Containing the coronavirus and reviving the economy

Economies cannot function normally until COVID-19 is contained, nor can people survive without the economy functioning. This is the paradoxical predicament the world is in. Sri Lanka too is very much in this predicament.

International view

There is a growing view internationally that countries must focus on reviving their economies. Many countries have come to realise there is a trade off between policies that contain the virus and the need to get their economies moving. Many nations are relaxing their economic shutdowns.

China is gradually getting her industries functioning. Vietnam that has managed to contain the virus in a cost effective manner has also got her wheels of the economy moving.

Virus spreading

However, some countries that relaxed their economic shutdown too early to revive their economies have paid the price of COVID-19 spreading. Singapore’s unfortunate experience is a warning to be cautious in relaxing restrictions to get the economy moving.

Caution

COVID-19 is still spreading rapidly. It has infected over 2 million people all over the world. It has infected more than a million in the United States alone.

While recognising the need to get economies moving, governments must be mindful of the advice of the World Health Organisation (WHO) for countries to be cautious about lifting restrictions introduced to curb the spread of COVID-19 as it was taking hold of more countries. WHO advised countries not to rush into relaxing restrictions that prevent the spread of the virus.

Focus on economy

There is a growing view in Sri Lanka too that the time has come when the Government must focus on reviving the economy, while containing the spreading of COVID-19 that has infected nearly 700Sri Lankans.

Therefore the revival of the economy must be carefully planned to not lead to the spreading of the virus. The revival of economic activities must be without compromising the control of COVID19. Sri Lanka’s relaxation of the curfew to enable the revival of the economy must be carefully planned to not lead to a spread of the virus.

The control of the virus globally is a prerequisite to an economic upturn. At present there is inadequate evidence of either the containment of the pandemic or a global economic recovery.

Challenging tasks

Containing COVID-19 as well as reviving the Sri Lankan economy are challenging tasks. Doing both at the same time is enormously difficult. Nonetheless the time has come when reviving the economy is also important as containing the corona virus. However, a significant Sri Lankan economic recovery is possible only after the containment of the virus globally and in Sri Lanka. Meanwhile some economic enterprises could be revived to sustain the economy and livelihoods of people.

Cautious relaxation

The balancing of the relaxation of the restrictions for economic revival and the containment of COVID-19 has to be implemented with much care. Quite rightly the Government is cautiously allowing some vital economic activities to function, while maintaining vigil over the spread of the virus.

Limitation

Some economic enterprises have begun functioning at least to a limited extent. However the Sri Lankan economy is about 35 percent tradedependent. Therefore only a limited Sri Lankan economic recovery is possible as long as the global economy is not functioning. This is especially so in export manufactures that are dependent on international demand and imported raw materials.

New opportunities

Nevertheless it is important to seize new opportunities to revive exports and enhance domestic production. It is also essential to adjust consumption to cope with the changed economic conditions.The readjustment of manufactures in response to international demand and supply conditions is essential to avert a crash in manufacturing. This applies to the country’s main industrial exporter, the apparel industry that is adversely affected by reduced demand from Western countries. Garment manufacturers would have to explore manufacturing new products to cope with the global recession.

Rubber exports

The prospects for Sri Lanka’s exports of heavy duty tyres have diminished owing to limited air and heavy truck transport around the world. This is a serious setback to one of the notable successes in the country’s export manufacturing.

In contrast, there is a potential to increase exports of surgical, medical and protective gloves. The country may be able to earn as much as US$ 700 to 800 million owing to the huge demand for such rubber products. There should be adequate production of natural rubber and availability of other raw materials to enable an increase in these rubber products for export.

Agriculture

Agriculture is the least disrupted economic activity that could contribute much towards an economic recovery. Food and tree crops have fared well. Although tea production fell in the first quarter of the year compared to that of last year, it was due to draught rather than any setbacks on the estates and small holdings. Nevertheless there are labour problems and delayed payments for green leaf that must be resolved.

Availability of fertiliser, seed and planting material for food and tree crops is crucial for maximising agricultural production. Furthermore, there have been disruptions in transport and marketing of agricultural produce. Good weather and the availability of fertiliser in the coming months could enhance agricultural output.

Blueprint

All nine Deans of Agriculture of Sri Lankan universities presented a memorandum to His Excellency the President outlining the policies that should be adopted to increase agricultural production. These are a sound framework of policies, but implementing them and ensuring an effective institutional capacity has been the weakness in agricultural policies since independence.

Summary

A cautious relaxation of the curfew would enable the economy to revive somewhat. However the containment of the virus globally and in the country are prerequisites for the country’s economic recovery. Priority should be given to those economic activities that can perform with least disruption. Agriculture is foremost among them.

Garments, the country’s main manufactured export is severely affected by low international demand and disruption of raw materials. Other similar industries would have to explore adaptation of their production to the changed demand and supply conditions. Such an adaptation is especially possible in rubber manufactures where the demand for solid tyres have fallen, while the demand for surgical and other gloves has increased.

It is important that all agricultural crops perform at their optimum level. Food crops could contribute towards the country’s food security. Increased rubber production could boost rubber manufactures. Tea may have a strong demand, though lower oil incomes may temper demand in Middle Eastern markets that matter.

Conclusion

The Sri Lankan economy cannot function fully until COVID-19 is contained globally and in Sri Lanka. Nevertheless people cannot survive without the economy functioning. A balance between the opening up of the economy and containing COVID-19 has to be carefully planned and effectively implemented.