Blog

COVID-19 has been rapidly spreading across the globe, taking thousands of lives and bringing hundreds of economies to a standstill. Its initial impact on China’s economy and China’s consequent slowdown may have adverse economic impacts on the rest of the world as well. This article examines the impact of COVID-19 on the Sri Lankan economy, focusing on the sectors such as national output and employment, tourism, exchange rate and financial market and social and welfare. 

The outbreak of critical diseases and pandemics cannot be predicted or controlled as yet. Severe acute respiratory syndrome (SARS) in 2003 and the Middle East respiratory syndrome (MERS) in 2012 are recognised as epidemics in recent history together with the most recent outbreak of the coronavirus, COVID-19. It was first identified in Wuhan, People’s Republic of China, in early January 2020. As confirmed by scientists. COVID-19 also belongs to the same family of coronaviruses which caused SARS and MERS in 2003 and 2012, respectively. However, the mortality rate of COVID-19 is approximately 4.3% (as of 24 March 2020) which is significantly lower than that of SARS (10%) and MERS (34%) (Abiad et al 2020). Nevertheless, the infection rate of COVID-19 (between 1.5% to 3.5%) outnumbered that of SARS and MERS and also Ebola (Abiad et al 2020).  The total number of confirmed cases of COVID-19 rapidly increased in China initially and then the rest of the world. In fact, the confirmed number of cases had surpassed the total of SARS by the end of February 2020 and currently, there are 170,444,706 (as of 30 May 2021) confirmed cases across 220 countries with a death toll of 3,544,083 (as of 30 May 2021). The outbreak spread to a vast number of countries in record time and the World Health Organization had announced a global emergency. 

Apart from the health consequences of COVID-19, there are many economic and social impacts of the pandemic which should be addressed sufficiently. Recalling history, SARS in 2003 cost $50 billion of the world’s output (Raga 2020) and the Asian Development Bank (ADB) has now estimated that global output may drop from $77 billion to $347 billion or by 0.1% to 0.4% of the global gross domestic product (GDP) (Abiad et al 2020). No doubt that China is the most adversely affected economy, approximately accounting for two-thirds of global GDP drop-down and the rest of the impact on the global economy is shared equally by developing countries in Asia and the rest of the world. The impact on China’s economy is more substantial through their stock markets, paused production and cancelled flights, and international travels. Currently, China is the second largest economy in the world and therefore China’s slowdown will adversely affect other countries as well.