Wednesday July 06, 2022

Looking at the economy

May 01, 2020

Pakistan’s economy is already in a critical condition and Covid-19 has the power to destroy the economy even further. According to initial estimates, the country is set to feel an economic loss that equates to Rs1.3tr from the coronavirus alone.

The worldwide economic fallout due to the coronavirus could see recessions in Japan, US and European areas. China is reporting its slowest growth ever, standing at a lost output of $2.7 trillion. However, China can sustain this because of their enormous reserves.

The rate of inflation in Pakistan stands at 12.93 which is horrifying and indicates that there will be more price increases whilst the money of the middle class and poor will remain the same.

Due to flights being cancelled all over the world, several Pakistanis who were working abroad are now stranded. And, considering the economic condition and seizure of economic activities, the UAE government has allowed private firms to lay staff off that are not seen as high-ranking workers. It should also be noted that there is no new recruitment and some employees are being sent on unpaid leave.

World health indicators are continuing to emphasize the lockdown and Pakistan cannot afford to follow suit as it is already facing massive shortfall in revenue and limited resources in this collapsing economy. The lockdown of Karachi will cause major loss of revenue according to the Federal Board of Revenue and if this continues until June tax losses will reach Rs380 billion. The secretary of commerce has indicated that exports could face losses in the amount of $2-$4 billion as orders are cancelled. The UN has estimated that international tourism will fall three percent due to the virus which equates to $50 million globally; this is further bad news for Pakistan as the government has been committed to increase tourism to the country.

The Planning Commission of Pakistan has estimated that Pakistan’s GDP is likely to lose 10 percent, estimated at Rs1.1 trillion, due to Covid-19. In March 2020, the Pakistan Bureau of Statistics (PBS) estimated that the total exports of Pakistan were Rs287.7 billion. China, Germany, Netherlands, UK, and the US make up 40 percent of the total exports. However, all these countries have been affected by the Covid-19 outbreak. Therefore, the Ministry of Commerce has estimated that the decline in exports of Pakistan may go up to 20 percent.

In March 2020, the PBS reported that Pakistan imported a total of approximately Rs525 billion. However, the import sector is expecting to decline due to the corona outbreak, particularly as China accounts for almost 21 percent of the total imports on its own, but this is not all bad news as the decline in imports will have a positive impact on the current account deficit. Remittances also make up an important aspect of Pakistan’s economy. Most of the remittances come from Saudi Arabia, UAE, and the US. However, due to Covid-19, delays in sending and receiving the remittances are inevitable and have a further effect on Pakistan’s economy.

Investors across the globe fear that the Covid-19 outbreak will destroy economic growth. In this instance, the travel industry has been one of the most badly hit industries. The same is the case with the hotel industry.

The virus is either a boon or a bane for companies around the world. Firms across the globe have sent their workforce home. This has opened new avenues of transformation. This may be the start of a new disruptive revolution. Although movie theatres have been closed across the world, people are still watching movies and their favourite shows through digital platforms. Although news channels have been running their operations, we have also seen TV talk shows being shot at homes.

Physical classes have ceased as academic education facilities have been shut down. But the option of online classes has been explored by almost all institutions. Distant learning in the post-corona world is going to create disruption. Due to the large amount of lay-offs across the globe, people have realized how vulnerable they are. Therefore, alternative sources of income are being explored. One of these sources is freelancing.

Digital technology has been playing a key role for effectively fighting the coronavirus. For instance, interactive maps are being utilized globally for monitoring the virus spread. Following the epidemic this closely with such a precision is crucial to eradicate it. Developers at the Johns Hopkins University have already created an online dashboard to visualize and track the reported cases. Technology has made it possible for scientists to diagnose the coronavirus in patients, by examining a small amount of vital DNA taken from patients’ saliva or a blood sample.

We do not know whether the unemployed will find jobs after the Covid-19 outbreak is eliminated. We are standing on the verge of recession, where countries across the globe will be bankrupted, leaving behind vast numbers of people who will have lost their jobs. The financial crisis we are experiencing is different, and worse, because it is caused by a health crisis. Therefore, economists are finding themselves in a helpless situation as their own houses are on fire. It is high time that digitalization in its fullest form is utilized to fight Covid-19.

The writer is director ICT and founding director of the Centre for Information and Communication Technology at IBA.

Twitter: @imranbatada