Impact of fluctuations in global crude oil prices on economy of Sri Lanka with a special reference to tourism and agricultural sectors

Abstract

This research is to focus on the complicated relationship between the economy of Sri Lanka and the price variability of crude oil on a global scale, including tourism and agriculture sectors by itself. This study is carried out using the secondary data from annual reports since 1984 till 2023. The results analyzed by econometric analysis, which is conducted using data as an input in EVIEWS and SPSS, aim at ascertaining the dimension of oil price volatility’s impact on these sectors. The results demonstrate that, along with the oil price volatility, there is a strong connection between the contribution of agriculture to GDP and Tourism sector revenue. ARMA models for both sectors yielded notably intriguing insights. Autoregressive relation in both agriculture and Tourism Sectors have highlighted the instinct connection of current level with the previous ones. Autoregressive relation in Tourism Sector has stressed the level of future final sales depends on the level of profit earned in the past. Agricultural trend analysis displays declining trend despite the one significant role it has in the economy. For that contrast, tourism revenues’ foreseen trend shows in increasing trend over the years and the volatilities can be assigned to uncontrollable, external factors such as war, COVID-19 pandemic etc. In brief, this study argues that global crude oil price fluctuations, in a way, either harm or help the economy of Sri Lanka depending on the conditions. While the agricultural sector needs strategic planning and resilience measures under increasing oil prices, the tourism sector is inherently stable and risk absorbing.