We have made a quarterly update of the estimated impact of the Coronavirus pandemic on Pakistan’s GDP and employment. Using a General Equilibrium Macro (GEM) model for the Pakistan economy developed at the Lahore School of Economics.
For a three-month lockdown scenario, for March to May 2020, annual GDP growth for the calendar year 2020 is now expected to contract by3.2%.Annual job loss over 2020, is now estimated at 1.6 million. With the majority of 1.3 million jobs being lost in the informal economy, and 0.3 million in the formal economy.
For a six-month lockdown scenario, for March to August, with a more prolonged and graduated easing in the lockdown over these six months, annual GDP growth is now expected to contract by 4.4%.Annual job loss over 2020, is now estimated at 2.2 million. With 1.8 million jobs lost in the informal economy, and 0.4 million jobs lost in the formal economy.
While for a nine-month lockdown scenario, for March to November, annual GDP growth is now expected to contract by 6.6%. Annual job loss over 2020, is now estimated at 3.4 million. With 2.8 million jobs lost in the informal economy, and 0.6 million jobs lost in the informal economy.
Immediate policy to counter this loss in GDP and jobs, has to be based on, replacement of lost income.
Replacement of lost income, must prioritize not income lost by everyone, but of the poor. Four percent of the population of 221 million fell below the internationally established extreme poverty line of $1.90, on last count. The job and income loss can be expected to swell this number. Therefore, policy must be predicated on an estimate of the increase in poverty in Pakistan.
Accordingly, we have estimated the impact of the loss in GDP and jobs, for the extremely poor falling under per capita expenditures of $1.90 per day.
For the three-month lock down scenario, the annual extreme poverty headcount over the 12 months of the calendar year 2020, is estimated at 4.65% of the total population. Which is an increase in the headcount from its baseline pre shock value of 4.04% of the total population by 0.62% of the total population; this is an increase of approximately 1.4 million people.
For the six-month lock down scenario, the annual extreme poverty headcount over the calendar year 2020, is estimated at 4.93% of the total population. An increase in the head count from its baseline pre shock value of 4.04% of the total population, by 0.89% of the total population; this is an increase of approximately 2 million people.
For the nine-month lock down scenario, the annual extreme poverty headcount over the calendar year 2020, is estimated at 5.74% of the total population. An increase in the extreme poverty head count from its baseline pre shock value of 4.04% of the total population by 1.70% of the total population; this is an increase of approximately 3.7 million people.
The quantum of the additional transfers required for the extreme poor, for the six month scenario which we are in now, and for the nine month eventuality come out to be:
For the six-month scenario, from March to August, daily per capita expenditure is assumed to drop by an average of $0.21 per month. This lost income has to be replaced for all the extremely poor falling below $1.90, now estimated by the model to be a monthly average of 8.00% of the total population, which is 17.67 million for 6-month period.
This gives a daily income replacement bill for these 17.67 million extremely poor, at a daily per capita expenditure rate of $0.21, of $3.7 million. Replacing this lost income over the six-month shock, gives a total income replacement bill of $664.8 million.
For the nine-month scenario, from March to November, daily per capita expenditure is assumed to drop by an average of $0.19 per month. This lost income has to be replaced for all the extremely poor falling below $1.90, now estimated by the model to be a monthly average of 8.00 % of the total population, which is 17.67 million for a 9-month period. This gives a daily income replacement bill for these 17.67 million extremely poor, at a daily per capita expenditure rate of $0.19, of $3.4 million. Replacing this lost income over the nine-month shock, gives a total income replacement bill of $906.5 million.
Lahore School of Economics Modelling Lab Innovation and Technology Centre Lahore School of Economics
