RECENT ADB estimates suggest that Pakistan’s economy could suffer a loss of up to 1.5pc in its GDP growth rate due to the fallout from the spread of the novel coronavirus, while the capital markets have already been roiled by a strong bout of volatility due to mounting fears and anxiety.

World oil markets are seeing a sharp fall — according to some reports the sharpest drop in oil prices since 1991.

This has driven down oil-related stocks that carry heavy weightage in the KSE 100, such as OGDC and PPL, both of which hit their lower circuit breakers on Monday.

In addition, some estimates suggest the global aviation industry could see up to $113bn worth of revenue losses as a result.

Global supply chains have been disrupted badly because of the massive shutdowns in China that have either closed down industries altogether, or disrupted the return of workers from the new year holidays to the point of creating acute labour shortages in industrial areas that are not directly impacted by the shutdowns.

In every sphere, from travel and aviation to shipping and transport as well as oil prices and capital markets, economies around the world are seeing sharp downswings as a result of the fallout from the efforts to contain the spread of the coronavirus.

There are reasons to be concerned here in Pakistan as well.

At the moment, there are no indications emerging of a widespread outbreak of the virus.

But each day the number of people diagnosed positive is rising, albeit slowly, and there is no way of knowing how far this is going to go.

Besides the obvious public health emergency this poses, the fallout for the economy needs to be taken stock of.

Some people think it is a positive sign that Pakistani exporters are picking up the orders that might ordinarily have gone to China and exports could see a spike in the months ahead.

But it would be terribly shortsighted to find much comfort in this fact.

If the shutdowns persist and spread, it will also seriously impact the scale of demand for Pakistan’s traditional exports, such as garments.

Beyond that, the sharp fall in the value of oil-related stocks means the divestment of OGDC shares that was planned in the next few months will have to be postponed, and the privatisation programme will need to be shelved since global buyers are in no mood to extend their stakes while the uncertainty persists.

It is not known how far the phenomenon will go and how many shutdowns we will have to see around the world and for how long.

In this environment, an economy such as Pakistan’s, which is struggling to emerge from the crippling effects of a macroeconomic stabilisation programme, will face far more challenges than opportunities.

Published in Dawn, March 10th, 2020



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