‘A Terrible Storm’: Economic Impact of COVID-19 on Sri Lanka

Abstract

‘COVID-19’ has taken the world by storm, challenging the norm of ‘normal’ in most aspects of life. The pandemic situation ‘halted’ almost all economic activities of Sri Lanka. This review study comprehensively examines the impacts of COVID-19 on GDP, employment, poverty, tourism, household income, exchange rate and remittances in Sri Lankan context. The analysis reveals COVID-19 creates adverse impacts on both GDP and employment in Sri Lanka, despite magnitude of the impacts is significantly lower than that of South Asian average. Declining tourism receipts, declining export earnings and outstanding foreign debt repayments are essentially increasing the pressure on the foreign exchange rate. Accordingly, from the first week of March 2020, the Sri Lankan rupee began to depreciate against the major currencies. It reporting one of the highest depreciation in history. Moreover, COVID-19 adversely affected on tourism sector, construction, transport, hotel and apparel sectors while enhancing unemployment rate as a whole. Due to job lost, unemployment rate was increased while increasing the poverty line as well. Predictions show that under the current pandemic, poverty associated with all forms of poverty is likely to increase. Ultimately, the welfare impact of COVID-19, which is rising more than expected, will inevitably hamper the country's long-term economic development process. Therefore, appropriate measures should be taken to control the spread of the epidemic and to revive the economy.