While the people heave a sigh of relief over the end of 2020, the most challenging year witnessed in several decades, Sri Lanka as well as the rest of the world looks forward to 2021 with much hope. The year that ended yesterday was one of the worst years in living memory as that period marked an unprecedented global economic downturn. The year also marked a negative economic growth for most countries.
The New Year dawns with a positive outlook as several vaccines were invented to prevent the fatal COVID-19 pandemic that brought economic and social activities in almost every country in the world to a standstill. After months of economic recession, collapse of production activities, lockdowns and unemployment, there was a slow but steady recovery in economic activities towards the end of the year, giving hope for substantial recovery in 2021.
The optimism in the New Year was evident from the outpouring of expectations from all segments of the society beginning from President Gotabaya Rajapaksa. He expressed the belief that overcoming challenges in the New Year will not be as hard as in the year that just ended. That is because we have already planned the pathway needed in this regard with a clear perception, he said, confirming his satisfaction over the foundation laid for rapid implementation of the planned policy programmes.
The United States, the worst hit country due to the COVID-19 pandemic, has already introduced two new vaccines (Pfizer and Moderna) and the British Oxford University/AstraZeneca vaccine too has just been approved in the UK giving a new optimism to the people who almost lost their hope with rapidly growing gloom and pessimism. This vaccine (and some others that are due to be approved soon) may be more suitable for countries such as ours as it can be stored at normal refrigerator temperatures, unlike the Pfizer and Moderna vaccines which call for storage temperatures of -80 Celsius and -20 Celsius respectively. Most rural hospitals do not have the necessary cold chain infrastructure to store such vaccines. China and several other countries have approved the Chinese-made Sinopharm vaccine, which too does not need a cold chain.
In Sri Lanka, the first two phases of the pandemic were well controlled within a short span of time. However, the third attack came with a vehemence that took the health authorities and the people unaware and unprepared. Nevertheless, the Government took immediate and effective action to keep the pandemic controlled and isolated to a few pockets. Instead of opting for a total countrywide lockdown, the authorities went for selected lockdowns and isolations, a strategy that seems to be working well. Yet the crisis is not over and the extent of the impact on the economy and recovery will depend on the duration and spread of the virus which is still uncertain. Sri Lanka should also be on guard against more transmissible variants of the virus circulating elsewhere in the world. The steps taken to revive economic activities while managing the pandemic has already yielded results. Already some of the economic spheres show healthy signs of recovery.
President Rajapaksa said that no sooner than the commencement of the journey towards prosperity that the Government had successfully initiated, the country was compelled, together with the rest of the world, to fight the COVID-19 pandemic. He pointed out that amidst formidable challenges and obstacles, the Government was able to lay the foundation for sustainable development while prioritizing national aspirations.
The Health authorities say there is a glimmer of hope with the use of the vaccine(s). At the same time economists feel that it may be at the end of next year that COVID-19 will be contained for the global economy and economic life to return to normal, or to what has been described as a ‘New Normal’.
One of the most severe impacts of the COVID-19 outbreak was felt in the global tourism sector. Sri Lanka’s tourist arrivals crashed due to COVID-19, with lockdowns and closing of its international airports as well as health regulations enforcing social distancing. Realizing that recovery is dependent on the economic bounce back of Sri Lanka’s main tourism source markets and the opening of international borders, the Government has allowed limited tourist arrivals. The first charter flight carrying tourists arrived in the country on Tuesday. However, with the detection of three COVID patients in the first two flights from Ukraine and the new virus variant found in the United Kingdom, there is bound to be rethinking on the early opening of doors for tourists.
Investments are vital for Sri Lanka to speed up economic revival. However, there will be potential delays in investment activity over the next couple of months, owing to the uncertain economic conditions. Fortunately for the affected countries, economists expect a gradual but noticeable economic recovery fuelled by a surge in corporate profits, a strong housing market and the successful rollout of various vaccines. “The COVID-19 recession is over, and the economy is currently in an early-cycle expansion,” says Dr Sophia Koropeckyj, Managing Director of Industry Economics at Moody’s Analytics, a research firm based in Pennsylvania, USA.
However, for most businesses, normality should return gradually. During the first half of 2021, households will continue to self-quarantine as bankruptcies increase the number of permanent job losses and all these would adversely affect the capacity to purchase. Dr. Koropeckyj is confident that the economy will regain its stride in the second half of the year, when a vaccine or treatment is assumed to become widely available.
According to the forecasts from the International Monetary Fund (IMF), due to COVID-19, Gross Domestic Product (GDP) growth is expected to fall to -0.5 percent in 2020 and pick up to 4.2 percent, subject to the post-pandemic global economic recovery.
President Gotabaya Rajapaksa, in his New Year Message, assured that the Government is determined to further strengthen the steps that it had already taken to meet the expectations of the people. The new Government was formed with the objective of securing a people-centric development and to protect and preserve the national identity, he said, adding that no room should be left for the erosion of the confidence the people placed in the Government that it would not go against the country and the people’s will.
The dawn of the New Year motivates us to move towards a new meaningful height in life while providing an opportunity to clearly understand the challenges we face at each passing moment, the President said. “We welcome 2021 with positive attitudes, determination and absolute commitment. The prime responsibility of the Government is to make development targets enshrined in the ‘Saubhagyaye Dekma’ policy framework (‘Vistas of Prosperity and Splendour’), a reality,” he said.
