The economic threshold of COVID-19

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We are suffering from unprecedented global public health catastrophe of our times.  The world as we knew it before coronavirus outbreak in December 2019, is no longer the world that we know in political social and economic realms today. Global economic power centers are weakening, developing world economies are crumbling and isolated communities around the globe at the verge of collapse. At this stage there are more questions than answers. This pandemic has force people to confront the reality of people living below poverty lines, lack of health care facilities, increasing population and poor infrastructure, Pakistan is no exception especially given its already fragile economy which doesn’t have more strength to absorb more shocks. People are more on stake who have jobs in private sector, mostly companies are taking moderate steps to cumbersome the situation. Ventures keep on downsizing to cut their fixed cost and other major expenses under this depression. No one knows when this corona effect remains on economy of developing countries like Pakistan & neighboring countries. Exponential growth of corona cases is very challenging with available resources, our health care system can’t able to lift the load, apparently aids coming from other countries and from international financial institutions is helping hand. The magnitude of the negative impact globally is so large that some writers have suggested that it will be even worse than the Great Depression. The Moody’s rating agency has forecast that instead of an over 3 percent growth of the global economy in 2020, it will now see negative growth. Conditions accordingly are unlikely to improve till 2021. The growth rate of 2020 is less then 2018-2019 and coming own the target of 2.4 percent. The after shocks of corona economy will lead us such a miserable condition. GDP growth is still showing negative impact due to blockage of services and transport sector. Stock market is also is under pressure because investors are withdrawing their amounts due to this slump. The large scale of outflow in hot money from govt treasury T-bills also showing significantly perceptible in foreign exchange reserves which impacts in 7RS of devaluation of rupee.

Lockdown has passing on effects on supply & demand sides rigorously. The magnitude of the negative impact globally is so large that some writers have suggested that it will be even worse than the Great Depression. The Moody’s rating agency has forecast that instead of an over 3 percent growth of the global economy in 2020, it will now see negative growth. Conditions accordingly are unlikely to improve till 2021. Third, given the impaired liquidity position of potential investors and heightened risk perceptions, there is likely to be a big fall in private investment in coming months when faced with industrial closures and the obvious reluctance of banks to take on greater risk following the likely growth of non-performing loans.

SBP of Pakistan revised monetary policy and reduces interest rate by 4% gradually to encourage businesses and seeking of investments. Later on, prime minister issued an order to open the construction industry with some perks and privileges e.g. contractor didn’t ask the source of investment and many more. However, construction industry welcomes the initiatives and start doing construction after a long pause. The financial account of balance of payments is likely to come under stress because of big anticipated FDI foreign direct investment which leads us to increased borrowing from IMF.

Initiatives like Ehsas need to expand more effective targeting mechanisms will need to be developed to reach new families falling below the poverty line and the large number of displaced daily income and casual workers.

According to Gallup Pakistan’s latest survey 84% people said they have lost the major portion of their earning, and 68% said they have lost their job due to covid-19.

In conclusion, we pray that the economy will come out faster from the crisis and that there will be less loss of lives and suffering by the people of our country.

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I am a goal oriented, enthusiast and passionate blogger about advertising and marketing. Discovering newfound love for advertising and digital marketing. Love to decorate places. Trying to learn some and unlearn some as we sail through the highs and lows of life. “Digital” is my favorite keyword. Words work like therapy and the reason why this blog was created. Coupled with personal + professional experiences, this is my log book for myself and the world. Love Usman

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