Impact of COVID-19 on Sri Lanka Economy

Abstract

Sri Lanka, along with the rest of the world, is facing the biggest health and economic crisis in living memory. The economy is facing more and more challenges day by day. Like many other economies in the world, the Sri Lankan economy has been severely affected in many ways, especially due to the restrictions imposed to curb the spread of the epidemic. Many cities around the world are inactive due to curfew or social and physical distance law. Only the essential services are in operation and everything else is inactive. Buying and selling are severely restricted. The people of the country must pay the price for the essential drive to provide food. This study found that income earning sectors such as agriculture, household income, apparel and textiles, tourism, export income, poverty and small and medium-sized enterprises have been affected by this pandemic. In addition, the construction sector, the transport sector, wholesale and retail trade and many other sectors that directly or indirectly contribute to the country’s economy are still suffering from the epidemic. With the spread of the epidemic, the cost of imports of food and beverages and pharmaceuticals increased. During the period from January to August 2020, global demand is declining and supply chains are being disrupted. Which arose due to imposed restrictions due to the blockade, the country experienced the largest recession in the second quarter of 2020 since the GDP calculation began. Banking and financial services in the midst of suspensions and disruptions to the country’s total cash flows in the sector brought significant risks has arisen on credit growth and the quality of bank’ assets. The epidemic has completely reduced the ability of the country’s financial decision-makers to achieve the economic growth targets set through monetary policy. Micro, small and medium enterprises as well as low income families are facing severe difficulties and appropriate measures need to be taken to control the epidemic through the use of innovative technology or by activating all these sectors. Indeed, the best tool for making decisions in unusual situations is to plan correctly. In order to reach a state of relief from the plague at this time, it is important to allocate resources efficiently and effectively and to prioritize the sectors with the most powerful provisions. However, the success of the fight against the COVID-19 epidemic, both locally and globally, will be crucial in determining the extent of the resurgence and pace of recovery of the local economy in the years to come.