ISLAMABAD: Like other sectors of the economy, Covid-19 severely impacted the country’s external trade as it generated demand and supply shocks across the global supply chains.
Though Pakistan’s external sector had been under pressure for a long time and exports were on a downward trajectory by 3.9 per cent, imports decreased significantly by 16.2pc to their lowest level in four years.
According to the latest Economic Survey, the main reasons associated with falling exports include currency overvaluation, domestic energy crises, global market contraction, declining international commodity prices, competitiveness issues especially between Pakistan and major export nations.
Regarding the future outlook, the survey adds: “Under a worst case scenario, there will be a prolonged and severe phase of weak demand in Pakistan’s major exports and remittances may fall significantly due to layoffs of our workers abroad.”
It states that before Covid-19, export performance of Pakistan was satisfactory in terms of both products and destination diversification.
Product diversification included growth in exports of surgical goods and medical instruments by 8.3pc during July-March 2020, while in terms of destination diversification, the Ministry of Commerce initiated to explore new markets, especially in Africa.
Thus, there was a 10pc increase in exports to Africa during 8MFY20. Up to February, Pakistan’s exports were performing better than most of its competitors despite the challenging external environment, it added.
During July-February FY20, exports reached $15.6 billion, compared to $15.1bn last year, edging up 3.6pc. But the pandemic dragged them by 15pc in March compared to February.
Similarly, in April, exports fell by a further 47pc month-on-month and 54.2pc year-on-year to $957 million.
The publication added that the global lockdown was leading to the worst economic recession, as quarantines and social distancing have been adopted to contain the spread of coronavirus, which affects many sectors such as travel, hospitality, entertainment and tourism.
With the anticipation of fading pandemic in the second half of 2020 due to normalised business activity, the global economy is projected to grow by 5.8pc in 2021, it added.
“However, with prevailing global conditions, there is a risk of worsening of economic outlook,” the financial managers have expressed fears too.
“Global economy is highly integrated through tourism, trade and remittances. During 2020, trade volume is expected to decrease by double digits in nearly all regions, depending on the duration of the outbreak and effectiveness of policy response,” the document added.
Pakistan’s exports in July-April FY20 were $18.4bn, as against $19.2bn in the same period last year, showing a decline of 3.9pc.
Meanwhile, total imports during the period stood at $38.0bn, falling by 16.2pc from $45.4bn. Major reasons behind this contraction were the imposition of 60pc regulatory duties on 570 luxury and non-essential imported goods to curtail the rising imports, depressed industrial demand and lower international commodity prices especially crude oil, LNG, coal, and metals.
Published in Dawn, June 12th, 2020