Sri Lanka tourism may be able to weather the Easter Sunday shock

Governor Indrajit Coomaraswamy in an interview with CNBC after the Easter Sunday terror attacks. Photo credit CNBC

April 27, 2019 (LBO) – The Sri Lankan economy and its tourism sector may be able to withstand the shock from the Easter Sunday terror attacks according to Central Bank Governor Indrajit Coomaraswamy.

In an interview with anchor Sri Jegarajah of global business network CNBC, the highly respected central banker said it was too early to downgrade the country’s GDP growth prospects for 2019 which stand at 3.5-4%.

He said that the sector that would likely be affected most in the short term is tourism which accounts for 5% of the nation’s economy. Additional impacts are likely to be felt through the industry’s supply chain.

Softening the blow, he said that we are in the offseason for the tourism industry, which seasonally reaches it peak from November to March. He said if the country is able to return to a stable footing, the impact on the peak season might not be as bad as is feared. The Governor said that in previous crises, the impact was felt for one season, with the industry rebounding relatively quickly.

The Prime Minister of Sri Lanka, Ranil Wickremesinghe, said in a recent statement that the impact of these attacks on the economy is likely to be at least US$1bn, an estimate that he said could possibly be significantly increased.

Tourist and city hotels in Sri Lanka are emptying out, as visitors leave the island amongst a host of travel advisories. Today, the United States issued a statement saying:

“On April 26, 2019, the Department of State ordered the departure of all school-age family members of U.S. government employees in Kindergarten through 12th grade.  The Department also authorized the voluntary departure of non-emergency U.S. government employees and family members.”

With regard to the economy, fortunately for Sri Lanka, the Governor of the Central Bank has been running a very tight and conservative monetary policy. That policy that has come under criticism from political leaders for being the cause of slow growth. It is due to this policy that Sri Lanka’s foreign reserve position remains strong at over US$7bn, with over US$2bn in debt refinancings done after the recent political crisis ended early this year.

Statistics also show that there has been no exodus of capital from the bond and stock markets in reaction to the attacks, perhaps evidence of foreign investor confidence in the country’s fiscal and monetary postion.