Losing grip on COVID-19 now will have severe long-term economic implications

• Containing virus and putting economy back on track: Dr. Dushni Weerakoon says there are no easy trade offs
• Points out Sri Lanka lost its early mover advantage it enjoyed soon after first wave
• Says message of reassurance and confidence imperative moving forward

By Shabiya Ali Ahlam
While the government and all sections of the business community are stepping up efforts to put the economy back on track, a senior economist warned that losing control of the COVID-19 outbreak now would lead to an economic hit that would be much severe in the longer term.

“In some sense, I understand the government’s urgency to get the economy back to normal as early as possible because the longer we delay, others (regional peers) are steaming ahead. But as health specialists pointed out, there are no easy tradeoffs,” said Institute of Policy Studies (IPS) Executive Director Dr. Dushni Weerakoon.

With the second wave that began in early October, the total number of COVID-19 cases in Sri Lanka has soared nearing 34,000 as of now, with over 150 deaths.

Pointing out that Sri Lanka lost grip of the early mover advantage it enjoyed soon after the first wave, which led to improved foreign direct investments (FDIs) and export figures, she stated that reassurance to all segments of the economy is imperative going forward. Dr. Weerakoon, speaking at the annual conference of Asia Securities that kicked off yesterday, stressed that this means that there needs to be a strong public health message that the situation is under control, so that both the formal and informal workforce have some sense of confidence in actively participating in the economy.

That is, they should be confident that they are not putting their lives at risk by resuming their livelihoods and income-generating activities.According to the IPS chief, it is the tourism sector that will be most critically hit, if Sri Lanka shows any signs of lagging, since given the recent developments, tourists are highly likely to take a long-term view of the risks.

Further, the senior economist noted that while the government has put forward a medium-term policy programme, there is a pressing need to highlight the definitive plans conceptualised, as the economy is already struggling with high levels of public debt and widening fiscal deficits. 

“We need to underwrite those (medium-term plans) with more definitive plans on how we are going to claw back on this widening expenditure and revenue gaps.

Perhaps not immediately because the immediate action now is to tighten spending and raising taxes is going to be counterproductive, as it will choke off any economic recovery,” shared Dr. Weerakoon.