Undoubtedly, the globalization has converted the whole world into a global theatre. The globalization of economy has connected countries with each other. This may be justified after the outbreak of COVID-19, Which has affected each and every country of the world among which Pakistan is no exemption. The economy of Pakistan which was facing serious shocks prior to the disease is presumed tobe in doldrums once the pandemic is over. The abrupt eruption of this contagion disease has resulted in the reduction of FDI. Poverty, unemployment, and inflation have and would feared to increase. Trade has declined. The remittances have reduced. Tax ratio has badly shrunk and is proving a recipe for the disaster of our economy. Tourism and air industry areand will be in shackle. COVID-19 has brought a significant reduction in GDP leading to lower production and exports as well as lower imports due to lower income.On the contrary, this pandemic has proved to be a blessing in disguise. Due to worldwide lockdown and the unprecedented decline in oil consumption all over the world, the prices of oil have also reduced, which may help Pakistan to overcome its deficit. In addition to that, the rescheduling of debt will further help in recovering the economic decline.
In the presence of lockdown, the business is affected. Resultantly every part of economy faces shocks which further affects the GDP growth. The pandemic will prove a serious blow to economic growth. According to Assad Umar Minister for Planning and Development, “the GDP growth of Pakistan economy may reduce from 0.8 to 1.3 percent.” The governor state bank has also feared a 1.5% reduction. While the IMF estimates that Pakistan economy can be shrunk by 1.5%. This reduction will further deteriorate the budget deficit of the state to 9.2%, which might be highest in the history of this country. Apart from this, the trade of Pakistan will also suffer due to this pandemic. It is because of theinternational lockdown, which has seriously affected the major trade partners of Pakistan like, the USA, the UK, the EU, Japan and Germany. The spread of this virus has raised serious worries over global trade future. It has become a worldwide crisis that would pose serious threats to the economy of developing countries like Pakistan through the halt in production activities and cut off of supply chain for small businesses. According to PIDE from December 2019 to February 2020, the exports of Pakistan have reduced15.2%, to Japan, 6% to the UK, 5.92% to Germany,17% to China and 6% to the USA. This reduction in exports will bring serious consequences for the economic growth of Pakistan.
Airand tourism industries are two serious sectors of economic development that play a vital role for the robust economy. Due to the pandemic, the national and international flight operations have been canceled to control the spread of virus. This halt has globally affected the entire air industry. According to rough estimate, our air aviation industryhas lost more than 18 million dollars until March. In addition, Pakistan was declared animportant holiday destination for 2020 and now it is suffering its worst shock due to nation-wide lockdown. Travelers are confined to homes. Hotels are closed; the crisis has created serious hurdles for entrepreneurs with the consequences that are not fully realized yet. According to the President of Pakistan Hotels Association Zubair Baja, 95% booking of hotels have been canceled. The disruptions that COVID-19 may directly cause for the economy of Pakistan cannot be considered at this stage.
Remittances and Tax are the lifelines of Pakistan economy. Due to the national and international lockdown, the business has stopped. Majority of Pakistani migrants work and live in Saudi Arabia, the UAE, the UK and the USA. These all states have been seriously affected by the pandemic. Due to which, unemployment has increased there, which has affected Pakistani migrants too. Consequently,remittanceshave shrunk. While, due to domestic lockdown, the tax collection has reduced. According to the WB the remittances to Pakistan could be cut to 23%, the WB feared that Pakistan could lose 5.2 billion dollars due to this pandemic. On the other side, tax collection has reduced. The IMF has feared of 18.3 % reduction in tax revenue. In addition to that, Assad Umar minister for planning and development is of the opinion that the repeated lockdown and closure of business have resulted in the downfall of 119 billion rupees in tax collection in the month of March.
The most important segments which have been affected and will absorb shocks are the small business, poverty, unemployment and rise in inflation. These have been hit strongly due to closure of business and lockdown. According to Assad Umar the small business has lost 900 billion rupees since the eruption of this pandemic and lockdown in the country. Despite this, Inflation can rise to 11.5 % in FY 2020. Apart from this, according to PIDE, unemployment can rise from 4.07% to 4.48 %, while poverty can be increased from 23.4% to 44.7%. It means that 50 million people will be included in this category.
On the other side, some positive changes in the economy could be expected, due to the reduction of oil prices and debt rescheduling from the IMF, G20, and others. The ex- auditor general of Baluchistan and ex-finance secretary of Baluchistan Mr.Mahfooz Ali Khan is of the opinion that, “If the debts of Pakistan are deferred, Pakistan could save 9.8 billion dollars in interest.” He further said that, “Oil which is 20 to 22% of our imports, its reduction in prices will help in the reduction of inflation as the government is hopeful to save 4.5 to 6 billion dollars.” Consequently, budget deficit could reduce and current account deficit will shrink.
