Economy pre Covid-19
Sri Lanka was having USD 84 billion worth economy (2019) and is dominated by the Service sector with approximate 55-60% share, followed by Industrial sector, with approximate 25-30% share and Agri, with approximate 8-10% share.
The country was having a steady economic growth from 2001 onwards, where there was a contraction during 2007 to 2009 and then again in 2013. With the change of political power in 2015, Sri Lanka economy was experiencing a slow growth and there was a visible change in the focus and the direction of new government towards the economy.
After 30 year long civil war, the country was one the most preferred tourist destinations in the world, until the Easter Sunday terror attack, which took place in April 2019. The terror attack completely paralyzed the tourism and leisure industry of the country, whereas occupancy rate of hotels falls to one of the lowest in the history. There was a visible disruption to the lifestyle of the general public of the country too, as the fear and uncertainty speared all over the country. However, normalcy in day to day activities and positive signals over early recovery of economic activities including travel, tourism and leisure have been felt towards latter 2019, signaling potential for moderate growth.
Nevertheless, the outbreak of Covid-19 in China during latter 2019, hit the global economy, signaling possible risks to the local economy as well.
The 1st Covid infected patient was reported in January 2020 and the virus spread over the major parts of the country, causing economic and social disruptions.
Government introduced the lockdown curfew during latter March to mid May 2020. The economic activities of the country have been adversely impacted during this period, as the domestic production disrupted to a greater extent. At the same time closure of global markets caused slow demand for exports, whereas the imports were intact creating a pressure on exchange rates. Foreign debt payments amidst standstill economy had further pressurize the foreign reserves and exchange rates.
Global credit agencies announced the downgrade of the country’s credit rating, stressing the possibility the economic outlook further. Fitch Ratings has downgraded Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC’ from ‘B-‘ on 27 Nov 2020.
Where to focus
Apparel, USD 5.3 billion worth industry, is one of the potential industries to grow. The local apparel manufacturers are well recognized globally for their quality standards, work ethics, efficiency and effectiveness. Therein, it is vital to support this industry to expand further, where government support is mandatory.
Developing much needed infrastructure, introducing favorable import tariffs, support for vertical integration, sponsoring for skilled labor development are the key arears where government should get involved.
At the same time, understanding the market sentiment and trying for innovative solutions is important to succeed. Therein, it is vital that the industry should evolve complete the entire value chain, from produce raw materials to finished garments, reducing the dependency on imported raw material.
Handloom and Bathik are the subcategories having potential to grow. Innovative production methods, material usage, example the banana leave based manufacturing, will support country to gain the competitive advantage.
Amidst outbreak of pandemic, it was felt the untouched potential for health industry of the country as Sri Lanka is having potential to attract foreign patients, especially from the countries including India, Pakistan, Bangladesh, Maldives and Seychelles.
Availability of treatments, service level, safety, reliability, standard, convenient and the cost are the decision-making factors, where there is a need for developing a system, which can ensure the status-quo of the industry players and the reliability.
It is essential to look out and see how best Industry can perform at this juncture. Digitally integrated health service is one of the innovative concepts try out. Online channeling services can be improved to fully fledged online platforms to meet medical officers through digital platforms and to obtain medical reports, referring same for medical officers and ordering medicines.
Despite the threat of the pandemic, country has been repeatedly identified as one of the preferred tourists’ destinations signaling potential to grow.
Developing countries as one of the safest and convenient destinations is the key for attract tourists as the country is rich with the sceneries and places to visit.
Identifying the target market, which would bring higher revenue, is one of the key factors to improve. Having a national strategy to ensure the standard of the country as a tourist destination would certainly support the industry.
There is a need for developing the industry, out of the traditional tourism, by focusing on medical, education and academic researches-based tourism, event-based tourism, wildlife, etc
Quarantine Tourism is a novel concept to promote amidst the outbreak of pandemic. End to end pre-arranged tour within the recommended health protocol will support country to attract tourists even at this juncture.
Education is a rising need, signaling opportunities as a country for education hub.
Even now students from India, Pakistan, Bangladesh and Maldives are following their higher education in Sri Lanka, due to cost effectiveness, in comparison to the countries like Maldives and Singapore.
Standardizing the private education industry and supporting industry players to affiliate with globally recognized universities will certainly support to improve the outlook.
There is growing demand for digital education, which will support industry to reduce higher capital expenses on typical classroom education and other amenities.
What to expect beyond 2021
Outbreak of pandemic was caused to change the earlier projections on Global Economy for 2021. However, production and approval for vaccines for the pandemic has given a light to the gloomy outlook for possible medium to long-term recovery.
Nevertheless, realigning major economies, political power shifts and trade wars are the possible events in time to come, post Covid-19 and that will certainly lead the global economic recovery.
Sri Lanka as country, should ideally focus on the industries where there is a recognition and potential to grow.
Public and private sector collaborations would certainly support for economic prosperity.
Innovative thinking, technological advancements and risk taking will lead the way to success.
Senior Analysts – Team STATISTICIA