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This is being written soon after heralding the dawn of the Sinhala and Tamil New Year when people all over the island are wishing each other Subha Aluth Avuruddak.

They are wishing that the New Year would  be a good year for their family, relations and friends. For most, their happiness is linked with the fortunes of the country; a Subha Aluth Avuruddak for the country.

Economic recovery

The wellbeing of most Sri Lankans this year is dependent on the country’s economic recovery in the coming months. And the country’s economic fortunes are dependent on the global economic recovery that is dependent on the elimination of the COVID pandemic.

Therefore we must hope for a Subha Aluth Avuruddak for the entire world: A world free of COVID and a global economic resurgence.

Global economic recovery

Despite the increasing optimism of a COVID free world, there are fears that the pandemic will not pass away easily; fears of increasing spread of COVID in some countries and lockdowns in others. A global economic recovery is possible only after the COVID pandemic is eliminated the world over.  The world would be completely safe only when it is eliminated in the entire world. So we must hope for the global containment of the COVID and the prevention of a resurgence of the pandemic in any part of the world.

Expectations

There is an air of optimism as we celebrate the New Year with the world economy expected to grow by 6.6 percent, led by Chinese growth of 8.8 percent and the US economy growing by 6.4 percent.

In this context, the Sri Lankan economy is expected to recover from its negative performance of 3.6 percent last year, to about a four percent growth this year. This recovery brings with it hopes of increased employment, higher incomes and lesser poverty. However we must be cautious in our optimism for economic recovery this year as global and domestic uncertainties abound.

Containing COVID

There is a growing optimism of containing COVID with the increasing vaccination around the world. Yet, there are large numbers, especially in South America and Africa that have no access to the vaccine as yet. Therefore, a COVID free world is quite a distance away when a sustained resurgence is possible.

There are fears that the pandemic will not pass away easily and that there could be an increasing spread of COVID in some countries and lockdowns in some others. The world would be completely safe only when it is eliminated in the entire world. And the global economic recovery is possible only after the COVID pandemic is eliminated globally.

We must hope and wish that the pandemic is eliminated globally in the New Year to usher in the hope-for robust economic recovery.

Celebration

Nevertheless, unlike at the time of the New Year last year, when it was all gloom, uncertainty and little expectations, this year it is a time of celebrations in the traditional manner. We must hope that the resurgent travel and social interaction will not result in a resurgence of COVID as feared by the Public Health inspectors (PHIs).They expect a third wave of COVID in the country that would be an unbearable economic and human tragedy. It is vital that the government takes measures to prevent such a resurgence of COVID.

In retrospect

There is much to be grateful for at the dawn of this New Year. At this time last year, the country was not able to celebrate the New Year with restricted travel, fears of the spreading epidemic and loss of employment and incomes.

The celebration of the New Year in this year is a more joyous one than that of last year. Yet in many homes, an underlying reason for the subdued and even non-celebration of the New Year in many homes is their loss of employment and incomes. Penury is hardly the environment for celebration.

Hopefully the many that have been left behind would receive from the generosity of the more fortunate and the welfare measures of the government have reached the deprived deserving poor.

Increasing poverty

The biggest blow of COVID fell on the poorer sections of the population. Many  informal and casual workers, many self-employed craftsmen and those displaced from the workforce of industries and services that were compelled to shut down  have joined the poverty stricken in the country and for most their uplifting is but a distant dream.

Favourable expectations

Nevertheless, at the beginning of the New Year there are favourable economic expectations. These include the improvement in the external finances, the resuscitation of the industrial sector, increased exports and an improvement in earnings from ICT services. The government expects the increase in workers’ remittances to continue and hopefully there would be a revival of international travel and tourism later this year.

Monsoon rains

An important determinant of this year’s economic performance would be the onset of the monsoon in May that will not only ensure a good Yala harvest but reduce the fuel imports for thermal generation of electricity. A failed monsoon could increase fuel imports at much higher prices this year.

All expectations have uncertainties and risks. Prudent management of the economy is vital to tame the unfavourable developments. The most pertinent uncertainty is the extent and pace of containing the pandemic globally and within the Island.

Global demand

The containment of the pandemic globally will determine the extent of the economic recovery the demand for our manufactured exports. Both the pattern of the emerging global demand and changes in destination for our exports would determine the extent of export growth. Exporters would need to be vigilant of the emerging changes in international demand. Hopefully there would be a revival of demand for our pre-COVID exports such as solid tyres, apparel and ceramics.

An improvement  in exports would not only contribute to an improvement in the balance of payments but increase employment, incomes and reduce poverty. Similarly increased international tourism will increase incomes and employment and improve the level of poverty.

Conclusion

The New Year celebration brings with it hopes and expectations of an economic recovery that would reduce unemployment and poverty. The reduction of poverty and unemployment is the formidable challenge in the New Year. The recovery of the economy is a prerequisite to achieving this. This in turn requires a global economic recovery that in turn requires an eradication of the global pandemic and its containment in Sri Lanka.

At the dawn of the New Year, there are expectations of both the containment of COVID and a global economic recovery. Although the global economic recovery is a necessary precondition for the country’s economic revival, adoption of appropriate and pragmatic policies and effect economic management are vital. Subha Aluth Avuruddak Weva.