THE IMPACT OF GLOBAL CRUDE OIL PRICE FLUCTUATIONS ON THE ECONOMY OF SRI LANKA WITH A SPECIAL REFERENCE TO THE TOURISM AND AGRICULTURAL SECTORS
D.A.D. Lavindika1*, S.C. Mathugama2, and D.R.T. Jayasundara3
1,3University of Moratuwa, Sri Lanka, 2Institute of Technology University of Moratuwa, Sri Lanka
Session: Technical Session A
Abstract
This research paper analyses the relationship between global crude oil price fluctuations and their impact on Sri Lanka's economy, with particular emphasis on the tourism and agriculture sectors. Utilizing secondary data sources from the Central Bank of Sri Lanka (CBSL), the study examines the period from 1984 to 2023 and employs statistical methods to evaluate how changes in oil prices affect these sectors. This reperch paper centres around the objectives of identifying trends and patterns in global crude oil prices, tourism revenue, and agricultural contributions to Gross Domestic Product (GDP), and to assessing the correlation between these variables. As per the findings, oil price volatility has a significant influence on both sectors. It is evident that the tourism sector has shown resilience with a moderate positive correlation with oil prices which can be attributed to Sri Lanka's positioning as a budget-friendly travel destination. Conversely, the agricultural sector shows a negative trend and a strong negative correlation with rising oil prices. This can be understood as the sector’s high sensitivity to increased input costs and economic pressures. The autoregressive nature of both sectors, observed through the Autoregressive Integrated Moving Average (ARIMA) model is a clear indication of a dependency of future outcomes on past trends. As per the findings it can be concluded that while the tourism sector displays agility to a greater extent, the agricultural sector is highly affected by increases in oil prices and requires assistance and strategic measures to mitigate adverse impacts. The paper highlights the necessity for continuous efforts and longer-term solutions to address the dual effects of oil price volatility. It is recommended to improve the models by incorporating additional variables into the analysis and incorporating predictive tools. This research paper provides valuable insights for policymakers and industry stakeholders in navigating the economic impacts of crude oil price variability.
Keywords: agricultural sector, ARIMA, crude oil prices, economy, tourism sector
DOI: 10.64752/OTUI2939