As a developing country Sri Lanka has undergone three waves of coronavirus. COVID-19 continues to pose significant challenges to Sri Lanka even after the lockdowns of the first and second waves. The country is currently on island-wide travel restrictions since 21st May 2021. Sri Lanka had massive impacts on the economy due to the first and second waves. The observable variations in GDP rate contraction by 3.6%, poverty rate by 4.1%, unemployment rate by 5.2%, and inflation rate by 4.56% in 2020 are evident to prove the economic massacre of the country. This paper explores the impact of coronavirus disease (COVID-19) on the economy and unemployment. Several themes emerged from the literature and survey results of various institutes. First, the economic crisis had caused high layoffs and closures in informal sectors at beginning of the crisis. Second, the risk of closure is negatively associated with the livelihood of induvial. Third, most small businesses are financially delicate: and with less capital to operate the business was unable to pay salaries. Fourth, the vaccination crisis within the country will lead to more exposure to increasing the number of COVID-19 impacted cases on new variants. Further, the Sri Lankan Government needs on devising an appropriate National Level vaccination plan or health and safety measures to avoid an increase in the number of impacted COVID-19. The paper analyses the results of the surveys and predictions of the World Bank and other entities to predict the aftermath of three waves of COVID-19 on creating economically unstable conditions within the country. As a result, increase in unemployment and poverty.
Sri Lanka is presently facing the third wave of COVID-19 lockdown consequences. The rise of COVID-19 due to the outpouring in the number of infections in mid-April this year (2021), the country was enforced into an island-wide travel restriction. The travel restrictions were placed for nearly a month and the article is written during this time period to envisage the unemployment response in upcoming months by comparing the results of data on the first and second waves. As of 12 June 2021, 213,581 cases are been reported, of which 59,585 were yet active. The number of losses of life officially attributed to COVID-19 was limited to 2073 as of now, while nearly 2700 patients were reported on a diurnal basis (Health Promotion Bureau, 2021). The imposed travel restrictions will be eased with fewer cases reported daily and limited community spread (Kapilan, 2020). While the COVID-19 pandemic impacts the livelihood, Sri Lanka’s economy constricted by 3.6 percent in 2020, the worst growth performance on record (World Bank, 2021). The swift measures enacted by the government hit on livelihoods and the economy. Though the costs borne in facing the first impact is principally unavoidable, the costs of the second and the third strategy are dependent on the chosen strategy.
The International Monetary Fund has projected global economic growth to progress around 5.5% in 2021 (Economynext, 2021). Sri Lanka’s economy is projected to grow between 5.5% - 6.0% in 2021 as per the central bank, convalescing from contraction in 2020, driven by the Coronavirus pandemic. The International Monetary Fund has lowered growth to 4.0% from an earlier 5.3%. In spite of the growth in handling Coronavirus, outlying debt remnants a challenge within concerns over printing money under Modern Monetary Theory and foreign exchange dilemmas. The World Bank has warned the country’s public and publicly guaranteed debt can increase to 115% in 2021 and poverty could deteriorate further. (International Finance Corporation, A World Bank Group, 2020).
Sri Lanka was successful in controlling the spread of the first wave of the virus in the community with a lower death rate. As an outcome, the economy constricted by 16.4% (y-o-y) in the second quarter. Therefore, the economy was largely kept open during the second wave of the impact. In spite of restricted fiscal space, resources were allocated (almost 0.7 percent of GDP) for health procedures, cash transfers, and suspended tax payments. Although public expenses increased, revenues declined, consequently in a broadening of the fiscal deficit in 2020 (World Bank, 2021).
The paper adopts a qualitative analysis based on secondary data and information from responsible authorities; hence, the prevalence of the informal sector covers a higher percentage of the country’s GDP. Addressing the informal sector is vital to funding the economy of the country. The COVID-19 pandemic has a severe effect on the economy too. The statistics related to informal sector employment are not precisely traceable to include in the paper (Bartika, 2020). Employees have collapsed from formal employment to informal employment raise of 70% as per the informal sector employment 2021 (Labour Department of Sri Lanka, 2020). The time limits and revealing data is been a constrain throughout the literature search.
However, Sri Lanka couldn’t rule out the second wave of the virus, at least the third wave of the virus could be controlled with effective strategies enforced by the government. Therefore, it is suitable to draw insights from the reactions to the first wave and second wave to inform the policy response to a potential third wave. As a result of the previous learning, travel restrictions were imposed instead of lockdown and curfews. Also, if government can avoid further economic contractions through adopting appropriate methods could support the recovery and sustainability of GDP. This article will examine the unemployment impact as a result of the economic crisis of the strategies imposed by the government during the first and second waves and forecast the upcoming issues in the economy and labour market. The paper contributes towards the future economic crisis which country will possibly face. If the future challenges are addressed with proper mechanisms by the government, we can eliminate the drastic raise in poverty, inflation, and economic devastation.
Sri Lanka has an economically dynamic population of 8.6 million, with 64.5% males and 35.5% females. Further, nearly 3.5 million employs the private sector whilst self-employed workers are 2.7 million. It is significant to indicate that 81.3% of the non-public sector employees and 57.3% of self-employed employees are employed in the non-agriculture sector (Labour Department of Sri Lanka, 2020). A quarter of labour are engaged in agriculture, 28% in industries, and the remainder in services. A large share of workers continues to be engaged in low-productivity jobs, especially in agriculture. It indicated a 3.3 million employed population of informal sector employment. Since 85.7% employers from the non-agricultural sector the degree of the susceptibility and the effect on the employment was severe. Annual Labour Force survey 2020 indicated 68% of employment from informal sector. Considering the fact that the key sectors of Services, Industry and Agriculture contributions of 57.4%, 26.4% and 7% respectively contributes the US $ 84.0 billion in 2019 to the Gross Domestic Product (GDP), with a portion of almost 40% of the whole exports, it is necessary to incorporate measurements to withstand the manufacturing industry of the country. The significantly high level of employment in the manufacturing industry confirms this requirement further (Gunawardane, 2020). This indicated the need for government interventions to revive business in these selective sectors.
The survey conducted by the Sri Lankan Labour department on COVID-19 impact indicates that 53% of the institutions have closed their businesses for operations. Further, another 44% operates under capacity. The survey indicates that 64% of employees were not in employment. This signifies the threat of unemployment. The report summaries, travel restriction and curfew as the reason for closed operation for business. A significant finding in the survey is the capacity of paying salaries and continuation of business (due to lack of capital) declines with the scale of the businesses. The number of terminations transpired in this category is significantly lesser than in the establishments with more than 500 employees.
These are mostly the firms with more cash in their pockets. Another survey conducted in the US estimates that closures of businesses discretely might lead to 32.7 million job losses. If the crisis lasts for 4 months and 35.1 million job losses if the crisis lasts for 6 months. The challenging fact is now the crisis has lasted for more than 14 months around the world with on and off lockdowns, travel restrictions and curfews.
Despite the fact that the transportation and storage sector was encouraged and promoted under the essential services it was still under capacity or inability to operate as these mostly operate through informal sectors. Further, the Labour Department survey report indicates 596,022 employees were employed by their selected sample at the end of February 2020 and the number has declined to 213,011 by the end of May in the same year. Accordingly, below indicates how employment losses have occurred after the first and second waves of the COVID-19 impact.
The employment in the informal sector is not stable as in the formal sector, the statics need to be more accurate to trace the employment percentage in the informal sector. One article suggests the suitable strategy to recognize the informal jobs is through an appropriate subcategory of status (Organisation, 2022). A unique characteristic of labour markets of developing countries is the prevalence of informal operations, which have been defined as the informal sector or the informal economy (International Labour Organisation, 2022). Informal sector workers are a shortage of informal work. Informal sector workers are expected to be poor than the formal sector employees due to a lack of social protections and formal implications in employment. The informal sector employment allied with higher differences in payments: similar skills workers are paid/earn less in an informal sector (Corinne Deléchat, 2020). A different view could be that people avoid the formal framework to be resilient to respond to uncertainties such as the pandemic. Contradict, the pandemic may encourage some employers to shift from formal to informal, due to existing opportunities for flexibilities and quick response to crucial tremors that informal provisions consent for. Small and medium-sized entities, where informal jobs are distillate, may grieve from interrupted supply chains: bigger firms give priority to goods in restricted supply releasing minor ones, or the supply chains basically changed due to the pandemic (Alekksandra Webb, 2020; Delechat, 2020).
“Decent work and economic growth” are the eighth sustainable development goal. This goal identifies that economic growth will generate employment-productive and meaningful work, and contribute to human development (Perera, 2020). Therefore, it’s significant to be alert not only about the impact on the economy but also about the creation of jobs and the degree of unemployment. There are no exclusions in labour laws which could be applicable in situations like COVID-19. Safeguarding employment whilst safeguarding businesses and ensuring sustainability has become a challenging task in Sri Lanka.
Sri Lankan labor market had a huge impact immediately after the first wave of COVID-19 hit the country. There were many survey reports which resulted to show the impact on the country. As reflected in the below
As we can see in
| Level of Education | Unemployment rate % | |||
|---|---|---|---|---|
| Sri Lanka | Sri Lanka | Gender | ||
| Number | Male | Female | ||
| Sri Lanka | 441,997 | 5.2 | 4.1 | 7.5 |
| Below GCE O/L | 140,434 | 2.9 | 2.3 | 4.1 |
| GCE O/L | 113,671 | 7.3 | 7.5 | 7.0 |
| GCE A/L & above | 187,893 | 9.3 | 6.3 | 12.8 |