Rising COVID-19 cases threaten the economic recovery
The apparel sector is the most affected: It could lose between 80,000 and 300,000 jobs. The health emergency is driving foreign investors away. The government wants to reduce dependence on imports. Expert notes the lack of planning to reboot exports.
Colombo (Asia News) – The increase in coronavirus cases threatens Sri Lanka’s economic recovery. After an initial phase during which the pandemic was kept under control, the number of cases has surged since 4 October.
According to the World Health Organization, Sri Lanka has reported more than 4,600 cases with 13 deaths. At present, the main cluster is the Brandix Lanka factory in Minuwangoda, owned by one of the largest garment manufacturers in the country
Kusal Perera, a Colombo-based political and economic analyst and journalist, notes that the lockdown and the weakening of global supply chains have dealt a severe blow to the Sri Lankan economy.
Pre-COVID-19 apparel exports were one of the engines of the country’s economy, worth US$ 5.3 billion in 2019, responsible for more than 250,000 direct jobs.
Until the recent jump in the number of cases, Sri Lanka was gaining market share at the expense of India and Bangladesh, Perera explained.
The outbreak at the Brandix plant will have a very negative impact on the industry. According to various estimates, the sector could lose between 80,000 and 300,000 jobs.
The wave of cases has led to Sri Lanka being downgraded by the Moody's rating agency.
The local health situation is discouraging foreign investors and seriously damaging the country, whose economy is dependent on foreign investment.
Foreign earnings from the three main income sources – export manufacture, tea, and migrant labour remittances –are declining.
In addition to the loss of thousands of jobs, this decline will complicate the government’s ability to service its debt, already at alarming levels.
The tourist sector, which was hit hard by the Easter Sunday terrorist attacks in 2019, will also struggle to get back on its feet.
To reduce the impact of import costs, the government has banned the purchase of non-essential food products from abroad, most of which can be grown in Sri Lanka.
The authorities are oriented towards boosting local production; however, Perera notes that there is no pre-established plan to substitute imports.
For the analyst, lower imports alone are not enough to support the national economy. In his view, the government must encourage a growth in exports, combined with less dependence on foreign direct investment.
This requires medium and long-term planning, which is almost absent for now, and a well-thought out plan to contain job losses.
The government plans to recruit 50,000 college graduates and 100,000 less qualified young people into the public sector. But for Perera, this will not compensate for lost private sector jobs.
Any recovery effort will have to be carefully planned in order to promote environmental security, democratise state functions and eliminate social and economic inequalities.
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19/10/2020 14:04
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