Melting down of Sri Lankan Economy and It’s Impacts Due to COVID-19

Abstract

COVID-19 is the most tragic disease which has been discovered most recently by Corona virus. It originated from Wuhan, China in December 2019 and currently this virus is widespread all over the world by damaging various sectors. Because of that, The World Health Organization declared a global emergency condition. All the affected countries have been looking for a safety precaution while few countries are researching the specific vaccine against this Corona virus. But currently with lack of awareness and management, it has gone out of hand. Sri Lanka also has made great procedures in controlling the widespread of COVID-19 for more than six months in a pandemic situation. However, still not yet over. Apart from the disastrous effects that have done for the health sector in Sri Lanka, the impacts of COVID-19 on the economy in Sri Lanka are also tragic as well. This study comprehensively discusses the impacts of COVID-19 on GDP, employment, tourism, poverty, household income, exchange rates and remittances. The analysis reveals COVID-19 creates adverse impact on both GDP and employment in Sri Lanka. But the magnitude of this impact is lower than that of the South Asian average. COVID-19 drastically affected the key income earning sector; tourism as well. Due to the restriction on travel by airways and ports, the earning of tourism has dropped by 1,901 USD to 956USD from January to June each 2019 and 2010 respectively. In addition to major economic impacts, this study follows the microeconomic impacts on COVID-19 by highlighting poverty dynamics under four way classification. The prediction reveals that there is a greater potential of increasing poverty which is related to all poverty types as extreme poor, poor and vulnerable non-poor. Also this study briefly examines the potential impacts that the COVID-19 crisis will have on household welfare in Sri Lanka, analyzing stimulated impacts on household income using both pessimistic and optimistic scenarios. As the weakening of export earnings, tourism receipts and remittances, the Sri Lankan rupee has depreciated against the major world currencies. Significantly, the impact of COVID-19 on the economy will be higher than the expected. Hence, the Sri Lankan government should take steps and measures to rebuild the economy while controlling the spread.