ICRA Lanka’s analysis indicates aftermath of Easter attacks Sri Lanka saw a V-shape recovery. “The crisis peaked during Q2. The impact on agriculture was minimal. Manufacturing sector recovered in Q3 while services made a near complete recovery in Q4.”
Tourism was the most affected sector of all. Arrivals dropped over 70% (Y/Y) in the month following the attacks. Rupee depreciated by just over 1% from the day of the incident to end of June 2019. In April 2019, the Hotels Association of Sri Lanka said it was expecting USD 1.5 billion revenue loss for 2019.
Early estimates expected a revenue loss of approximately Rs.26 billion from VAT and NBT alone. “Despite these setbacks the economy performed better than expected.”
Main impact of the Easter attacks was transmitted to the agriculture sector through the fisheries subsector which is the largest component of the agriculture sector (15% in 2018). The impact affected fishing communities, and this delivered a major blow to the fishing industry. The impact of the Easter attacks caused the agriculture to lose 1% of its projected GDP in the Q2 and 0.8% in the next. This shock translates to about Rs 5 billion.
The manufacturing sector activities plunged across the board immediately dragging the quarterly growth rate down. In ICRA Lanka’s assessment, the Easter attack shock caused the industry sector to lose of about 2% of its projected GDP in Q2. The total shock on the industry sector is around Rs 18 billion.
The Service sector experienced deterioration in activities weeks following the Easter attacks. The shock by Easter attacks cost nearly 3% of the projected quarterly GDP of the sector in Q2, 1.4% in Q3, and less than 1% in Q4 for the Service Sector. The total loss to sector GDP is over LKR 108 Bn. The Easter attacks had a direct impact on the tax base and tax collection.
The government’s also offered a relief package to affected sectors like finance, tourism, trade and construction. ICRA Lanka estimates the revenue loss from the taxes on goods and services to be close to Rs 18 billion.
Easter attacks had a profound impact on the GDP and had the attacks not taken place, the country’s GDP would have not altered its original trajectory that much. ICRA Lanka’s estimations show in such a case the country would have grown at a rate of 3.3%. The total shock is about 1% of the GDP which is about Rs 150 billion.
“It has been a year since the deadly Easter attacks which claimed 259 lives and injured at least 500 individuals and it left deep scars in the society and the economy.”
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