Are We Prepared For The Economic Doomsday Resulting From The Covid-19 Pandemic?

Are we prepared for the economic doomsday resulting from the COVID-19 pandemic?

- Prof. Lalith Goonatilake

We hope the COVID-19 control measures ongoing will work and we will all be safe. While major disease control measures are in place, in parallel we need to consider the economic and social impact we will face from the corona pandemic within Sri Lanka and induced from the rest of the world.

As stated in the UK Guardian on 26 March, the coronavirus pandemic has delivered the fastest and deepest economic shock in history. It will have a major impact on industrialised countries as well as the developing ones. A G8 wide recession is very likely, leading to a decline in purchasing power and consumer demand.

While the G8 countries have already started major economic remedial measures, developing countries are currently more focussed on controlling the epidemic, and at the same time offering ad-hoc measures on the economic front.

While we sincerely hope the Government of Sri Lanka’s coronavirus control measures will succeed, we need to take stock of the potential impact on the Sri Lankan economy. Let us look at some sectors and potential economic impacts:

1. Tourism

Tourism will be severely affected for a minimum of six months. There are no tourist arrivals now and even if the pandemic is controlled, it is very unlikely that many people will venture out from their home countries. It is highly likely that the impact will be felt for more a year or so.

Many global airlines face bankruptcy or nationalisation. Cash-rich Middle eastern airlines will survive. The Sri Lankan tourism sector directly employs close to 600,000 while a further 300,000 are employed indirectly. Almost a million workers face redundancy. The hotels and the support industries face a real threat of potential bankruptcy.

2. Apparel

Over 80% of our garment exports are to the USA and europe. Shopping malls in these countries have been shut. The summer and autumn orders are unlikely.