly where severe flooding overlaps with long-standing vulnerabilities. She has also noted that Sri Lanka cannot afford to rely on additional borrowing to finance reconstruction.
The Government has requested $ 200 million in emergency assistance from the International Monetary Fund, an appeal that remains under review.
A post-disaster assessment by First Capital highlighted broader economic spillovers, noting that private consumption, which accounts for nearly 68% of GDP, is expected to weaken as households face income disruptions and higher costs.
Meanwhile, Moody’s has warned that the cyclone could slow Sri Lanka’s post-default fiscal recovery, citing extensive infrastructure damage and limited capacity to manage rising climate risks.
According to PepperCube Consultants, the sharp fall in the BCI reflects the operational, economic, and emotional toll of a large-scale climate disaster. The firm noted that sustaining business confidence would require targeted policy responses focused on human capital development, operational efficiency, and a clearer strategy to address wider socioeconomic challenges.
December reading places the index 29 points below its 12-month average of 193 and 15 points lower than its level a year earlier, underscoring the depth of the confidence shock.
Leave a comment