Coronavirus and our economy

The coronavirus has brought China, an economic superpower, to its knees. The world’s second-largest economy has been brought to a virtual shutdown to stop the relentless coronavirus outbreak. As China’s prepares to reopen its shuttered factories and offices, after claiming to have turned the tide against the virus, the focus has now shifted to Europe.

The US has banned all flights from Europe for thirty days, even though trade has been allowed. From nationwide lockdowns to school shutdowns, the EU has imposed unprecedented measures to stop or slow down coronavirus. Italy, the second worst-hit country after China, is under lockdown as all shops are closed, travel is only permitted in urgency, and schools and universities are shut.

US President Trump was quick to blame Europe for not doing enough to control the spread of the virus. Passengers have scrambled to get last minute flights to return home. The airline industry has been affected by fears that entire countries may be under lockdown. Saudi Arabia has suspended all flights to several countries including Pakistan, India and EU, and has halted travel of its citizens and residents. Even the Umrah pilgrimage has been temporarily stopped from virus affected countries.

Beneath all this doom and gloom lies several opportunities for Pakistan to spring up the economy which we should capitalise on to our advantage. Oil prices are traded being a low price not seen in decades. Pakistan has bought oil from Saudi Arabia on deferred payments worth $9 billion. The oil war triggered by Saudi Arabia can bring prices down to even $20-25 per barrel. If this sustains, petroleum prices will be drastically reduced leading to a decline in inflation rates.

This would be a sigh for relief for the prime minister and his economic team that there is hope in times of advertising. The prime minister has expressed concerns that interest rate is already very high. Now is the opportunity for Pakistan to slash the interest rates. A meeting of the monetary policy committee of the State Bank of Pakistan is being held on March 17 where the decision is expected.

Another golden opportunity lies for the textile industry. EU has extended the GSP plus status to Pakistan until 2022 which provides preferences on exports. Pakistan exports to EU increased to 7.49 billion euros in 2019 ever since this status was given in 2014. The maintain sectors that benefitted were textile and garments. China is the largest importer to Europe but the economy is at a standstill. Therein lays an opportunity to boost its exports to EU and receive some much-need foreign exchange. The government should seize the moment and provide a stimulus package to the textile sector including subsided utilities and cutout taxes avail the GSP plus status but also take advantage of the situation in China.

As we need in the foreseeable future, oil is forecast to remain low and the impact from coronavirus will affect world economies. Pakistan sees an opportunity in adversity but it can also test out patience and resolve and we should faith that all miseries and fears will be resolved. Regarding our economy, the industry can surge particularly the cement and construction sector. The deadly virus can be a boon or bane for us.