Sri Lanka and the COVID-19 crisis - UNICEF

© UNICEF/UN0321664/

Impact on the incomes of Sri Lankan householdsMay 2020

Sri Lanka and the COVID-19 crisis

Purpose

This is a summary of the fourth paper of a series

of UNICEF Sri Lanka Policy Briefs that aim to

provide evidence to support the Government of

Sri Lanka in its social protection response to the

economic crisis created by the COVID-19

pandemic.

This fourth brief examines the potential impacts

that the COVID-19 crisis will have on household

welfare in Sri Lanka, analysing simulated impacts

on household income using both ‘pessimistic’ and

‘optimistic’ scenarios.

It employed expert consultations and historical

evidence to determine a range of possible futures

of several parameters.

For more information, please contact:

[email protected]

mailto:[email protected]

Scenarios for the impact of COVID-19 crisis on Sri

Lanka households’ income

• In this analysis, we present scenarios on the COVID-19 economic effect on the household income. We do not predict future socioeconomic change compared to the structure of the economy as captured by the HIES in 2016;

• Proposed COVID-19 scenarios are used to capture the reduction of income compared to a baseline, under a pessimistic and an optimistic scenario (“what‐ if” scenarios);

• We combine assumptions on the impact of COVID-19 regarding income changes by economic sectors. The range of possible futures of these parameters is determined based on expert consultations and historical evidence;

• This analysis is the first step to estimate the potential impacts in “bad” scenarios and to explore possible policy options to minimize the risk that such bad scenarios occur.

Households at the top of the wealth distribution are characterized by the presence of workers in the services sector, hugely affected by the COVID-19 crisis. On the contrary, less wealthy households are composed of workers in the primary and secondary sectors.

Distribution of household income by industry by decile

(Data Source: HIES 2016)

• Depending on the scenario, monthly household income will decrease by 21 – 31 per cent

• Household income among male headed households is likely to decrease more than female headed households because of the COVID crisis

-23

-16

-21

-33

-27

-31

-35%-30%-25%-20%-15%-10%-5%0%

Male head

Female head

Total

Pessimistic Optimistic

Impact on household income under different scenarios

(Data Source: Own elaboration based on HIES 2016)

Impact on income by broad industry groups

• The largest reductions in income will be felt by those working in services and manufacturing

• If we are being optimistic, we expect on average a reduction in income of around 28 and 30 per cent respectively

• However, in the worst-case scenario we may expect see income fall by 39and 43 per cent, respectively

• The least affected industries include agriculture and mining which would still have a combined average reduction in income of between 13and 20 per cent.

-43%

-39%

-20%

-30%

-28%

-13%

-0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50%

Manufacturing

Services

Agriculture & Mining

Percentage change in income

Optimistic Pessimistic


Impact on income by Occupation

• Most occupations will see some significant reductions in income ranging from 6 per cent up to 56 per cent

• The group of individuals that would be most severely affected by COVID-19 are managers who could see their incomes reduce anywhere between 45 and 56 per cent

-0% -10% -20% -30% -40% -50% -60%

Managers

Plant and machine operators, andassemblers

Craft and relate

Service and sale

Subsistence agricultural activity

Clerical support wokers

Technicians and associate professionals

Elementary occupations

Professionals

Skilled agricultural, forestry and fisheryworkers

Armed forces occupations



Impact on income by province

Op

tim

isti

c S

cen

ari

o

Pes

sim

isti

c S

cen

ari

o

Western

Central

Southern

Northern

EasternNorth-Western

North-Central

Uva

Sabaragamuwa

© GeoNames, MicrosoftPowered by Bing

-26 -15Income

reduction (%)

Western

Central

Southern

Northern

EasternNorth-Western

North-Central

Uva

Sabaragamuwa

© GeoNames, MicrosoftPowered by Bing

-38 -23Income

reduction (%)

• The Western and

neighbouring provinces

will be the most

impacted by the crisis

• Under the Optimist

Scenario, household

income is likely to shrink

by 26 per cent

• Under the Pessimistic

Scenario household

income will reduce by 38

per cent


• Households in urban sectors will see the highest decrease in household income of around 37per cent

• This is likely due to the fact that whilst most of the population reside in rural areas, most services-related and a great deal of manufacturing work is based in urban areas

-26%

-21%

-13%

-37%

-30%

-23%

Urban Rural Estate


Impact on income by area of residence


-40%

-30%

-20%

-10%

0%

Pe

rce

nta

ge

ch

an

ge

in

in

co

me

Five-year age groups


Impact on income by age groups

While the health crisis hits especially the elderly population, the economic impact is more substantial for the young generation


-25%

-20%

-12%

-9%

-17%-22%

-12%

-19%

-35%

-30%

-25%

-16%

-27%

-33%

-22%

-29%

Couple household, withchildren

Couple household, with nochildren

Single parent/caregiver (<60years)

One-person household, 60+years

One-person household, 18-59years

Three generation household

Skipped generation

Other household types


• Households that would experience the

largest shrinkage in income are three

generation households and households

consisting of couples with children

• The former see a reduction of income of

around 22 and 33 per cent, whilst the

latter could lose between 25 and 35 per

cent

• We should not be surprised that skipped

generation and one person households

with a household head over the 60 years

appear to be affected the least since a

significant proportion of these households

will mostly have economically inactive

members.

Impact on income by household type


Sri Lanka and the COVID-19 crisis - UNICEF

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