The loss of tourism and remittances receipts is expected to shave off between 3.8 per cent and 4.3 per cent of GDP in Sri Lanka’s current account in the balance of payments (BoP) this year (2020) because of COVID-19, data on an IMF report released yesterday (Tuesday, 4 August) showed.
Hardest hit would be tourism where its impact on the current account in the BoP is envisaged to be between two per cent to 2.5 per cent, while that of remittances are expected to hit the current account in the BoP by an amount of 1.8 per cent of GDP, IMF statistics showed.
‘Losses in tourism proceeds exceeding two per cent of GDP are expected to be concentrated among large net tourism exporters, such as Sri Lanka,’ the IMF said.
With uncertainty being high, the effects on tourism may persist to some extent in 2021 (next year) and beyond, globally, the IMF warned.
During the first four months of 2020 international tourism arrivals were about 50 per cent lower than over the same period in 2019 globally, with deeper declines for related indicators, such as international flight arrivals and hotel reservations, the IMF said.
The projected direct impact on tourism trade balances in 2020 globally will depend critically on the pace of tourism recovery, which is highly uncertain. A recent study (UN World Tourism Organisation 2020) includes a scenario involving a gradual lifting of travel restrictions starting next month (September). This scenario implies tourism receipts at 73 per cent below their 2019 levels, worldwide, the IMF said.
‘Remittances, globally, are highly vulnerable to the COVID-19 crisis because migrant workers are typically more exposed to the risk of unemployment and wage losses during recessions than are native workers,’ the IMF report further said.
Meanwhile, for economies such as Sri Lanka where remittance inflows represented more than five per cent of GDP, World Bank (WB) 2020 forecasts an average 20 per cent fall in remittance flows in 2020, the IMF added.
‘The decline would imply significant hardship for many households and small businesses that rely on remittances, just as their domestic economies are hit by the synchronised nature of the COVID-19 crisis,’ the IMF warned. Remittances are expected to rebound only partially (by five per cent) in 2021, the IMF further said.
Remittances and tourism were Sri Lanka’s single largest and third largest foreign exchange earners last year, according to the Central Bank of Sri Lanka.