ECONOMIC IMPACT OF COVID-19 PANDEMIC

D.R.C. Perera

206090A

Bachelor Of Business Science Degree

University of Moratuwa

Sri Lanka

July 2021
Abstract

This report analyzes the potential economic impact of the COVID-19 pandemic. The
short and long-run predicted scenario shows that, compared to the agriculture sector,
the manufacturing & service sectors will be affected terribly in all South Asian
countries. Countries have included farmers and allied workers in the government’s
support system to utilize resources. To keep the balance of international trade, the
export & import of essential items must be given special support. To deal with this
situation, governments can invest money from different autonomous institutions to
build up Micro, Small, and Medium Enterprises (MSME). The findings of this report
will be helpful to sustain and revive the economic activities in the world.

ECONOMIC IMPACT OF COVID-19 PANDEMIC

Introduction

The 2019–2020 coronavirus pandemic, which is globally known as COVID-19,

has affected the world in many ways. The very first case of the pandemic were
identified in Wuhan, China, in December 2019.After that, it has infected over 180
million people in more than 219 countries. The death toll reached 4.3 million by July
2021 and continues to rise. Irrespective of the health issues, the economic impact of
the outbreak of COVID-19 has also had awful effects on the wellbeing of families
and communities. For vulnerable families, lost income due to an outbreak can
increase poverty, create a lack of food security, and reduce access to healthcare
facilities. The pandemic has also led to severe global socioeconomic disruption, the
postponement or cancellation of sporting, religious, political, and cultural events.
And the widespread shortages of supplies exacerbated by panic buying through
imbalanced trade. Moreover, statistics have shown sharp declines in the agriculture,
trade, tourism, and travel sectors due to the COVID-19 outbreak.

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 Figure 1: The Economic Impact Of Covid-19 Pandemic | United Nation Industrial Development Organization

Experts have suggested that the ongoing novel coronavirus outbreak will have a
significant impact on developing countries. South Asian countries such as , India, the
largest country in South Asia, has announced an economic stimulus package worth
1.7 trillion rupees ($22.5 billion), designed to help low-income families. And in
Pakistan, the informal sector, (a cash-based sector) is likely to lose millions of jobs,
therefore the government will need to provide people with an absolute minimum
income to meet their daily requirements. In Afghanistan, the world’s biggest oil
industry is coping with the dramatic decrease in crude-oil price. According to the
Central Bank of Sri Lanka, if the pandemic was contained by mid-2020, the
economic recovery would only start in the latter part of the year, and real gross
domestic product (GDP) growth would be less than 2%. Also, Sri Lanka & Maldives
economy on tourism, has dropped sharply because of travel restrictions. (Figure 2)

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 Month 2019 2020 % Cha. 2019/20
January 244,239 228,434 (6.5)
February 252,033 207,507 (17.7)
March 244.328 71,370 (70.8)
April 166,975 --- ---
May 37,802
June 63,072
July 115,701
August 143,587
September 108,575
October 118,743
November 176,984
December 241,663
Figure 2: Monthly tourist arrivals to Sri Lanka from January 2019 to March 2020

Source: SLTDA

According to the estimates of economists the COVID-19 pandemic will be a big

crisis to the whole world. It will have a severe negative impact on the global
economy. Early estimates predicted that, should the virus become a global pandemic,
most major economists will lose at least 2.4 percent of the value their gross domestic
product (GDP) over 2020, leading economists to already decrease there 2020
forecasts of world economic growth down from around 3.0 percent to 2.4 percent.
And, the global stock market has suffered dramatic falls due to the outbreak.

Due to this coronavirus outbreak, there is a huge impact on leading economists

such as the USA, CHINA, UK, EUROPIAN UNION, RUSSIA, INDIA, SOUTH
KORIA, etc. The growth rate of Italy fell by 0.4 percent, the UK and FRANCE by
0.3 percent, GERMANY by 0.1 percent. The hotel revenues of Italy decreased to 3.3
million euros which have generated 12.5 million euros in 2019. Russian GDP also
marks a decline by nearly five percent relative to the last years. Apart from that the
Chinese government's GDP loss caused by COVID -19 compared with SARS is 5
times higher, and the estimated percentage point change in GDP growth rate in China
is -2.4.

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 Figure 3: the impact of coronavirus on stock markets since the start of the outbreak

Source: bloomberg,24 January 2021

As a result of the COVID-19 pandemic, the global business travel market is

subjected to see a loss of 810.7 billion U.S dollars in revenue in 2020. China, the
origin country of the virus, is projected to see the biggest loss from COVID-19
reduced by a total of 404.1 billion U.S dollars.
Due to the COVID-19 pandemic all major stock market indices lost value between
the period of March 6 and 18,2020. (Figure 3) Corona outbreak hit the financial
markets hard. Europe's largest bank, HSBC, has seen the value of market
capitalization fall by 35 billion U.S dollars between the period of December 31, and
February 28, 2020. According to the investigations it was expected that South Korea
will see a loss of around 2.9 trillion. South Korea won in tourism revenue. Besides,
the number of foreign tourists visiting South Korea was expected to decrease by 2
million.

The coronavirus outbreak threatens not only leading economists but also developing
economists too. Due to this outbreak the United Nations development program
(UNDP) has warned about a health crisis due to limited resources in these countries.
The socioeconomic impact on poor and developing countries will take years to
recover their losses. Due to this coronavirus outbreak nearly half of all jobs in Africa

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could be last. And also due to lack of support from the international community there
is a risk of a massive reversal of gains made over the last years. Especially the
countries that were already heavily indebted before the crisis will take the hardest hit.

There are several possible futures, all dependent on how governments and society
respond to coronavirus and its economic aftermath. Due to this coronavirus outbreak,
Lockdown situations create pressure on the global economy. Sometimes the
countries might face a serious recession. The businesses cannot make profits, the
industries cannot produce and sell therefore due to lack of profits businesses are less
able to employ people. Therefore, it leads to unemployment which shifts the
economic growth curves inward.

Due to the coronavirus, there are also some possible and potential advantages that
might create to countries like Sri Lanka. They are, controlling imports in the country
which increases inland industries. Receiving debt payment reliefs from international
agencies and receiving of financial and health care aids from foreign countries. Due
to this crisis most of the international attention draws to the need to protect and assist
the weaker social groups in disaster situations so according to the factors considered
above Sri Lanka is ready to grab those potential benefits.

Conclusion

The economic consequences of the pandemic are already impacting South Asian
countries. In this report I have outlined possible strategies adopted by different South
Asian countries and their failure to take appropriate short and long-term action to
tackle this pandemic immediately. The economies of South Asian countries will be
adversely affected in 2020 and subsequently. Additionally, developing economies
will face challenges with unprecedented reversals in capital flow due to travel
restrictions and very insignificant trade that will ultimately reduce income and lead
to a minimum living standard. The countries who faced loss of employment in the
informal sector the economy will suffer a high inflation rate that will ultimately
reduce its real GDP growth rate.. In the Maldives, the real GDP will slightly decline,
while the nominal GDP will fluctuate severely due to the restriction of the world

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tourism sector. Remittance inflows in South Asian countries have been decreasing
significantly because of the pandemic.

References

BBC Future,2020, ‘how will corona virus change the world’,[online],viewed July
2021, <https://www.bbc.com/future/article/20200331-covid-19-how-will-the-coronavirus-change-the-
world>

Talking economics,2020, ‘Coronavirus Epidemic and China’s Slowdown: Economic

Impact on Sri Lanka’[online],viewed July 2021,
<https://www.ips.lk/talkingeconomics/2020/02/13/coronavirus-epidemic-and-chinas-
slowdown-economic-impact-on-sri-lanka/>

Presidential secretariat,2020, ‘COVID – 19 Fund increases further’[online], viewed

July 2021,< https://www.presidentsoffice.gov.lk/index.php/2020/03/31/covid-19-
fund-increases-further/>

Statista,2021, ‘Coronavirus COVID-19 in China - statistics & facts’[online], viewed

July 2021,< https://www.statista.com/topics/5898/novel-coronavirus-covid-19-in-
china/>

Statista,2021, ‘Estimated impact of the coronavirus (COVID-19) on revenues of the

tourism industry in Italy in 2020, by sector’[online],viewed July 2021,
<https://www.statista.com/statistics/1105157/impact-of-coronavirus-covid-19-on-
tourism-revenues-in-italy-by-sector/>

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