Sri Lanka trade, tourism, remittances to be hit by Coronavirus: Central Bank
ECONOMYNEXT – Sri Lanka’s exports, imports, tourism and overseas remittances would be hit by an ongoing outbreak of novel Coronavirus (COVID-19), which would outweigh any benefits from lower global interest rates, the central bank has said.
“The exact impact on the Sri Lankan Economy would depend on the extent of the global spread of the COVID-19 outbreak, its persistence and policy responses of major economies and trading partners,” the central bank said in its March monetary policy statement, after holding rates steady.
“The likely slowdown of the global economy and disruptions to the supply chain could affect Sri Lanka’s merchandise and service exports as well as related logistics.
“These adverse implications are likely to outweigh any marginal benefit arising from reduced global energy prices and international interest rates.”
The US Federal Reserve cut policy rates by a surprise 50 basis points this week saying it will help mitigate the effects of the virus, which is spreading in Italy and some European countries. There have also been deaths in the US.
Sri Lanka’s central bank had already cut rates in January, despite a spike in inflation and fears of and expanding budget deficit, though private credit had been weak.
Sri Lanka’s gross domestic growth is projected at 3.7 percent by the International Monetary Fund, with the islands authorities projecting over 4 percent growth.
The UN’s trade agency said up to 50 billion dollars in global rate could be hit.
Chairman of Sri Lanka’s Apparel Exporters Association told EconomyNext that between 200 to 500 million dollars of apparel exports could be hit as buying markets in Europe slowed orders.
Factories which already been hit by lack of raw materials from China may have to suspend operations for a time he said.
Chairman of Sri Lanka’s Export Development Board, Prabash Subasinghe was quoted by Sri Lanka’s DailyFT newspaper as saying that up to 750 million dollars of exports could be hit in 2020.
The central bank said other sectors could also be hit.
“The spread of the virus to countries with a significant number of Sri Lankan migrant workers could affect remittance inflows as well,” the central bank said.
“The slowdown in global tourist movements will affect Sri Lanka’s tourism sector, in addition to the direct impact of lower arrivals from China.
“Sri Lanka’s economic links with China could be directly affected as significant volumes of consumer goods, intermediate goods and investment goods are imported from China.”
China is a top trading partner for Sri Lanka in imports, remittances. Chinese contractors in the country also use workers, who are more productive.
Chinese arrivals plunged 92 percent in February 2020, to just over 2,000 visitors while overall arrivals dropped 17 percent with dips in major markets except India.
From a new hotspot in Iran, COVID-19 has started to go into several Middle Eastern countries. Korea another hotspot also has Sri Lanka’s migrant workers. (Colombo/Mar05/2020)