LAHORE: Digitisation has grown tremendously during the COVID-19 crisis and would be the main driver of growth when the crisis is over.
The global economic scenario would be substantially altered once the Covid-19 threat is over; technology would, of course, be the main driver in marketing, production, and procurement in line with the changing attitude of consumers.
Our economic planners and entrepreneurs should devise a strategy to ensure that we are not left behind. Consumer confidence has returned more quickly in Pakistan than in other economies. Still, the uptake of goods and services has not reached the pre-Covid-19 level.
The buying patterns have; however, changed, air travel is need-based and mostly inside the country. Most retailers have gone online. Our businesses must understand the post-Covid-19 scenario would be different than what prevailed in the pre-Covid-19 period.
The initial consumer surge in all areas is because of pent-up demand. Most buying plans were put on hold during the pandemic. As it receded, the demand for cars, motorcycles, home appliances increased. Those who had postponed buying had the resources when markets opened, but they had to arrange additional resources because the prices have increased substantially. No one is sure that this tempo would continue for long, as middle-class consumers have seen their incomes decline and prices rise.
If we look at the global trends, the most recent survey by McKinsey’s published in late October, found that the countries with older demographics, such as France, Italy, and Japan, are less optimistic than are those with younger populations, such as India and Indonesia.
Pakistan has a higher percentage of youngsters than these two countries. We can expect that consumer spending will be robust. There is but a catch the consumer confidence in India and Indonesia is more pronounced than Pakistan.
Spending will only recover as fast as the rate at which people feel confident about becoming mobile again — and those attitudes differ markedly by the country.
The travel sector has been devastated during Covid-19. In the case of Pakistan, foreign travel has almost dwindled, though domestic air travel has picked up. There are two types of travelling, one is for pleasure and the other need-based mostly relating to business. The pleasure travel is picking pace, but business travel has reduced. The businessmen have realised during the pandemic that they could conduct most of their meetings through video calls.
Effective use of technology during the pandemic and the economic constraints that many companies will face for years could augur the beginning of a long-term structural change in business travel.
COVID-19 has been devastating for small businesses. It was particularly painful for millions of small and medium enterprises (SMEs) operating informally in Pakistan.
Their losses cannot be documented, and the state is at a loss how to compensate them. The one-off attempt to subsidise their electricity bills was not enough to rehabilitate them. Healthcare, too, has changed substantially, with telehealth and biopharma coming into their own.
Greater use of technology has enhanced productivity and reduced costs. The entrepreneurs benefiting from technology would continue to further strengthen it, which will mean lesser jobs in the offing.
According to McKenzie, the productivity increased in the United States by 10.6 percent, which is the largest six-month improvement since 1965.
Productivity in Pakistan had always been much below the global standards. Many enterprises were forced to embrace technology during Covid-19 peak when workers were not available.
Earlier they were reluctant to buy technology because of its initial cost. However, during the pandemic, they had no other choice, but to make this investment. Now they have realised the benefit of artificial intelligence and the efficiency that accompanied.
For consumer industries, particularly, for retail, that could mean improving digital and omnichannel business models. The growth would be substantial in the retail segment from the low base. It is just a matter of time, as the shift to online retail is real, and much of it will stick.
Direct-to-consumer selling requires the development of new skills, capabilities, and business and pricing models. But the trend is clear: many consumers are moving online. To reach them, companies have to go there, too.
Climate change would be high on the agenda of foreign buyers. Our exporters must gear-up sustainable production or lose the orders. For the governments, the most difficult task would be to address their fiscal problems.
Pakistan was already running an unmanageable fiscal deficit that has further increased after Covid-19. After the moratorium granted on bilateral foreign loans expires, the government would be constrained to borrow more for debt servicing.
Will it be able to further raise taxes or cut spending? Doing so could risk slowing the recovery and stimulating political backlash.