Is This COVID-19 Hauling Us To Recession?

In the current global health crisis of COVID-19, a question emerges in everyone’s mind that how longer the financial impact of this deadly corvid 19 will stay in the global economies. This pestilence is affecting the economies by diminishing supply chains, decrease in sales of products, the enterprises connected with construction and the travel industry are under great pressure with the plunge in oil prices is likewise disturbing. Thus, financial markets are confronting the most noticeably terrible era after 2008.

This depression can be counted as negative growth of two continuous quarters. The first quarter is going to end the world economy, which is currently breathing under lock down and the circumstance is getting antagonistic step by step. Just China can counter this pandemic and rest of the world is under the condition of war against COVID- 19. This tumultuous circumstance may take another 3 to a 6 months to get settled, which unmistakably shows a worldwide downturn.

While discussing the developing economies like Pakistan, the main ideal factor is decreasing oil prices which may reduce the imports cost up to USD4 billion. Oil prices simply contracted to half from its previous cost and the inflation in Pakistan has diminished from 12.9% to 11% further. It may also decay the inflation in the country. However, then our limited exports may again shorten down in coming days. Developed countries like China, USA,UK retain our 60% of the exports, which may decrease in coming days.

Besides this, the shortage in revenues of oil trading nations may at last impact the work power, which prompts the unemployment that may lead to decrease in foreign remittances to Pakistan. Thus, the ruin in trades and foreign settlements will badly affect the foreign reserves of the country.

A special bail out packages will be required to counter this emerging recession. Revival of construction industry may strengthen the diminishing economies. Taking advantage of plunge in oil prices, the new units of consumer products may also become favorable for upcoming economic crunch.

Umair Raza

The author is an Executive Editor of Positive Pakistan Magazine & President Positive Pakistan Foundation.