Spotlight: Econ Op-eds in Summary (Week ended 06th May'20)
1. Economic implications of COVID-19
By: Dr. Sarath Rajapatirana
· The Sri Lankan economy was already in a weak position when the COVID-19 pandemic struck the economy. As such, we can expect a substantial economic impact of the spread of virus, both directly and indirectly, the latter being more important than the former.
· In such a condition, while the measures proposed are appropriate to address the short run situation created by COVID-19, especially on the consumption side, complete shut-downs of the economy can result in more longer-term impacts both economically and socially.
· As such, the country should now start focusing on policies which could support the economy in the long run. For this purpose, the government should make sure that its role is not overplayed and more price focused measures are used to manage the economy.
2. Assessment of COVID-19 lockdown impact on household economy and an income-support package proposal
By: Harsha De Silva
· The nationwide lockdown as part of the containment measures for COVID-19 has resulted in severe economic implications for low income earners in Sri Lanka. This exacerbated a pre-existing situation where the bottom 50% of households found it difficult to make ends meet prior to the lockdown.
· The lockdown will also affect both demand and supply sides of the economy, with the impact varying by industry. Further, the reduction in income at the household level will be more than proportionate to the reduction in expenditure, necessitating income support to the most vulnerable segments. Given certain assumptions, the estimate of income support required could reach LKR 45.5 bn or USD 233 mn.
· This is well within the emergency facilities open to Sri Lanka through multilateral agencies, as well as debt concessions that may be open to Sri Lanka. However, the duration of the support is contingent on the economic recovery. Part of this amount can be financed by the government directly, while the balance can be via concessionary loans through the domestic financial system.
(Compiled by: Promodhya Abeysekera & Eshan de Mel)
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