KARACHI: The government expects that a V-shaped economic recovery is highly likely when the spread of coronavirus slows down, according to Pakistan Economic Survey 2019-20.
It notes that the country was on path towards stabilisation until the pandemic hit and hence, any assessment of the economic performance should be made with respect to both pre- and post-Covid-19 basis.
The pre-pandemic situation was marked by extraordinary improvement on the external front, driven by a 70.8 per cent plunge in the current account deficit to $3.3 billion during July-April FY20. “It was mainly due to a 29.5pc contraction in trade deficit and 5.5pc increase in workers’ remittances.”
This was accompanied by a surge in foreign direct investment of 137.3pc to $2.1bn in July-March, which the survey attributes to the improvement in the ease of doing business index by 28 places.
Govt’s Rs1.24tr stimulus to help economy get back on track
Similarly, improvements witnessed on the fiscal side, where the government even posted a primary surplus in 9MFY20, and year-on-year growth in tax collection – despite missing the 2019-20.
However, in the post-pandemic situation, the economy has taken a hit with GDP in FY20 expected to shrink by -0.38pc. This is led by agriculture contributing an increase of 0.5 percentage points while the industrial and services sector are projected to drag the overall growth figure by 0.52pps and 0.36pps.
While agriculture has largely been immune from the effects of coronavirus, the document paints a bleaker picture among other sectors. “72pc of Pakistan’s non-agriculture workforce is engaged in the informal sector, with no social security or insurance cover and it may take a major hit. The estimated size of informal employment in non-agriculture sector is around 27 million, with only food, pharmaceuticals, and few services still functional, these employees will be worst affected,” it says.
To help stave off the effect of the pandemic, the government has launched an aggressive policy response including a Rs1.24tr stimulus package. This included Rs200 billion earmarked for daily wage workers and employees who have lost their jobs. “A registration portal has been developed to screen laid off workers and employees. In addition, Rs12,000 are being distributed to around 12m families all over Pakistan through the Ehsaas Emergency Cash Programme.”
This was coupled with easing on the monetary front that included the key interest rate cut by 525 basis points to 8pc as well as the multiple refinancing schemes to help businesses stay afloat.
Published in Dawn, June 12th, 2020