Economic impact of coronavirus

The coronavirus has wreaked havoc all over the world. The economic impact could be even worse than that of the Great Depression. The IMF expects the global GDP to fall by 3% in 2020. The WTO has warned that the volume of world trade could shrink by up to 32% while the ILO has indicated that 195 million jobs globally could be lost.

Pakistan will inevitably be impacted by both the global and domestic developments arising from the spread of the virus. The economy was recovering earlier slowly under the umbrella of an IMF programme. Now the process of growth could be hampered seriously leading to big increases in unemployment, poverty and hunger.

The World Bank in its latest South Asian Economic Focus report has projected that Pakistan’s economy will experience negative GDP growth of 1.3% in 2019-20, followed by only 1% growth in 2020-21. This implies that the GDP growth in the fourth quarter of 2019-20 will be a big negative 10%. This is highly likely given the quantum decline expected in exports, private investment and consumption spending by households.

The most vulnerable groups are self-employed daily- income earners and employees of SMEs. The lockdowns and the subsequent fall in the GDP could lead to unemployment of over 5 million more workers. This will raise the national unemployment rate to the unprecedented level of 14%. The number of people falling below the poverty line could be as many as 20 million, raising the number of poor in the country to almost 100 million.

These developments will increase the danger of social unrest as highlighted by the IMF. Not only do the medical and health facilities have to be expanded rapidly but also simultaneously relief activities and measures for preventing unemployment must be put effectively in place.

The government has already started a cash transfer of Rs12,000 per family to 12 million households. An overall relief programme of Rs1,200 billion has been implemented by the federal government. The SBP has announced special subsidized credit programmes for private businesses to sustain their operation and maintain their workers over the next three months. These initiatives must be implemented successfully and upscaled if necessary. We all pray for an early recovery.

The author is former federal minister and vice chancellor of the University of Karachi.