A. R. F. Razeena Nimaaz Marso, Effects of Third Wave of COVID-19 in Sri Lanka: Response on Unemployment and Economic Cost (2022)
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A journal article by A. R. F. Razeena Nimaaz Marso, Effects of Third Wave of COVID-19 in Sri Lanka: Response on Unemployment and Economic Cost, published September 15, 2022 in the Journal of Human Resource and Sustainability Studies, volume 10, pages 449-463. Drawing on literature and survey results of various institutes, the paper examines the effect of the pandemic on Sri Lanka's economy and unemployment. It reports that Sri Lanka's economy contracted by 3.6 percent in 2020 and that, as of 12 June 2021, 213,581 cases had been reported. Its themes include layoffs and closures in informal sectors, small businesses unable to pay salaries, and the need for a national vaccination plan, and it predicts an increase in unemployment and poverty.
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Journal of Human Resource and Sustainability Studies, 2022, 10, 449-463
https://www.scirp.org/journal/jhrss
ISSN Online: 2328-4870
ISSN Print: 2328-4862
Effects of Third Wave of COVID-19 in Sri Lanka:
Response on Unemployment and Economic
Cost
Abdul Razick Fathima Razeena Nimaaz Marso1,2
University of Kelaniya, Kelaniya, Sri Lanka
1
NEST Academy of Management Education, Dubai, UAE
2
How to cite this paper: Razeena Nimaaz Abstract
Marso, A. R. F. (2022). Effects of Third
Wave of COVID-19 in Sri Lanka: Response As a developing country Sri Lanka has undergone three waves of coronavirus.
on Unemployment and Economic Cost. Jour- COVID-19 continues to pose significant challenges to Sri Lanka even after
nal of Human Resource and Sustainability the lockdowns of the first and second waves. The country is currently on isl-
Studies, 10, 449-463.
https://doi.org/10.4236/jhrss.2022.103027
and-wide travel restrictions since 21st May 2021. Sri Lanka had massive im-
pacts on the economy due to the first and second waves. The observable vari-
Received: June 22, 2022 ations in GDP rate contraction by 3.6%, poverty rate by 4.1%, unemployment
Accepted: September 12, 2022
rate by 5.2%, and inflation rate by 4.56% in 2020 are evident to prove the eco-
Published: September 15, 2022
nomic massacre of the country. This paper explores the impact of coronavirus
Copyright © 2022 by author(s) and disease (COVID-19) on the economy and unemployment. Several themes
Scientific Research Publishing Inc. emerged from the literature and survey results of various institutes. First, the
This work is licensed under the Creative
economic crisis had caused high layoffs and closures in informal sectors at
Commons Attribution International
License (CC BY 4.0).
beginning of the crisis. Second, the risk of closure is negatively associated
http://creativecommons.org/licenses/by/4.0/ with the livelihood of induvial. Third, most small businesses are financially
Open Access delicate: and with less capital to operate the business was unable to pay sala-
ries. Fourth, the vaccination crisis within the country will lead to more expo-
sure to increasing the number of COVID-19 impacted cases on new variants.
Further, the Sri Lankan Government needs on devising an appropriate Na-
tional Level vaccination plan or health and safety measures to avoid an in-
crease in the number of impacted COVID-19. The paper analyses the results
of the surveys and predictions of the World Bank and other entities to predict
the aftermath of three waves of COVID-19 on creating economically unstable
conditions within the country. As a result, increase in unemployment and
poverty.
Keywords
Unemployment, Informal Economy, Economy Growth
DOI: 10.4236/jhrss.2022.103027 Sep. 15, 2022 449 Journal of Human Resource and Sustainability Studies
A. R. F. Razeena Nimaaz Marso
1. Introduction
Sri Lanka is presently facing the third wave of COVID-19 lockdown consequences.
The rise of COVID-19 due to the outpouring in the number of infections in
mid-April this year (2021), the country was enforced into an island-wide travel
restriction. The travel restrictions were placed for nearly a month and the article
is written during this time period to envisage the unemployment response in up-
coming months by comparing the results of data on the first and second waves.
As of 12 June 2021, 213,581 cases are been reported, of which 59,585 were yet
active. The number of losses of life officially attributed to COVID-19 was limited
to 2073 as of now, while nearly 2700 patients were reported on a diurnal basis
(Health Promotion Bureau, 2021). The imposed travel restrictions will be eased
with fewer cases reported daily and limited community spread (Kapilan, 2020).
While the COVID-19 pandemic impacts the livelihood, Sri Lanka’s economy con-
stricted by 3.6 percent in 2020, the worst growth performance on record (World
Bank, 2021). The swift measures enacted by the government hit on livelihoods
and the economy. Though the costs borne in facing the first impact is principally
unavoidable, the costs of the second and the third strategy are dependent on the
chosen strategy.
The International Monetary Fund has projected global economic growth to
progress around 5.5% in 2021 (Economynext, 2021). Sri Lanka’s economy is pro-
jected to grow between 5.5% - 6.0% in 2021 as per the central bank, convalescing
from contraction in 2020, driven by the Coronavirus pandemic. The Internation-
al Monetary Fund has lowered growth to 4.0% from an earlier 5.3%. In spite of
the growth in handling Coronavirus, outlying debt remnants a challenge within
concerns over printing money under Modern Monetary Theory and foreign ex-
change dilemmas. The World Bank has warned the country’s public and publicly
guaranteed debt can increase to 115% in 2021 and poverty could deteriorate
further. (International Finance Corporation, A World Bank Group, 2020).
Sri Lanka was successful in controlling the spread of the first wave of the virus
in the community with a lower death rate. As an outcome, the economy con-
stricted by 16.4% (y-o-y) in the second quarter. Therefore, the economy was
largely kept open during the second wave of the impact. In spite of restricted
fiscal space, resources were allocated (almost 0.7 percent of GDP) for health pro-
cedures, cash transfers, and suspended tax payments. Although public expenses
increased, revenues declined, consequently in a broadening of the fiscal deficit in
2020 (World Bank, 2021).
The paper adopts a qualitative analysis based on secondary data and informa-
tion from responsible authorities; hence, the prevalence of the informal sector
covers a higher percentage of the country’s GDP. Addressing the informal sector
is vital to funding the economy of the country. The COVID-19 pandemic has a
severe effect on the economy too. The statistics related to informal sector em-
ployment are not precisely traceable to include in the paper (Bartika, 2020). Em-
ployees have collapsed from formal employment to informal employment raise
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A. R. F. Razeena Nimaaz Marso
of 70% as per the informal sector employment 2021 (Labour Department of Sri
Lanka, 2020). The time limits and revealing data is been a constrain throughout
the literature search.
However, Sri Lanka couldn’t rule out the second wave of the virus, at least the
third wave of the virus could be controlled with effective strategies enforced by
the government. Therefore, it is suitable to draw insights from the reactions to
the first wave and second wave to inform the policy response to a potential third
wave. As a result of the previous learning, travel restrictions were imposed in-
stead of lockdown and curfews. Also, if government can avoid further economic
contractions through adopting appropriate methods could support the recovery
and sustainability of GDP. This article will examine the unemployment impact
as a result of the economic crisis of the strategies imposed by the government
during the first and second waves and forecast the upcoming issues in the econ-
omy and labour market. The paper contributes towards the future economic cri-
sis which country will possibly face. If the future challenges are addressed with
proper mechanisms by the government, we can eliminate the drastic raise in po-
verty, inflation, and economic devastation.
2. Economic Base to Unemployment Drift
Sri Lanka has an economically dynamic population of 8.6 million, with 64.5%
males and 35.5% females. Further, nearly 3.5 million employs the private sector
whilst self-employed workers are 2.7 million. It is significant to indicate that
81.3% of the non-public sector employees and 57.3% of self-employed employees
are employed in the non-agriculture sector (Labour Department of Sri Lanka,
2020). A quarter of labour are engaged in agriculture, 28% in industries, and the
remainder in services. A large share of workers continues to be engaged in low-
productivity jobs, especially in agriculture. It indicated a 3.3 million employed
population of informal sector employment. Since 85.7% employers from the
non-agricultural sector the degree of the susceptibility and the effect on the em-
ployment was severe. Annual Labour Force survey 2020 indicated 68% of em-
ployment from informal sector. Considering the fact that the key sectors of Ser-
vices, Industry and Agriculture contributions of 57.4%, 26.4% and 7% respec-
tively contributes the US $ 84.0 billion in 2019 to the Gross Domestic Product
(GDP), with a portion of almost 40% of the whole exports, it is necessary to in-
corporate measurements to withstand the manufacturing industry of the coun-
try. The significantly high level of employment in the manufacturing industry
confirms this requirement further (Gunawardane, 2020). This indicated the need
for government interventions to revive business in these selective sectors.
The survey conducted by the Sri Lankan Labour department on COVID-19
impact indicates that 53% of the institutions have closed their businesses for op-
erations. Further, another 44% operates under capacity. The survey indicates
that 64% of employees were not in employment. This signifies the threat of un-
employment. The report summaries, travel restriction and curfew as the reason
for closed operation for business. A significant finding in the survey is the ca-
DOI: 10.4236/jhrss.2022.103027 451 Journal of Human Resource and Sustainability Studies
A. R. F. Razeena Nimaaz Marso
pacity of paying salaries and continuation of business (due to lack of capital) de-
clines with the scale of the businesses. The number of terminations transpired in
this category is significantly lesser than in the establishments with more than 500
employees.
These are mostly the firms with more cash in their pockets. Another survey
conducted in the US estimates that closures of businesses discretely might lead
to 32.7 million job losses. If the crisis lasts for 4 months and 35.1 million job
losses if the crisis lasts for 6 months. The challenging fact is now the crisis has
lasted for more than 14 months around the world with on and off lockdowns,
travel restrictions and curfews.
Despite the fact that the transportation and storage sector was encouraged and
promoted under the essential services it was still under capacity or inability to op-
erate as these mostly operate through informal sectors. Further, the Labour De-
partment survey report indicates 596,022 employees were employed by their se-
lected sample at the end of February 2020 and the number has declined to 213,011
by the end of May in the same year. Accordingly, below indicates how employ-
ment losses have occurred after the first and second waves of the COVID-19 im-
pact.
3. Informal Sector Unemployment
The employment in the informal sector is not stable as in the formal sector, the
statics need to be more accurate to trace the employment percentage in the in-
formal sector. One article suggests the suitable strategy to recognize the informal
jobs is through an appropriate subcategory of status (Organisation, 2022). A
unique characteristic of labour markets of developing countries is the prevalence
of informal operations, which have been defined as the informal sector or the
informal economy (International Labour Organisation, 2022). Informal sector
workers are a shortage of informal work. Informal sector workers are expected
to be poor than the formal sector employees due to a lack of social protections
and formal implications in employment. The informal sector employment allied
with higher differences in payments: similar skills workers are paid/earn less in
an informal sector (Corinne Deléchat, 2020). A different view could be that people
avoid the formal framework to be resilient to respond to uncertainties such as
the pandemic. Contradict, the pandemic may encourage some employers to shift
from formal to informal, due to existing opportunities for flexibilities and quick
response to crucial tremors that informal provisions consent for. Small and me-
dium-sized entities, where informal jobs are distillate, may grieve from inter-
rupted supply chains: bigger firms give priority to goods in restricted supply re-
leasing minor ones, or the supply chains basically changed due to the pandemic
(Alekksandra Webb, 2020; Delechat, 2020).
4. Cost of Unemployment
“Decent work and economic growth” are the eighth sustainable development
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A. R. F. Razeena Nimaaz Marso
goal. This goal identifies that economic growth will generate employment-pro-
ductive and meaningful work, and contribute to human development (Perera,
2020). Therefore, it’s significant to be alert not only about the impact on the
economy but also about the creation of jobs and the degree of unemployment.
There are no exclusions in labour laws which could be applicable in situations
like COVID-19. Safeguarding employment whilst safeguarding businesses and
ensuring sustainability has become a challenging task in Sri Lanka.
Sri Lankan labor market had a huge impact immediately after the first wave of
COVID-19 hit the country. There were many survey reports which resulted to
show the impact on the country. As reflected in the below Table 1 on the Sri
Lanka Labor Force Survey for the 4th quarter of 2020 produced by DCS indicates
overall unemployment increased to above 6% in the second quarter of 2020
(Department of Census and Statistics, Ministry of Finance, 2021) retrieved from
CEIC data website.
As we can see in Figure 1, during the past few years Sri Lanka has reported an
unemployment level of less than 5% in every quarter. The impact of the gov-
ernment strategy on curfew enforcement can be seen in the percentages of the
first quarter (5.7%) and third quarter (5.8). hence, the lockdown was completely
Figure 1. Distribution of unemployment rates and 95% confidence interval (2017Q4-
2020Q4) CEIC, 2022).
Table 1. Number of unemployed and unemployment rate by age group and gender—fourth
quarter 2020.
Unemployment rate %
Level of Education Sri Lanka Gender
Sri Lanka
Number Male Female
Sri Lanka 441,997 5.2 4.1 7.5
Below GCE O/L 140,434 2.9 2.3 4.1
GCE O/L 113,671 7.3 7.5 7.0
GCE A/L & above 187,893 9.3 6.3 12.8
(Department of Census and Statistics, MInistry of Finance, 2021)
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A. R. F. Razeena Nimaaz Marso
elevated after June 28. COVID-19 infections seemed controlled until a breakout
in an interrelated combination that led to an exponential heave in cases during
the latter quarter of 2020. Confined lockdowns were introduced beginning from
October 4, primarily in high-risk areas in the highly developed and populated
Western, Central and North Western provinces.
As presented in Table 1, the number of unemployed persons is projected as
441,997 through the fourth quarter 2020. The unemployment rate for the fourth
quarter of 2020 is 5.2 percent. It indicates female unemployment is higher than
male employment. Employment loss was more likely to arise in urban areas and
among private-sector employees and self-employed workers which may also in-
clude the informal sector employment. It was indicated that 28.6% of all workers
were home in urbanized Western Province before the pandemic, but it surged
with 36.3% share for employment losses. This is predicted to be led to a large
contraction in industries that are existing in urban areas. Most Employment losses
arose among private-sector employees and informal sector employees, followed
by self-employed workers (Department of Census and Statistics, MInistry of
Finance, 2021). Letting a significant sector of the employed population lacking
with any form of social security makes them highly susceptible in the event of
deprived of income.
Sectoral progress forecasts and past employment resistances suggested that
employment in 2020 decrease by 1.1% in industry and 0.8 percent in services
(World Bank, 2021). While agricultural operations sustained through the pan-
demic, there were recurrent interruptions in logistical operations and tea exports
slightly declined in 2020. Moreover, the fishery sector grieved a substantial shock.
Employees at the top end are more likely to have jobs that are formal and that
can be operated remotely and are secured from unemployment (Economynext,
2021). Also, employees working in services that have suffered the smallest over-
all shock are secured the employment during the pandemic. The high segment of
employment sufferers in the mid of the revenue distribution could surge both
disparity and poverty. For some individuals, the income loss will imply that they
fall into poverty (World Bank, 2021).
The deprived employees susceptible to unemployment are majorly informal.
While the burden of job loss is lesser, the employees who are impacted are mostly
informal. This unveils a dual vulnerability with regard to their position on the
income dispersal and in the social security actions, they can approach. These un-
derprivileged, informal employees are unlikely to have personal managing mea-
surements, such as savings to deal with the crisis, and do not have the option of
unemployment cover (insurance) or compensation payments connected to their
jobs. Even formal workers are not resilient to the unemployment crisis and in
fact, confront the effect of the impact (World Bank, 2021). At the higher end of
the distribution, the weight of employment losses is much lower, partially be-
cause these employments are in sectors that had fewer affects. These employees
are partially adopted teleworking options. The position of employment loss in
the distribution has significant insinuations for total poverty rates.
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A. R. F. Razeena Nimaaz Marso
A survey conducted by International Financial Corporation on “Gendered Im-
pact on COVID-19” indicates that all companies have implemented remote work-
ing policy, hence, companies have started practicing temporary shifting in em-
ployees’ work roles, increasing and reducing working hours, using different work
locations, utilizing paid and unpaid leave and further, 20% conglomerate and
garment sector firms have made employees redundant (International Finance
Coporation, A World Bank Group, 2020). The World Bank report states only
around 27% of employees in Sri Lanka have potentially tele-workable jobs. In
comparison to Sri Lanka, a survey conducted by a US survey group on employee
concern about COVID-19 indicates that 71% of the respondent has moved into
remote work (Anthony Caputo, 2021). Among the 20% the highest 20% of in-
come earners, the segment of teleworkers is 47%. To be able to telework, one
needs the digital access to fulfil the specific job requirements.
However, Export oriented subsectors are impacted by Weak external demand.
Among industrial subsectors, construction and textile manufacturing, which are
delicate to demand complications and required employees to be physically avail-
able, suffered the largest failure (Alekksandra Webb, 2020). As a result, the ex-
port-oriented clothing industry, which employs about more than five hundred
thousand a worker, allegedly cut a significant amount of employment and ap-
plied significant salary reduction. As other reports published after the first wave
indicates these industries were not planning to do so but unfortunately the
second wave raised with the export-oriented textile industry this decision has
changed.
Inequal opportunities to work remotely have presented new economic and
spatial separations as working remotely is virtually a possibility for high-income
earners, and small and medium-sized enterprises were doubtful to implement
digital technologies. In the medium to long-term, digital transformation could
develop a significant engine for an increase in jobs. However, in spite of the wi-
descale possession of cellphones in Sri Lanka, the digital revolution will not be
up to expectations without the extension of high-speed networks and accessible
data around the country.
5. Employee Layoff & Reduction of Salaries
Sri Lanka has a highly defensive labor law administration; hence it does not con-
tain provisions to manage with incomparable circumstances such as the COVID-
19 pandemic, making employment shield tough even for formal workers, an em-
ployer position to seek reduction of salaries for employees who are in a non-ope-
rational status due to reasons beyond his/her control. Furthermore, even in this
type of scenario, employers must follow the provisions of the “Termination of
Employees Act”, if they compelled to fire employees due to the impact of
“COVID-19”. In addition, Shop and Office Employees Act restricts female em-
ployees from being employed after 8.00 p.m. excluding in a few definite indus-
tries and trades (Gunawardane, 2020). As flexible employment provisions have
DOI: 10.4236/jhrss.2022.103027 455 Journal of Human Resource and Sustainability Studies
A. R. F. Razeena Nimaaz Marso
not been distinct and related to the rights of the employees, employers are hesi-
tant to assume such types of employment arrangements. Hence, this exacerbation
may incline the employers to misapplication of terms and conditions of employ-
ment signifying the possibility of fundamentals of obligatory labour being infil-
trated the workplace. It is foreseen that employee providing agencies will take
the excessive benefit of the growing circumstances leading to the exploitation of
employees and disadvantaging them. Labour Department survey indicates layoffs
have occurred more towards the below-average income generated. Also, these
layoffs were more likely to arise in municipal areas and among private sector and
self-employed persons. According to the report compiled by the Sri Lanka La-
bour department on “COVID-19 Impact on the Labour Market Sri Lanka” (La-
bour Department of Sri Lanka, 2020) states job losses arose less frequently than
decrease in earnings. While intermediate labors are more likely to suffer deprived
income.
It reported that in spite of high food inflation, feeble demand kept overall in-
flation in check. Annual regular inflation measured by the Colombo Consumer
Price Index (CCPI, 2013 = 100) was 4.1% in February 2021 (World Bank, 2021).
Food inflation has sustained continuously high at around 10% since the second
half of 2020, reflecting the brunt of supply disturbances. Therefore, employees
are susceptible to facing the third wave with no salary or being jobless.
As per the Labour Department survey, the percentage of sectors “not in work”
category indicates 64.26% (as per the sample) in comparison to the number em-
ployed in February 2020. Whilst, Manufacturing industry indicates a percentage
of 37.48% were included in the “unable to pay salaries” category. We must note
that though the employers pay half, full, or basic salary throughout the lock-
down, they will not be able to continue this for a long period of time Businesses
is suffering. Since the second wave surged at the end of September through the
textile industry resulted in closing down the entire garment manufacturers. How-
ever, the government planned a strategic lockdown around the country to miti-
gate the loss of economic functions but most of the lockdowns were in highly
populated and commercialized western provinces. This was the second hit on the
industries as they were trying to recover from the economic loss that occurred
after the first wave. This adverse effect was predicted by the report (Kapilan,
2020) to have a negative shock of 50% then being optimistic. Production and
consumption sectors were unviable due to lockdown rules. As a result, accom-
modation, food & beverages and transportations were severely affected.
Further according to the report non-essential manufacturing, construction,
and financial services are expected to face a moderate negative shock of 45% in
the pessimistic scenario. Sectors that were allowed to operate during the lock-
down such as agriculture, and other essential manufacturing and services are es-
timated to face a lower negative shock of 10% in the optimistic scenario and
15% in the pessimistic scenario. Although these sectors were allowed to operate
throughout the lockdown, lesser demand is expected in these sectors due to li-
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A. R. F. Razeena Nimaaz Marso
mited movement and income restraints of consumers. Sectors that are expected
to have a positive shock include the manufacturing of cleaning materials.
6. Is Sri Lanka Ready to Face the Aftermath of “Third Wave
of Covid-19”?
Several countries around the world are seen to be approaching a way out of the
pandemic with the vaccine lift restriction. Sri Lanka has implemented an ad hoc
plan on vaccination with vaccine distribution, securing the essential quantity of
vaccines, and failed in guaranteeing the “Right to Health” of others who are not
under the priority list. The actions of the government of Sri Lanka and the in-
ternational community are serious at this stage, during the third wave of the vi-
rus Sri Lanka was struggling with the number of daily cases mounted to more
than 2500 a day (Amensty International, 2021). Sri Lanka’s Health Promotion
Bureau issued a public warning over Coronavirus after the New Year festive sea-
son in April in the respective year.
The current COVID-19 vaccination program in Sri Lanka is a failure due to a
lack of strategic initiative, scarce resources, and malpractices in managing re-
sources were reported through the media during dispatching. Currently, the
country has denied the “right to health” by ensuring vaccination access to all.
Hence, Sri Lanka initiated the vaccination procedure after receiving the dona-
tion of the first 500,000 doses of the AstraZeneca vaccine from India as a part of
the “Neighborhood First” policy. These were first given to health sector em-
ployees, Tri forces, and Police as they were compulsory service providers. The
500,000 doses of the next batch arrived end of February 2020 which was invoiced
on an agreement between the State Pharmaceuticals Corporation (SPC) of Sri
Lanka and the Serum Institute. The 10 million doses of AstraZeneca were or-
dered by SPC from the Serum Institute of India at a cost of USD 52.5 million,
due to postponements. Given the production delays with the AstraZeneca vac-
cines, Sri Lanka then secured the Sino pharm and Sputnik V vaccines and started
their administration with limitations such as administrating only to elderly civi-
lians (above 60).
Additionally, 264,000 doses of AstraZeneca were received as the second dona-
tion through the COVAX facility to the country. In total, COVAX’s pledge offer
8.4 million vaccine doses to cover 20% of Sri Lanka’s population at no cost to the
government. WHO reports, that a total of 3,345,165 persons have been vacci-
nated as of now. Approximately 11.5% of Sri Lanka’s 21 million population has
obtained the first jab of any of the vaccines, while another 4% have received both
jabs (Amensty International, 2021).
This slow vaccination process and the results stated above would not be a
deviation from the third wave that we encounter now, though the travel restric-
tion is in force, mobility of essential services and rest of the industry in non-es-
sential and informal sectors were closed down islandwide will not have a de-
viated impact comparing to the previous predictions and statistics. The after-
math effect of this would be much worse than the predictions made about the
DOI: 10.4236/jhrss.2022.103027 457 Journal of Human Resource and Sustainability Studies
A. R. F. Razeena Nimaaz Marso
country’s growth. But seeing through the dark clouds, Honorable President Mr.
Gotabaya Rajapakshe, stated during his speech addressing the nation that 13
million people are expected to be vaccinated by end of September with the arriv-
al of ordered vaccination.
At the same time, allegations were made against the Health Promotion Bureau
(HPB) for not releasing accurate information on COVID-19 was revealed. The
government needs to assure the accuracy of the data and information on the
current pandemic in order to make effective decisions to overcome the situation.
The Asian Development Bank’s (ADB) flagship annual economic publication,
the Asian Development Outlook (ADO) 2021, estimates a substantial reflection
in Sri Lanka’s economy as local and international economic action reinforces
and vaccination campaigns drive domestically and abroad. ADB forecast Sri Lan-
ka’s economic growth to increase to 4.1% in 2021 and moderate to 3.6% in 2022
(Asian Development Bank, 2021). It is believed that growth will generate from
improved private consumption reinforced by less-interest rates and as pent-up
demand is released, also recovery in investment reinforced by less-interest rates,
sturdier global demand, and base effect following the contraction in 2020. Hence,
unfortunately, due lack of prevention measures taken by the government, the
country had to go through the island-wide travel restriction with the third wave
of the COVID-19 for more than one month with strategic isolations (Asian De-
velopment Bank, 2021).
The choice of COVID-19 mitigating strategies has implications on the overall
well-being of communities in a country like Sri Lanka. Where a larger propor-
tion of the community depends on the informal economy and the daily wages.
As many have lost their income sources during the first wave and second wave
(Gunawardane, 2020). Third-wave would bring adverse effects on their diurnal
activities. The government paid an estimated 0.7% of GDP in fund transfers to
displaced workers, affected senior citizens, kidney patients, and persons with a
disability, some of these actions likely facilitated lessen the impact of the crisis
on poverty. Numerous tax relief actions were also taken. The payment limits for
the income tax, the VAT and certain other taxes were protracted, income tax ar-
rears of SMEs were partly exempted, payment terms were lessen, and legal activ-
ities in contradiction of non-payers were frozen. The government did not pay
any concessions to the public yet. This has made employees and their families
more vulnerable to the consequences. Unemployment in 2020 reached an ele-
ven-year high of 5.7% at the end of the year with the full impact of curfews set in
during the first and second waves, in Sri Lanka. Based on the GDP contraction
would have resulted in the unemployment levels at the end of the year. Accor-
dingly, this would have a devastating effect on the aftermath of the third wave.
7. Research Approach and Implications
The paper attempts to present a literature review with an analysis of selected aca-
demic literature and statistical data shared by accountable authorities. The au-
DOI: 10.4236/jhrss.2022.103027 458 Journal of Human Resource and Sustainability Studies
A. R. F. Razeena Nimaaz Marso
thor’s observation of the increase in unemployment rates and decrease in GDP
percentages are identified as a research requirement in this discipline to identify
the consequences of reflected statistical findings. There are various implications
identified throughout the study. Although the COVID-19 pandemic unduly im-
pacted the formal sector and informal sector employment. The literature pro-
vides limited statistical evidence on the informal economy in Sri Lanka, unem-
ployment statistics, and similar prior research on similar topics conducted in Sri
Lanka. This paper will provide an insight to future researchers on informal econ-
omy studies and unemployment when investigating economic uncertainties caused
due to COVID-19. These results can be applied to other countries with the com-
parable environment. The findings suggest that government involvement in sup-
porting the unemployment with proper mechanisms and increasing vaccination
percentages among the public.
8. Anticipated Issues & Recommendation
It is assumed with employment loss and earnings reductions, the “poverty gap”
has increased from 17.9% in 2019 to 20% in 2020. Hence, poverty has surge
significantly in 2020. Over 500,000 people are anticipated to have fallen into
poverty as a result of the crisis, which led to an increase in the $3.20 poverty
rate from 9.2 percent in 2019 to 11.7 percent in 2020. Both these measure-
ments imply that not only are there more poor people but also that the poor
have fallen deeper into poverty. As per the analysis, if the Sri Lankan gov-
ernment allow SME and informal sector supporting loan scheme to address
this issue. Extending a debt repayment halt on bank loans for garment, tour-
ism, plantation, information technology, and SMEs until considerable time
period devised in 2020, would be support to the in displaced business and
workers to sustain their business.
Alarmingly, Sri Lanka encounters substantial economic challenges curtailing
from high public debt and outside financing provisions. Actions to appeal
non-debt generating capital inflows, improve domestic income deployment,
and expenditure management will be crucial to minimize vulnerabilities. Ap-
propriate mechanism needs to be immediately implemented to sustain a pos-
itive GDP growth.
High impact of curfew-type mitigation on GDP and employment, it would be
prudent to assess such mitigation strategies in contradiction to other non-
pharmaceutical mitigation strategies for GDP and employment impact to
update the decision-making process. Such strategies could include more in-
tensive testing, better quarantine measures, increasing healthcare capacity, and
social incentives for social distancing and good hygiene within communities.
Mitigation strategies can also be aimed, for instance, by aiming at contact re-
strictions on the most vulnerable groups. Therefore, aiming for escalated mi-
tigation strategies for people above the age of 50 or those with respiratory ill-
ness and other pre-existing conditions would be a possible method for con-
DOI: 10.4236/jhrss.2022.103027 459 Journal of Human Resource and Sustainability Studies
A. R. F. Razeena Nimaaz Marso
taining the negative impact on GDP and employment, while continuing to
contain the negative impact of the spread of COVID-19.
The annual average inflation is expected to contain at 4.5% in 2021 before ris-
ing to 5% in 2022 as the base effects of high food inflation in 2020 and good
agricultural growth. As Government decides to enforce a ban on chemical fer-
tilizer and promote organic fertilizer. Now the farming community faces a
new crisis with inadequate fertilizers this will have an impact on the harvest
expected in the upcoming seasons.
Sri Lanka is expected continuity in exports to meet the demands in the export
market to gain and stabilize the foreign reserves of the country. Imposed im-
port restrictions will help contain the deficit by recovering domestic demands
and higher oil prices. The anticipated current account deficit is to edge de-
creased to 1.1% of the GDP product in 2021. Indecision of the prevailing
pandemic situation, pace of vaccination, restricted fiscal space, debt vulnera-
bilities, mechanical issues, and extreme weather stance a risk to the strength
of the recovery of Sri Lankan economy.
Sri Lanka’s Tourism act as the third-largest foreign exchange earner after
worker transmittals and garment exports the tourism sector was distressed by
the duple blow of the 2019 terror attacks and the triple lockdowns and new
variant development surge during a pandemic. Reviving this sector demands
devising a strategy to appeal the assurance of both local and international
travelers.
Considering the nature of remote working, embracing telework and digital
technology is advanced for private sector institutions than for small and me-
dium scale businesses. A great number of top private-sector employers speci-
fied that relaxed work policies were the most beneficial for managing human
resources during COVID-19. However, challenges in infrastructure and ac-
climating jobs to a fully remote workplace continue to be uncertain. Lack of
smartphone users (as only 1/3 of the population use smartphones) and lack
of internet (4G) connectivity around the country were cited as the primary
reason for productivity dips among employees during the pandemic.
Sri Lanka has not devised a one national COVID-19 vaccination plan which
is transparent, speedy, and accessible to everyone. Therefore, Sri Lanka needs
to devise a strategy map to communicate and include the participation of civ-
il society and marginalized groups to this plan. This information must clearly
communicate to the general public so people are conscious of when they will
receive the COVID-19 vaccine.
Compared to the other countries hit by COVID-19 first wave, Sri Lanka lack
appropriate strategies to avoid the second and third wave. Though the travel
restrictions will be removed, Government needs to ensure health and safety
measures with less impact on the economy.
The government needs to procure quality and adequate vaccination imme-
diately to the general public.
DOI: 10.4236/jhrss.2022.103027 460 Journal of Human Resource and Sustainability Studies
A. R. F. Razeena Nimaaz Marso
9. Discussion & Conclusion
This paper attempts to define unemployment and the economic consequences of
the increase in unemployment due to the COVID-19 pandemic. As we recognize
it’s early to determine the long-term effect of the pandemic but as we identify
unemployment and lack of vaccination might lead to multiple waves of disease.
However, Sri Lanka’s first and second COVID-19 mitigating strategies had sig-
nificant implications for the overall well-being of the people. Especially in de-
veloping countries like Sri Lanka, where there’s a great level of informal sector
workers depending on daily wages and the adverse effect of lockdown strategies
has resulted in unemployment, GDP, and Poverty. The benefits of employing a
low-cost labor force at the cost of such things as income security, health and
safety, and with no welfare are drivers of employers resulting in a 70% increase
in the informal sector employment in Sri Lanka. In order to overcome this small
business owners or entrepreneurs who are self-accounted are out of regulatory
frameworks therefore formalizing these entities will offer limited power in set-
ting mechanisms for labor. The decrease of jobs in 2020 due to the COVID-19,
and uncertainty about the future due to the prevailing situation, have primarily
changed the costs and benefits of informal employment.
As we now understand COVID-19 pandemic has affected labour market with
challenges. Established countries addressed the pandemic challenges with a va-
riety of policies to offer subsidies to affected employees and entities. It was easier
for them to extend the support through social security systems. Having reliable
information on how formal and informal sectors are affected by COVID-19
enabled most countries to offer attentive involvement to produce better results.
As stated in this study, the pandemic-led economic downturn has affected in-
dustrial and employee groups differently focused interventions supporting the
most affected sector of the labour market are indispensable for a speedy recovery
of the economy. Entities that are robust can cooperate, collect information on
labour market situations, and deploy these to formulate policies for labour mar-
ket retrieval.
Mitigation strategy impact has been more severe on the economy than the
disease. Observing the unemployment percentage, salary deductions, reduction
of domestic demands, and GDP contraction can be seen with the third impact of
COVID-19 on the country. The government will need to evaluate the mitigation
strategies’ impact before enforcing the same in the future. Though due to strict
laws employers cannot terminate employees’ temporary salary deductions harm
the livelihood of employees and their families. Therefore, the government will
need to assure the quality vaccination for the entire population in order to regu-
larize the livelihood of people.
Further research is required in the informal economy between the impact of
COVID-19 and informal sector employment. While the immediate effects of the
pandemic are complicated and uncertain. It is most likely to reflect the adverse
effects on the economy as a long-term effect of COVID-19. This can include
DOI: 10.4236/jhrss.2022.103027 461 Journal of Human Resource and Sustainability Studies
A. R. F. Razeena Nimaaz Marso
formal and informal employment and adverse economic crisis.
Conflicts of Interest
The authors declare no conflicts of interest regarding the publication of this pa-
per.
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