Pandemic-Led slowing of Asian economies

Tracing the Early Economic Impacts on Sri Lanka and Thailand

From South Asian Survey

The COVID-19 pandemic is unleashing deleterious effects on countries, institutions, and people in more ways than one. This is visible through demand- and supply-side shocks. While on the supply side, businesses have closed and layoffs are visible; on the demand side, it is the loss of income that has created huge disruptions. The world economy is at a critical inflection point in history in which fears about dependence on others are growing. Economists forecast that world GDP would decline by 3.8% in 2020. Estimates of additional unemployment worldwide range between 90 million and 110 million.

This article seeks to assess the early impacts of the pandemic on Sri Lanka and Thailand, which have experienced negative impacts of this pandemic. The visible impacts are seen across sectors, especially in the complete decline in tourist arrivals since April 2020, declining exports, as well as a decline in remittances. According to the World Bank estimates, 20% of remittances would fall in low- and middle-income countries (LMICs).

Therefore, within the context of slowing globalisation in most Asian economies, this article focuses on the economic disruption in Thailand (in Southeast Asia) and Sri Lanka (in South Asia), both critically dependent on trade and tourism for their contributions to GDP. At the same time, an assessment of the sectoral contribution to GDP of both countries shows a noticeable similarity. Sri Lanka’s agricultural sector contributed only 7.42% of GDP in 2019, while the service sector being the largest accounted for 58.24%. In Thailand, the industry contributed approximately 35% and the services sector contributed 58.59% of the country’s GDP. In terms of trade openness too, the two countries’ data point to their dependence on trade for contribution to GDP. A comparison of the two countries being impacted in the sectors of trade and tourism, comprised within the services sector, is what adds to the raison d’etre for focusing on these two countries.

Although both Thailand and Sri Lanka are middle-income countries, post-2010, Thailand’s trade has been 10 times more than that of Sri Lanka. In 2019, the contribution of exports of goods and services to Sri Lanka’s GDP was 22.8%; it was 66.8% for Thailand (The World Bank, 2020a).

This article attempts to answer questions as to the extent to which tourism, exports, and inflow of remittances have been adversely affected in these two countries, in 2020, the expected duration of the adverse impacts and possibilities as well as policy prescriptions for an early revival. A delineation of cross-country learnings in governance and steering the recovery phase will also be studied.

This article is organized as follows. Section 2 discusses relevant literature and the motivational facts of the study. Section 3 shows the methodology and structure of the article. Section 4 presents a comparison of COVID-19 impacts on Sri Lanka and Thailand with some statistical evidence. A summary of this article is presented in Section 5. Finally, Section 6 comprises the conclusion, implications, and policy prescriptions.

In response to the pandemic, even as countries beef up their health infrastructure, they also seek to restart international travel and trade. Hence, the role of the state is critical to pull the economies out of the de-globalisation trends that are expected to gain pace in and beyond the pandemic.

Article Details
Pandemic-Led Disruptions in Asia: Tracing the Early Economic Impacts on Sri Lanka and Thailand
Reena Marwah, Sanika Sulochani Ramanayake
First Published March 7, 2021 Research Article
DOI: 10.1177/0971523121995023
From South Asian Survey