World Bank forecast

Published October 9, 2020

IN a new report, the World Bank has painted a very dismal picture of Pakistan’s economic outlook for the next two financial years, saying the nation’s growth prospects will remain significantly subdued.

The report projects the economy will recover by 0.5pc during this fiscal after it shrank by 0.4pc last year — the first contraction since 1952 — owing to the pandemic. This depressing forecast may face further risk in the case of infections going up again and given the impact of resumption of economic stabilisation policies under the IMF deal.

In fact, the release of the report South Asia Economic Focus coincides with worrisome news of a surge, albeit slight, in Covid-19 cases as business picks up in the wake of a government decision to reopen the economy after virus infections peaked in June.

Read: Marriage halls, restaurants becoming Covid hubs, says Asad Umar

The report also warns that poverty is likely to rise with Covid-19 lockdowns, which have chiefly affected informal services and small industrial businesses, the two sectors in which the majority of non-farm labour is employed.

Though the bank has not given any numbers related to the increase in poverty, experts estimate the economic crisis induced by the pandemic could have pushed millions more into poverty, especially in the cities.

It is hard to dispute the projection. Yet it is also difficult to agree completely with the gloomy post-lockdown picture. The report has apparently drawn heavily on old data to make its projections, and short-term trends depicted by new economic data for the first quarter of the present financial year to September tell a more encouraging story.

The economy and businesses that were badly hit during the lockdowns have shown resilience and performed better during the last three months. GDP is now projected to expand by 2pc this year compared to the bank’s projection of 0.5pc. Many of those who lost their jobs during the pandemic are back at work, even if in certain cases they have been forced to accept pay cuts. The cash handouts given by the government under the Ehsaas programme prevented hunger in several households. The rural population was also largely spared the crop losses in spite of the desert locust attack.

There is no denying that a possible resurgence of infection still poses a major risk to the economy, and the resumption of demand-compression measures under the IMF programme is likely to keep growth muted for some time. Yet the outlook is neither too desperate nor too encouraging. There is still uncertainty hanging over the future but there are also signs of recovery.

The situation demands that the government implement the required reforms to assist struggling businesses quickly get back on their feet, and address, in the words of a senior World Bank official, the weaknesses of the “informal sectors through smart policies” and by ensuring wise allocation of meagre public resources to help the poor.

Published in Dawn, October 9th, 2020

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