Covid-19: An economic crisis of global proportions
The coronavirus crisis continues to rage around the world, decimating both strong and weak economies and devouring the livelihood of millions of people. The pandemic has caused serious financial damage and negatively impacted the gross domestic product (GDP) growth rate of all the economies, big and small, including Pakistan. With continuous rise in the human toll, the economic damage to different sectors across the globe has come as a major shock for all the countries. The unprecedented downturn is estimated to have caused a total global GDP loss of $9 trillion. There is no example in modern economic history of such a colossal loss to production and exports.
Mercifully, Pakistan has fared better than many other countries in the face of the raging pandemic. According to available figures, the projected change in the GDP of many countries in year 2020, as compared to 2019, would be as follows in case no second wave of the coronavirus hits the globe:
UK -11.5%, France -11.4%, Italy -11.3%, Spain -11.1%, Euro area -9.1%, Russia -8%, Canada -8%, Brazil -7.4%, US -7.3%, Germany -6.6%, Japan -6%, India -3.7% and China -2.6%.
Compared with the numbers, Pakistan’s GDP next year is estimated to be around – 0.4. According to the Economic Survey of Pakistan, the country’s gross domestic product (GDP) is estimated to have incurred a loss of Rs3 trillion. The GDP was expected to increase by three per cent with the support of economic policies, but it would now go down by -0.4pc.
The latest figures quoted by the world media show that the United States’ GDP during the current quarter was down by 48% and that of the United Kingdom by 20.4% in the month of April alone.
On the other hand, the European Union’s GDP, which is 20% of the global GDP, saw its sharpest decline in the last 14 years.
According to the World Bank’s latest report, the baseline forecast envisions a 5.2 per cent contraction in the global GDP in 2020, using market exchange rate weights—the deepest global recession in decades, despite the extraordinary efforts of governments to contain the downturn with wide-ranging fiscal and monetary policy support.
Expert studies show that most countries will face severe recession in 2020, with per capita income contracting on an unprecedented scale globally since 1870. Advanced economies are projected to shrink by 7 per cent. As per one international report, every region is subject to substantial growth downgrades. East Asia and the Pacific will grow by a scant 0.5%. South Asia will contract by 2.7%, Sub-Saharan Africa by 2.8%, the Middle East and North Africa by 4.2%, Europe and Central Asia by 4.7%, and Latin America by 7.2%.
The World Bank has warned that the advanced economies are projected to shrink by 7-8 per cent, adversely impacting the outlook for emerging markets and developing economies, which are forecast to contract by 2.5 per cent as they try to fight off the negative effects of coronavirus outbreaks.
Although it faced opposition from many quarters, yet the PTI government moved fast to contain the recession by reopening various sectors, including construction, industry and agriculture with strict adherence to the standard operating procedures (SOPs). It also launched the Ehsaas support programme for the provision of financial support to the large vulnerable segments of society.
Under the programme, an amount of Rs122.99 billion has so far been distributed among a total of 10,118,814 people in various categories.
The Indian government’s response to the pandemic was hesitant, patchy and half-hearted which created severe hardship for the people, particularly to millions of migrant workers who were left high and dry as the Modi’s government imposed one of the world’s harshest Covid-19 lockdowns. In the process, Narendra Modi inflicted unprecedented damage on India’s economy and on the poor, who live from hand to mouth at the best of times.
According to some estimates, more than 120 million people lost their jobs and incomes immediately after the lockdown was ordered in India on March 24. And about half of the country’s population of 1.38 billion is likely to have been impoverished, with many approaching starvation levels. After weeks of callous disregard for the plight of tens of millions of migrant workers, the government announced grain rations for them for only two months. The workers were hungry and homeless after suddenly losing their jobs, and with public transportation locked down, many had no choice but to walk hundreds of miles with luggage and children to their villages. Hundreds died on the way.
A well known India economist has pointed out that the Indian government did not take care of hundreds of millions of daily-wage labourers and urban workers. The Modi administration also ignored the pressing need for a large-scale transfer of central funds to bankrupt state governments that had little funds to spend on healthcare and social protections.
There is a consensus of opinion among experts that by contrast, Pakistan has done a much better job of looking after its poor hit by the coronavirus crisis.