The Finance Ministry had little reassurance to offer as regards the fate of the economy amid the Covid-19 coronavirus pandemic. Independent assessments, however, are bleak. An analysis by former finance minister Dr Hafiz Pasha and former State Bank of Pakistan governor Shahid Kardar has suggested that the national output would see losses of anywhere between Rs891 billion and Rs1.6 trillion in the fourth fiscal quarter alone. Gross Domestic Product (GDP) was initially projected to grow by 3% in the current fiscal year, but the coronavirus outbreak has made even that modest target look unachievable.
Domestic production and exports are both expected to suffer due to the decline in global demand, according to the ministry.
The best-case scenario for the fourth quarter, according to the assessment by Pasha and Kardar, would be a 4.6% decline in GDP or Rs891 million, while the worst-case scenario could see a contraction of 9.5% or Rs1.6 trillion. The unemployed population, they suggest, will rise by around 3.1 million people on the lower estimate and over five million in the case of the second scenario. This unemployment would be attributable to job losses caused by the economic slowdown and would take quite some time to address. Temporary unemployment would be even higher, as much as 10.5 million people while anywhere from nine million to 15 million people will crop below the poverty line.
The two renowned economists have also suggested that inflation will float between 9.6% and 16.1%; tax collection will be significantly lower; and although debt servicing costs will decrease, remittances will also fall due to the global economic slowdown. The falling price of oil may be one of the few silver linings though. Imports may rise due to falling international prices, but that is up in the air due to global supply shocks. And despite the prospect of incoming financial aid, they have warned that the balance of payments situation was still likely to come under stress because of significant declines in foreign direct investment and the continuing exit of existing short-term investments.
All in all, top minds clearly feel that the worse is yet to come.
Published in The Express Tribune, April 3rd, 2020.
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