Even giants like the United States and India have had difficulty dealing with the coronavirus pandemic. Donald Trump, Dwayne Johnson, and Ellen DeGeneres have all been infected by this virus. In this situation, Pakistan has succeeded in reviving its economy, which is expected to grow by nearly 4% in 2021, exceeding initial projections, noted American business magazine Forbes.
Pakistan’s Economic Growth
The State Bank of Pakistan (SBP) initially predicted a 3% growth in GDP, while the International Monetary Fund (IMF) and World Bank predicted 1.5% and 1.3% increases, respectively. The country’s per capita income will rise 14.6% from $1,405 in 2020 to $1,610 in 2021.
The services sector, which is forecasted to grow by 4.43% in 2020-2021, is responsible for the majority of the growth. This is certainly remarkable for a country like Pakistan which is becoming successful in expanding its services sector. The agricultural sector’s predicted growth is 2.77%, while that of the industrial sector is 3.57%.
Measures Taken By The Government
The bleak situation in India, which has reported an incredible number of 28,441,986 cases and 338,013 deaths, has alarmed both government authorities and medical specialists in Pakistan. Due to the increase in awareness caused by social media in Pakistan, Pakistani citizens have begun to wear masks, which they did not previously.
Last year, the country saw a surge in cases during the Eid-festival, but the government was quick to move this time, imposing partial lockdowns, closing non-essential enterprises, and prohibiting domestic tourism, which helped the country avoid a spike in cases. However, the restrictions imposed have jeopardized the labor class’s livelihoods.
Vaccination Plan
The government hopes to have vaccinated 70% of the population by the end of 2021. 5.3 million citizens have been vaccinated so far. With the help of CanSino Bio, a Chinese company, Pakistan has developed its own “PakVac” vaccine, bolstering the country’s vaccination program.
Stock Market Sentiment
Last week Pakistan reported the highest traded volumes on the Pakistan Stock Exchange at 1.56 billion shares and 2.21 billion shares respectively on May 26 and May 27. Investors are optimistic because of the populist budget proposal and improved growth forecasts.
Economic Growth
According to SBP’s Governor, Reza Baqir, the unexpected growth in GDP is due to accommodative monetary and fiscal policy. SBP quickly reduced its policy rate by 625 basis points to 7% and released a stimulus amounting to 5% of GDP. In addition, the governor said that the government was able to control the coronavirus situation reporting 12 new cases per million, compared to 62 new cases per million reported globally.
Public Debt to GDP
The IMF’s world economic outlook numbers Pakistan’s public debt to GDP remained broadly unchanged in 2020 over the previous year, as reported in Bloomberg. This statistic for most emerging countries increased by 10% during the coronavirus pandemic. Reza Baqir explained that this was caused by a “prudent fiscal and aggressive monetary policy.”
Inflation
Pakistan recently reported a CPI of 11%, up from 6% a few months ago. The country expects inflation to range between 7% and 9%, with experts predicting that it will be closer to the higher end. According to Reza Baqir, recent high inflation was caused by a small number of products such as energy and food. Because of supply-side factors, he described these factors as “one-time,” but officials are prepared to respond quickly to demand-side pressures if they arise.
IMF Program
The International Monetary Fund (IMF) has granted the country a $6 billion Extended Fund Facility (EFF). According to Reza Baqir, who worked at the IMF for nearly 18 years, Pakistan is transitioning from stabilization to growth. He stated that the government was successful in converting a $19 billion current account deficit into a $900 million surplus, as well as more than doubling the country’s foreign reserves from $7.2 billion to $16 billion. These objectives were met not through borrowing, but through “high-quality measures.”
The Bottom Line
The successful management of the coronavirus pandemic and the success of the IMF program, as evidenced by the growth in GDP to 4%, demonstrate Pakistan’s ability to grow and serve as a good investment opportunity.
