Prospect of Economic development - Post Covid-19 Sri Lanka

           Since the President Gotabaya was elected he and his administration took ever greater measures to stimulate stagnating economy, cutting down taxes and increasing VAT threshold to encourage investments. He welcomed all developed nations to invest in Sri Lanka instead of finger pointing at the biggest investors. However, prevailing world reality of this unprecedented Covid-19 pandemic projects the development of our economy in a blur horizon at its worst, and as an uphill struggle at its best.

Chart 1 - Ratio of world merchandise trade growth to world GDP growth, 1990‑2020

% change and ratio

Source:   WTO Secretariat for trade and consensus estimates for historical GDP. Projections for GDP based on scenarios simulated with WTO Global Trade Model. 

                

                The idea of being self-sufficient is up in the agenda of every country now. A little bit of Government’s encouragements and examples of raw models in the society is going a long way, it seems. Everyone is worried about immediate to long term food security of their families. There might even be a time of over production of same vegetable and fruits across the island in months to come, in which case the Government needs to plan ahead of storing capacities for the future. 

             However the gravest concern of all is how the Government will get back on the path to become an industrialised nation, a nation which is capable of producing at least something from its raw materials. Influx of Covid-19 donations will soon stop and sooner dry out.  How the Government will find investments to develop country’s infrastructures without sacrificing national interests and to sustain its orientation to be an industrial state needs a careful assessment.

          The post-19 West is most likely to be a stricter protectionist one, following the experience of their economical manoeuvres of Great Depression in 1930s. No look further than what Sri Lankan Government wants to do with its agricultural sectors and spot of production lines. We want to protect them, for example produce as much onion as needed without importing from India. On the other hand, the Chinese economy will be the one who looks for more market liberalisations around the world to sustain its economic growth rate and its people’s expectations. Economic assistance without string attached to developing countries will hardly come by in post Covid-19.

                First thing is first, it seems we are in a very early stage to predict how this virus will end itself. Will there be a second and third waves or what the final number of casualties would be and how long these quarantine procedures will last in what places, very early to predict. But following the predictions of WTO and Bill Gates and many economic experts in the world, the economic downturn will surpass the conditions of 1930’s great depression. It is for sure it will be at least 18 months or more ahead that we can see all production lines coming back to normal capacities, Gates said. It is difficult to guess when all harbours and airports will reach their true potential again. Ever increasing unemployment rates among western nations and across the world will catapult the rosy time of world labour force having some spare cash again for leisure activities, from five years ahead or more.  The potential of our tourism sector, as a reliable short-term speedy foreign currency earner, is a very distant one now.

Chart 2 - World merchandise trade volume, 2000‑2022

Index, 2015=100

Source:   WTO Secretariat.

              In this misty projections, Gotabaya Government needs to work harder on two fronts in country’s economy. On one hand, micro economic managements to eradicate corruptions, mismanagement, to boost agricultural output and to store those for future consumption, to increase the potential of value added services to county’s raw materials and to secure existing markets for goods and find new markets. The hardest challenge of all is to debt restructuring of Government debt and securing foreign investments without sacrificing national interests and compromising on our sovereignty. 

                How this Government manages the former and latter will determine their own existence in power and country’s potential to weather the post Covid-19 world.  

To be continued ...

Author - A.V. Anuradha Samapth

MA in International Security and Law & BA Hon in International Politics.
LinkedIn - linkedin.com/in/amarasinghevidanage