- Life after the pandemic
By: Mishal-e-Noor
Since the advent of covid-19, economic growth has turned sharply negative, pushing the economies into global recession. The pandemic has somehow played the role of a double edged sword: if the lockdown is relaxed, the fear of increase in number of coronavirus cases rises; whereas if a lockdown is strictly imposed, economies tend to bear the repercussions. Economists across world have declared the pandemic a sequel to the Great Depression. Before March, the IMF projected positive per capita income growth for more than 160 countries for 2020, but unlike expectations – six months past covid-19– 170 countries of the world are currently experiencing negative per capita income growth. Livelihood opportunities, especially for daily wage workers, have been squeezed. Not only small and medium enterprises and traders are badly hit, the sudden closures of large industries, ports, airports and transport have also jammed the wheel of the economies across the globe. Additionally, this cut in economic activity has further scaled down the consumption of petroleum products which has resulted in partial closure of refineries, thereby immensely affecting the petroleum trade. Although philanthropists and donor agencies are actively participating in the provision of essential food items and services to the reachable population, survival in developing countries is yet a global concern.
Speaking of developing countries, Pakistan was already suffering from mild recession prior to covid-19. Therefore, despite huge global criticism, the government had to ease lockdown at the end of May considering the crawling condition of the economy. At that time, the number of active coronavirus cases was on an exponential rise to the extent that global health organizations were comparing Pakistan’s trend of increase in active cases with active cases in Italy and China. But unlike expectations, the relaxation of lockdown did not increase number of coronavirus cases. Health experts are yet unaware of the real cause of the switch in trend of active coronavirus cases. However, it is largely believed that the weather conditions in Pakistan have barred the country from covid-19. Regardless of the success in dealing with the pandemic naturally, the country has yet to struggle to cope with the loss the initial months of the pandemic brought forth. Pakistan’s economy for the first time in 68 years is projected to contract in the outgoing fiscal year with a negative growth rate of 0.38 percent and is set to face a shrinkage of up to four percent of GDP due to trade disruptions, decline in FDI and remittances, and fluxes in other sectors.
Adding to the misery, the country is prone to face gas shortage for a minimum of next two years, thereby further exerting a negative impact on the staggering performance of industries. In the light of circumstances like these, growth is unlikely to knock at the economy’s door for a while. Therefore, it is time for policy makers to be more vigilant in framing policies that can at least minimize the bandwidth of negative growth if not revert it back to positive
Figure 1: Pakistan Economic growth (from 2006 – 2020)
It is evident from the data that Pakistan’s economy has experienced prosperity and recession with no growth interval lasting more than five years. Since 2018, the growth rate was declining and the pandemic aggravated the situation further. The informal sector that accommodated 27.3 million employees prior to pandemic is now either suffering from increase in unemployment or underemployment. In a nutshell, the pandemic made people in the country even vulnerable to poverty and those who were already vulnerable lie below poverty line now.
In order to deal with the socio-economic implications of the covid-19 situation, the government of Pakistan collaborated with different donor agencies. The World Bank has approved a $200 million programme to help Pakistan improve access to quality healthcare, education and support economic opportunities for women to limit the impact of the pandemic. USAID and UNDP have also launched several programmes in different provinces of Pakistan to give revenue-generating activities a push.
Now that the markets have completely restored their operational status and are working in a restriction-free environment, to expect an upward swing in growth is still unrealistic primarily because of two factors: 1) the weather that worked as shield against the pandemic is on the verge of change and with this, we may see a tendency for coronavirus infections to occur once again. The government’s claim that Pakistan is one of the countries with the highest coronavirus testing is yet unreliable, as a major chunk of the population cannot afford the cost of a coronavirus test, which is Rs 4000 per person. Moreover, if we look at the household structure in Pakistan, a vast majority of households either have sole earners on whom the entire family is financially dependent, or they have minors working to make both ends meet. Therefore, affordability of a coronavirus test for an average poverty-ridden household comprising five to six individuals, is quite an issue. Therefore, it can be stated that although weather conditions prevented virus spread, a great deal of active cases go unreported. If these unreported cases wander normally in public with this changing weather, a second wave of infection is inevitable. 2) Apart from the pandemic, the foreign debt policy of the government, unprecedented price hike and reduction in exports have also made the economy stutter.
Adding to the misery, the country is prone to face gas shortage for a minimum of next two years, thereby further exerting a negative impact on the staggering performance of industries. In the light of circumstances like these, growth is unlikely to knock at the economy’s door for a while. Therefore, it is time for policy makers to be more vigilant in framing policies that can at least minimize the bandwidth of negative growth if not revert it back to positive.
The writer is working as Research Fellow at Institute of Social and Policy Sciences, Islamabad
