With over 55 countries having diagnosed the coronavirus on their territory, the world economy appears to be heading towards a down-slide not seen in many years. Investors fear that the spread of the virus will tip the global economy into the worst recession in a decade. This past week, stock markets the world over have seen the largest weekly loss since the great recession of 2008. As a new financial crisis is looming, the economic expansion the world had enjoyed during the past few years seems to be coming to an end. Companies, especially big ones, have already started readjusting their annual profit expectations, and economic managers are in the process of lowering their forecasts for global growth. On the other side, policymakers are also readying themselves to react in an appropriate manner if the economy destabilizes sooner than expected.
What does all this have in store for countries such as Pakistan? Any downturn in the world economy affects nearly every country in the world, but those developing countries are likely to suffer more whose economic and financial base is already precarious. The economic and financial structure of a country stands on a sound economic policy – which Pakistan lacks. First, our foreign-exchange reserve are never strong enough to sustain our economy in the face of a liquidity crunch. This crunch may result from declining exports, as other countries busy themselves in tackling the coronavirus, and their people eschew going to shopping malls for fear of contracting the virus from affected material or people. Second, within the country if the virus spreads, the people of Pakistan who are already under strain for the past 20 months, may display a panic that paralyses the economy further. And third, as the economy grinds to a slow pace, the financial market is likely to crash in an unprecedented manner.
This calls for a cautious approach. The government needs to develop an awareness-raising strategy on a war footing. Short video messages need to be filmed and telecast educating people about how not to panic if the virus is detected in anyone near them. The messages should also teach people how to develop their own protective masks, how to wash their hands properly, and how to check their own body temperature if they feel anything unusual in any of their family members. With around 220 million people in the country, Pakistan has already become the fifth largest country on the planet. The least it can afford at this moment is an outbreak of an epidemic. Urgent and imperative actions are needed to secure the population against the virus and to sustain the economy against a downturn.