The shock is likely to have a long-term effect. While the global economy is predicted to improve this year, GDP in both advanced and emerging markets and developing countries are expected to stay below pre-virus levels by the end of 2021. The extent of the medium-term cost, like the acute impact, varies greatly among nations, with EMDE incurring the biggest loss. According to the data given by IMF (2021), global GDP will be 3% lower in 2024 than in the absence of COVID (6 percent lower for LICs). Pakistan’s economy continues to suffer due to COVID.
According to research, Pakistan took an extraordinary punch because of the initial round of lockdowns. Between the pre-lockdown and the first wave lockdown eras, the unemployment rate went up by 34.1 percent, while mean income plummeted by almost 42 percent.
Read more: Cruise ship with over 3,000 passengers witness COVID disaster
However, not all residents took the same kind of punch. Individuals in the urban and rural non-farm sectors experienced a greater income and employment shock than citizens involved in farm operations. In urban regions, the unemployment rate climbed by 42%, while in rural non-farm areas, it increased by 38%. These people’s average incomes dropped by 48.7% and 47.2 percent, respectively. Respondents working on farms, on the other hand, saw their unemployment rate rise by 4% and their income fall by 6.5 percent.
The economic damage
Mid 2021 gave a brief reprieve from the pandemic, allowing the Pakistani government to postpone future large-scale lockdowns until the second and third waves of the pandemic. Was there a total return to pre-lockdown levels because of this? Without a doubt, the period of relief following the first wave resulted in a strong recovery for residents. The recovery, however, has been incomplete. Around 3 million residents were unable to reclaim their occupations a quarter after the initial wave of lockdowns ended and average income remained 5.5 percent below pre-lockdown levels in November 2020.
This can be problematic for two reasons. First, available data does not account for the impact of the second and third waves’ lockdowns. The improvements gained during the period of respite are likely to have been hampered or reversed because of these lockdowns. Second, an incomplete recovery a quarter after the first wave of lockdowns ended raises fears that structural unemployment has risen.
Trade challenges for Pakistan
In recent months, trade has gotten increasingly difficult and costly around the world. These increased costs have the same impact as non-tariff trade obstacles that are only in place for a limited time. Because of its considerable exports, Pakistan is experiencing and will continue to experience a temporary drop in its export market share because of trade issues. Indeed, the measures put in place to limit COVID-19 (restrictions on economic operations and people mobility) may obstruct the supply of key items. The outbreak has also had a considerable impact on trade and transportation by land, air, or sea. As consumer confidence wanes, vulnerable industries are suffering and will continue to experience a reduction in demand, and some may confront liquidity concerns sooner rather than later.
Read more: US to impose Covid-19 international travel testing rules
One of the most important takeaways is that the economic shock caused by pandemics like COVID-19 necessitates the institutionalization of emergency social assistance with considerably broader coverage, including the lower middle and middle classes. The research/findings suggest that the pandemic’s income shocks affect families at all levels of the asset distribution. Because the recovery is yet inadequate, a component of emergency social assistance should be tailored to safeguard jobs during lockdowns, rather than being distributed in the form of handouts to employers and individuals who are not employed. As part of social assistance programs, this would include formally recording employment and supplier contracts. However, these developments will necessitate a new social compact in Pakistan between the state, businesses, and the working and middle classes.
What should be our focus now?
Food insecurity in low-income nations may be exacerbated by rising food costs and accelerated aggregate inflation. Rising inflation numbers with every passing day should not lead to a de-anchoring of inflation expectations, and policymakers at every point should avoid employing subsidies or price restrictions to alleviate the pain of rising food costs since they risk contributing to excessive debt and increasing global agriculture prices.
Following the recession last year, a rebound in global commerce provides a chance for emerging markets and developing nations to boost economic development. Emerging markets and developing nations have half the trade costs of established economies, and decreasing them might enhance trade and drive investment and development.
In this regard, policy choices will be crucial. Ending this pandemic will require ensuring equal vaccination distribution at a faster rate. Many low-income nations will benefit from comprehensive debt reduction. Policymakers will need to use fiscal and monetary tools to help the economy recover while keeping a watchful eye on financial stability. Important will be to support growth on a resilient, and inclusive path, policies should focus on reinvigorating human capital and extending access to digital connections.
Read more: What is the post covid-19 scenario of higher education in Punjab?
Ending the Pandemic through broad immunization and prudent macroeconomic management to avert crises would need global collaboration. However, it is yet to be determined how many years this world and especially developing countries like Pakistan will take to fully recover from the economic punch caused by COVID.
The writer is an MPhil scholar, analyst and journalist with expertise in national and international politics. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space