The coronavirus outbreak has infected over 2 million people worldwide. Coronavirus cases in Sri Lanka are 238 in total with 7 deaths reported. The economic dip in manufacturing, export, tourism, and a significant drop in the remittances received from the Sri Lankan overseas is going to be devastating for the Sri Lankan economy.
Impact on the Sri-Lankan Tourism Sector
Tourism is an important sector for the SriLankan economy. In 2018, Travel and Tourism accounted for 12.5 percent of the Gross Domestic Product (GDP) and employed around 500,000. According to the World Bank data, receipts from international tourism accounted for 28% of total export revenues for the Sri Lankan economy, largest after the Maldives in Asia.
Sri Lanka’s tourism industry was still recovering from the horrific bombings last year during Easter that killed more than 250 people. Due to the coronavirus outbreak, on March 19, the government banned passengers’ flight service and imposed a curfew for an indefinite period until the situation comes under control. And the industry has been on a standstill since.
The decline in the number of foreign visitors has hit both the country’s income, employment and balance of payments.
How is Coronavirus Affecting Sri Lankan Exports?
The global disruptions of supply chains and markets are a threat to global trade. With the spread of COVID-19 in Italy, which is Sri Lanka’s single biggest European Market, seafood exports immediately felt the effects. Fishermen were unable to export 400 tonnes of fish because of the restrictions and the precautions that were taken by other countries.
Sri Lanka’s merchandise exports were already down by 7.4 percent to $961 million even before the COVID19 crisis. The Export Development Board (EDB) has warned for a challenging time ahead, as they said that the drop in exports will be 20 percent to 25 percent, which is about $750 million. This is the opposite of the Government’s positive target to achieve $13.5 billion worth of merchandise exports in 2020.
Remittance inflows amid the Coronavirus Outbreak
Sri Lankans overseas add up to an estimated population of three million. Increasingly remittance inflows have been one of the biggest earners of foreign exchange income for Sri Lanka. In 2018, $7.16 billion remittances were received, which is about 8.25 percent of the country’s GDP. For comparison, it is larger than Sri Lanka’s three largest export industries combined.
The remittance inflows during the pandemic have been hit significantly without a clear timeline of recovery. In light of financial hardships faced by the country, the Central Bank of Sri Lanka (CBSL) has appealed for help to the Sri Lankans living abroad to deposit their savings in the country's banking system to tackle the current financial hardships brought by the COVID-19 pandemic.
In the same statement by the Central Bank of Sri Lanka highlighted that remittances during the pandemic will be exempted from the exchange control regulations and taxes for a period of three months and would be protected under the banking secrecy provisions.
Government Response to the Coronavirus Pandemic
Sri Lanka acted early and responded to COVID-19 with aggressive quarantine, imposed a partial lockdown, and sealed international borders.
Sri Lanka post Coronavirus
The World Bank forecasts a recession in Sri Lanka in the coming months with forecast growth between -3 percent to -0.5 percent for 2020.
It is not just Sri Lanka but the global economy that has entered a recession due to the Coronavirus pandemic as the world has put on hold almost all economic activity unless deemed essential services.
The road to recovery and economic growth seems unclear currently, but looking at China and South Korea as an example, we can be optimistic about a rapid recovery. The World Bank estimates a GDP growth rate of 0.2 to 1.2 for 2021. This is part of a developing story. Please follow us on Twitter @CompareRemit for more updates.