The COVID-19 Pandemic job losses were more likely to occur in urban areas and among private sector employees and own-account workers, a Sri Lanka Country report by World Bank states.
The more urbanized Western Province was home to about 28.6 percent of all workers before the pandemic, but with 36.3 percent accounted for a much higher share of the job losses. This is to be expected given the large contraction in industries.
To mitigate the impact of the economic hardship on the poor and vulnerable, the government implemented several livelihood support programs, which helped to soften the labor market shock and the impact on poverty. Further progress in restoring livelihoods and making them more resilient could help Sri Lanka to continue its path of poverty reduction and shared prosperity. The current social protection system could support the reintegration of those who lost their jobs. In the medium term, social safety nets could be better targeted toward the poor and vulnerable, and adjusted to allow for support to be scaled up quickly and effectively in times of crises. Construction and textile manufacturing, which require workers to be physically present, suffered the largest shocks, leading to an overall contraction of 6.9 percent in industrial activity in 2020.
The services sector contracted by 1.5 percent due to weak performances in transport, tourism, and personal services (as mobility remained constrained).
Agricultural production suffered from disruptions in supply chains and contracted by 2.4 percent .
Formal workers are not immune to shocks, either, as revealed by the COVID-19 crisis. The export-oriented apparel industry, which employs about half a million workers, reportedly cut a significant number of jobs and implemented significant wage cuts. Sri Lanka has a highly protective labour law regime, but it does not include provisions to deal with exceptional situations such as the COVID-19 pandemic, making employment protection challenging even for formal workers.
The pandemic also affected most drivers of demand in 2020. Job and earning losses in key sectors (such as construction, manufacturing, and tourism) dampened private consumption despite buoyant remittance inflows.
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