Pandemic and economic collapse

The global economy is expected to contract sharply during 2020 as a consequence of the ongoing coronavirus pandemic. This could turn into the worst recession since the 2008 financial crisis.

The year 2020 was once projected to be the most progressive for Pakistan’s economy, but sadly the global COVID-19 pandemic has heavily affected the economic status worldwide. Due to this havoc, Pakistan’s economic growth for the ongoing fiscal year 2019-2020 is expected to stand in ‘negative’ after nearly seven decades. All the major economic targets are expected to be missed.

The World Bank and IMF have projected a negative economic growth rate in the range of 1.3% to 1.5%. The growth rate for the previous fiscal 2018-19 was recorded at 3.3 percent. The lockdown due to the deadly virus has adversely affected business activities all around the world which reduced demand and caused higher inflation.

During the last three month period, the State Bank of Pakistan has slashed the interest rate four times, down to nine percent on April 16. Pakistan has cut its interest rates the most this year to cushion the economy amid the economic and health crisis.

The world is facing a bigger challenge of unemployment due to the lockdown as business activities have come to a standstill. The pandemic has havoc wiped out millions of jobs worldwide. Businesses are shut down and the companies started to lay-off a large number of employees. The automobile sector is facing a crisis as for the first time in the country’s history not a single car was sold in the month of April while the country’s exports fell by a massive 54% in April 2020.

According to the Pakistan Institute of Development, up to 19 million people could be laid off due to COVID-19. The post-pandemic situation could be even worse as the country aims to rebuild the economy.

In the meantime due to the immense pressure on Pakistan’s economy, the Financial Action Task Force (FATF) has provided a three-month extension for Pakistan to submit its compliance report. The new deadline is now September 2020.

It remains to be determined how government is going to tackle this economic damage and how it will be able to recover from post-pandemic challenges.