The exact impact on the Sri Lankan Economy would depend on the extent of the global spread of the COVID-19 outbreak, its persistence and policy responses of major economies and trading partners, The Central Bank of Sri Lanka said. “The likely slowdown of the global economy and disruptions to the supply chain could affect Sri Lanka’s merchandise and service exports as well as related logistics,” Dr. C Amarasekara, Director, Economic Research Department of the Central Bank of Sri Lanka said whilst presenting the latest Monetary Policy Review in Colombo today (5). “These adverse implications are likely to outweigh any marginal benefit arising from reduced global energy prices and international interest rates.” “he added. The US Federal Reserve recently cut its interest rates by half a percentage point, as a pre-emptive move to protect the economy from the coronavirus. In an extraordinary attempt to contain the coronavirus’s economic fallout, the Federal Reserve slashed interest rates on Tuesday as policymakers unanimously approved their biggest one-time cut — and first emergency rate move — since the depths of the 2008 financial crisis. However, The Central Bank decided to hold policy interest rates at their current levels at the policy meeting today. Sri Lanka’s central bank reduced policy interest five weeks ago on 30 January 2020 and further decline in market lending rates is still awaited in response to the January action. Dr. Amarasekara further noted that the slowdown in global tourist movements due to the coronavirus outbreak will affect Sri Lanka’s tourism sector, in addition to the direct impact of lower arrivals from China. International tourism is slumping as the coronavirus outbreak spreads globally. In China, Italy, and South Korea, governments are quarantining towns and cities and shutting down transportation. The US has issued travel warnings for anyone considering visiting Italy, China, Iran, Japan, and South Korea. This has all put travelers on high alert, and many are electing to stay home. Moreover, he noted that the spread of the virus to countries with a significant number of Sri Lankan migrant workers could affect remittance inflows as well. “These adverse implications are likely to outweigh any marginal benefit arising from reduced global energy prices and international interest rates,” he added.
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