The Asian Development Bank (ADB) estimates that the economic uncertainty caused by the COVID-19 pandemic would cost the global economy between USD 2 and 4.1 trillion in 2021. The International Monetary Fund has revised its global economic growth forecasts downward, while the Organization for Economic Cooperation and Development has predicted that global growth might be halved as a consequence of the virus.
Prior to the Coronavirus epidemic, the Central Bank of Sri Lanka (CBSL) forecasted 4.5-5 percent economic growth and political stability after the Presidential elections. However, given the growing economic effects of the Coronavirus pandemic, these growth targets are unlikely to be met.
Global travel delays and travel bans imposed on some nations as a result of the pandemic epidemic will have a substantial impact on Sri Lanka’s tourist business. Tourist arrivals dipped below 30% in the first quarter of 2021, according to data from the Sri Lanka Tourist Development Authority.
According to ADB estimations as of 06 March 2021, Sri Lanka’s tourist income might drop by between USD 107 million and USD 319 million. This figure, however, is likely to be higher if public health policies are maintained.
While banks undoubtedly play a vital role during and after a crisis, the fact is that there is no assurance or predictability on how events will develop. Meanwhile, a greater knowledge of the nature, virulence, and means of defeating the unseen adversary remains difficult, evoking the idiom “fog of war.” The problems and consequences of the pandemic do not emerge sequentially or in any specific order.
Likewise, the answers will not be. To secure the future, responses must be rigorous, knowledgeable, and prudent. Bank resilience before to COVID is a necessary and reassuring condition, but it is inadequate for post-COVID recovery unless banks can effectively negotiate the fog of this new conflict and avoid joining the growing list of casualties throughout the globe. They will almost definitely face increased credit risk, capital and liquidity constraints, and increased operational and cyber security risks, to name a few.
In the near term, livelihoods and economic security seem precarious as the epidemic reveals flaws, fissures, and chasms in the global socio-economic system. This systemic stress may prompt national governments to repurpose historical political, economic, social, and security institutions, which may have a negative impact on enterprise recovery and viability, family incomes, and social cohesion. For banks, it becomes a game of waiting!
The financial sector has shown resiliency in the face of the COVID-19 pandemic, surviving the crisis and assisting in mitigating the pandemic’s broader economic damage. However, analysts caution that the business must avoid complacency if it wants to safeguard its future. Accelerating pre-COVID trends toward digitization and sustainability creates substantial difficulties and possibilities for banks as they attempt to manage the transition to a more sustainable and digital economy. Meanwhile, despite a recent wave of mergers, poor profitability continues to be a major concern, with officials from the European Central Bank (ECB) indicating that more consolidations may be required.