Fitch Ratings has assigned a stable outlook to Sri Lanka's alcohol beverage sector, even though government decisions in October and November 2015 to raise excise duties on alcoholic beverages increase prices.It said rising disposable income will absorb the higher duties, and Fitch believes the inelastic demand and increased consumer demand for refined alcohol should allow companies, including Distilleries Company of Sri Lanka PLC (DIST, AAA(lka)/Stable) and Lion Brewery (Ceylon) PLC (Lion, AA-(lka)/Stable), to pass on those charges to consumers without worrying about them shifting to the more affordable illicit market.
Positive Market Dynamics: Fitch expects increased per capita income, driven by the agency's forecast GDP growth for Sri Lanka of over 6% in 2016, the recent increase in public-sector pay, higher tax exemptions for private-sector employees and reduced essential-goods prices to improve the affordability of – and sustain the demand for – alcohol in 2016.
Positive Market Dynamics: Fitch expects increased per capita income, driven by the agency's forecast GDP growth for Sri Lanka of over 6% in 2016, the recent increase in public-sector pay, higher tax exemptions for private-sector employees and reduced essential-goods prices to improve the affordability of – and sustain the demand for – alcohol in 2016.
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