LAHORE: Coronavirus (COVID-19) is likely to have an adverse impact on Pakistan’s economy like the way the epidemic has taken its toll on the global markets and the economy.
The virus, since its outbreak in mid-December 2019, has caused turmoil in the world’s second-largest economy, China, with a trickle-down effect on nearly all big economies including those of the European Union, United States, Japan and South Korea.
Until now, the virus has reached 29 countries, affecting their economies, supply chains, production lines and equity markets.
Pakistani markets and imports are also starting to feel the impact of the outbreak despite the fact that not a single case of the disease has been reported in the country. However, the virus is spreading fast in neighbouring Iran.
Many economists and stakeholders are reluctant to anticipate the impact of the virus on Pakistan’s economy. However, a few of them are sceptical while some others are optimistic about converting the threat into an opportunity.
“I think we should not anticipate the impact of the virus on Pakistan at this point in time because quantification is difficult,” remarked former finance minister Dr Hafeez Pasha.
“Look at the global economies, stock markets have collapsed and oil prices are tumbling. Apart from gold, everything is disturbed due to the fast growing infections, one can have an idea of the negative impact on Pakistan’s economy,” Pasha added.
Lahore and Islamabad stock exchanges’ former chief executive officer Aftab Ahmad said policymakers and data analysts in Pakistan were underestimating the possible impact of COVID-19 on the economy. He was of the view that it could lead to a negative growth in Pakistan.
“In China, the virus is likely to cause a 25% drop in GDP in the first quarter of 2020, to 4.5% from 6%,” Ahmad told The Express Tribune. “Globally, the epidemic is likely to result in a revenue loss of $1.5 trillion in the whole year.”
He pointed out that the plunge of over 1,100 points in the KSE-100 index on Monday following a slump in global stock markets was a clear indication that market participants were bracing for a much harder landing for Pakistan.
“It may deal a blow to our already stressed economy,” he emphasised. “In the longer run, Pakistan may have to allocate massive additional resources to tackle the challenge and improve its healthcare facilities.” However, the federal and provincial governments are making extensive efforts to prevent the virus from entering the country.
The brighter side for the economy is the mounting orders for textile products being received by Pakistani businessmen. Global textile producers anticipate a disruption to the supply chains since China accounts for a big part of the global textile production.
According to Dun & Bradstreet, a US-based commercial data, analytics and business insight provider, five million companies are expected to be affected globally by the virus. Some analysts believe that following the outbreak of the virus, many companies would rethink their sourcing strategies.
“There is no doubt that Pakistan is receiving massive textile orders from Europe and USA, mainly for denim and home textile, and at present, buyers are offering higher prices,” said Pakistan Readymade Garments Manufacturers and Exporters Association Patron-in-Chief Ijaz Khokhar while talking to The Express Tribune. “However, buyers demand assurances of timely and quick delivery.”
The official termed it a golden opportunity for Pakistani companies to grab a considerable share in the global market. However, he lamented that the sector was already combating scores of challenges like higher energy tariffs and the lack of supply chain. Khokhar stressed that Pakistan would have to establish a proper supply chain without which it could not enhance exports and take advantage of the current opportunity.
“Buyers of textiles keep at least three sources of supply for their products,” he pointed out. “We currently are dependent on China for all technical and functional fabrics, dyestuff, accessories including sewing thread and even packaging.” He urged the government to prepare a contingency plan for establishing a proper supply chain besides addressing domestic issues or else Pakistan’s competitors would benefit from the crisis.
Published in The Express Tribune, February 26th, 2020.