The Devastating Impact on the Economy in the Wake of the COVID-19 Epidemic

Abstract

COVID-19 has been rapidly spreading across the globe, taking thousands of lives and bringing hundreds of economies to downturn and this review study comprehensively examines the impact of COVID-19 on GDP, inflation, stock market, poverty, employment and tourism industry downturn in Sri Lanka. In Sri Lanka, the first confirmed case of COVID-19 was reported on 27th January 2020. The infected person was a Chinese national who had arrived in Sri Lanka as a tourist two weeks prior to the reported date. After the treatments she was fully recovered and discharged on 19th February 2020. However, the worldwide travel bans imposed during the pandemic period, the arrival of tourists in the country decreased by 71% in March 2020 and tourists arrivals were nil in the following months of April, May and June. Similarly, the Purchasing Manager's Index [PMI] of the manufacturing sector, which was recorded at 54 in January 2020 dropped to 24.2 in April 2020 specifically owing to a decline in new orders, production and employment. Further, industrial exports in the country dropped by 74% while agricultural exports declined by 32% on a year over year basis, thereby posing an unfavourable effect on export earnings in the country. The impact of the pandemic on Small and Medium Scale Enterprises [SMEs] and the informal sector including daily wage earners was severe. One of another most pressing issues to be noted in terms of the social impacts of the pandemic is the disruption of educational activities. Lockdown restrictions that accompanied the demands for social distancing resulted in the closure of primary, secondary and tertiary educational establishments (Eg: schools, universities and support classes) As a relief , the government introduced a debt repayment moratorium which included a six-month debt moratorium for affected industries in tourism, garment, plantation and IT sectors and SMEs. the main objective of this review study is to explore the economic crisis arisen in Sri Lanka due to COVID-19. Accordingly, it is discussed about the various economic matters of macro and micro economic factors like Gross Domestic Production (GDP), employment, tourism, poverty, inflation and stock market effects along with valid statistical evidences. First heading of this paper discusses about the historical perspectives of global pandemics while bringing out sufficient evidences from the existing researches.