By Imasha Oshini
“A tree is dependent on a main root of a tree. If the main root is damaged it will affect every aspect of a tree. Likewise, the damage to an economy will affect every country in the world”
The world’s second largest economy owner China is currently being hit hard. This weakens the flow of trade, travel and investment, and affect the global economy. The spread of the coronavirus (COVID-19) to a global emergency, pose a significant threat to the recovery of the global economy by 2020. This no doubt enables policymakers around the world to deliver better policies to mitigate the impact. As uncertainties creep in within global economy it will be even harder for economic predictions. In order to mitigate this situation, many economists look for more relaxed policies referring to global demand and supply as a solution.
Due to the prevailing situation and its impact our country is also hit badly. We can also see the Sri Lankan economy shaping around the global spread of the virus, the duration of this outbreak, and the rivalry of key economies and trading partners as key factors affecting the state.
Global impact of the Corona virus (COVID 19) on Sri Lankan economic activities
- Since China imports a significant amount of consumer goods, intermediate and investment goods, it has a direct impact on Sri Lanka’s economic downturn. Also the depression of the local apparel sector which is a main contributor of GDP as a result of exports market stagnation are considerable headaches
- Sri Lanka’s commodities and services exports as well as their associated supply have been hampered by the global recession and disruption to the supply chain
- Declining tourist arrivals across the board are directly impacting Sri Lanka’s tourism sector.
- The spread of the virus in countries with
significant numbers of Sri Lankan migrant workers has also affected remittance
flows with many losing their jobs in the Gulf regions
- Global energy prices and falling international interest rates
have had minor benefits, but the effects of the circumstances mentioned above
are relatively big
- Business confidence, customer activity and day to day life has changed. Significant unemployment, income inequality and poverty risk in and between economies are increasing on the horizon
Predicting the growth of a small open economy like Sri Lanka is a difficult exercise. Looking at these situations, we can expect that growth in 2020 will be lower than the figure for 2019. However, by going through on following steps we can mitigate and control the economic downturn to a certain percentage.
Thoughts that Sri Lanka should follow to overcome economy downturn
- For the tourism sector: Positive sentiments and mental state to be created giving hope about potential opportunities in tourism sector with immediate task force focus
- Rates charged on remittance should be adjusted according to the amount of remittances from residents abroad. As example, less percentage should be charged from people who send higher remittances to Sri Lanka and subsidies charge should be charged from other people
- The composition of imports should be changed on the domestic production. That is, imports must be made re-looked at and local production avenues to sharpen in the long term
- Rural incentives should be provided to increase GDP by allowing people to grow their own vegetables in their home and excess amount to the market. The regulatory need to create an organic market for those excess vegetables by enabling them to reach directly. For those who are reluctant to cultivate their own backyard awareness needs to be created on the benefits
The COVID -19 as a global crisis had created major havoc on global economy. Sri Lanka is facing a severe crisis in each sector. By undertaking proactive actions during the correct time it will help Sri Lanka’s recovery. The government, policy makers and especially Business Leaders have to come forward in rectifying these burning issues and taking bold decisions to bring our country back on track.
The writer is a Finance/Accounts Executive at Communique PR
