NED University of Engineering and Technology

HS-106 (Pakistan Studies)

Civil Engineering Department
ASSIGNMENT TOPIC: COVID 19- EFFECT ON PAKISTAN’S ECONOMY AND SOCIETY

Group-K Members:
Muhammad Taha Alam Khan CE-164
Muhammad Noman CE-147
Muhammad Ahmed CE-154
Impact of COVID-19 on Pakistan’s Economy
The ongoing COVID-19 pandemic has devastatingly affected the lives of Pakistani people. In
particular, Pakistan has witnessed a swift increase in its confirmed COVID cases from the initial two
cases that were reported in the last week of February. Besides the health-related risks that are imposed
by this lethal virus on human lives, it has brought severe economic and social impacts. Although the
world is still witnessing its spread, most countries are experiencing direct and indirect impacts of the
global pandemic on their economy and society to varying degrees. Due to its geographical location,
Pakistan is found to be at high risk of increasing the number of cases. In particular, Pakistan shares its
borders with Iran and China which have reported large outbreaks. To control the spread of the virus,
the government of Pakistan initially decided to impose lockdowns in various major cities, along with
several other restrictions that included travel ban, quarantines, etc. This eventually resulted in reducing
the aggregate demand with an impact on the service sector that includes civil aviation, hospitality, retail,
and tourism. Due to this, international commodities also experienced an immense decline, specifically
for oil. The recent report has also shown that the real GDP of Pakistan is also expected to a slowdown
by around 3% for the year 2019-2020, mainly due to a decline in manufacturing and services sectors.
Moreover, the agriculture sector is also at the risk of facing unfavourable situation due to disrupted
logistical support, required labour for harvesting, unavailability of seeds, etc. The social and economic
effects of COVID-19 are being felt with greater intensity across least developed, developing and
emerging market economies irrespective of their income level. Most of them will experience a drop in
the GDP and losses in employment and income leading to greater poverty, food insecurity and
malnutrition. All in all, COVID-19 situation led Pakistan to experience considerable financial and
economic instability and uncertainty.
Economic Impact of COVID-19 on Pakistan’s Import and Export Sector
International trade (both import and export activities) have a huge contribution in the economy
of Pakistan, which is heavily disrupted due to novel coronavirus. There are mainly five trading partners
of Pakistan who have more than 50 per cent of the share in the country’s trade. These include Germany,
Japan, United Kingdom, United States of America, and China. Unfortunately, four of these trading
partners are worst-hit by COVID-19; hence, resulted in causing trade disruptions that eventually
threatened the economic stability of the country. Particular, China and United States of America are
among the most prominent import partners of Pakistan and the country heavily relies on these two
countries for importing intermediate goods which are used for the manufacturing of the products that
are later used for domestic consumption as well as export purpose. Another report shows that the exports
of Pakistan have experienced a decline of approximately 7.2% in the period of July 2019 – June 2020.
Following figure clearly show that the trading activities of Pakistan – particularly exports – were
increased in the initial three months of 2020. However, it got declined during April - May 2020 due to
travel bans and lockdowns. Additionally, the import volume was also decided due to the disrupted
supplies from the trading partners countries that were badly hit by COVID-19 pandemic. To closely
observe the trading situation in Pakistan during COVID-19, month-to-month comparison of a country’s
trade is shown in the table below. It is found that the country’s international exports have been declined
by 9.5% during April - May 2020. On the other hand, decreased imports have also been observed with
figures of 4.9% during March-April 2020. However, the export of medical and surgical goods and sports
items have been increased with the sharp decline in footwear, leather, food, pharmaceutical, chemical,
and textile products. Similarly, on the import side, textile, agriculture, machinery, metal and petroleum,
transport, and food-related items have also experienced a decline during March - April 2020. This shows
that COVID-19 pandemic has severely aggravated the trading sector of Pakistan that has negatively
impacted the economic conditions of the country.
 Figure (https://www.researchgate.net/publication/344266317_Effect_of_COVID-
19_on_International_Trade_Opportunities_for_SMEs_in_Pakistan)

Table (https://www.researchgate.net/publication/344266317_Effect_of_COVID-
19_on_International_Trade_Opportunities_for_SMEs_in_Pakistan)
Economic Impact of COVID-19 on Pakistan’s Industries
Suspension of transportation and lockdown – mainly due to COVID-19 pandemic – has resulted
in the absence of the workforce from their office. To effectively handle this situation, some of the offices
have adopted a policy named ‘work from home’. Since the country is not technologically strong and
lacks in digitalisation, all types of industries could not be operated on this new policy that eventually
halted their operations. More specifically, the manufacturing and industrial sectors were severely
affected by the lockdown, mainly due to the closure of production facilities that cannot be operated
remotely or through the home. The research highlighted another aspect that shows that the negative
effects of COVID-19 pandemic has resulted in the decreased consumption and lowering expenditures
of the citizens. It is mainly due to the fact that millions of low-income employees lost their source of
income that led them towards facing hardships to meet their both ends. In addition to this, people
belonging from the middle class also curtailed and controlled their discretionary spending for the sake
of saving money and assuring financial security. Besides that, people were also unable to spend more
money mainly due to travel bans as well as the closure of restaurants, shopping malls, etc. The following
figure also shows that in the country, i.e., Pakistan, the consumption accounts for approximately 82
percent of the overall GDP and any variation in the expenditures or consumption patterns may have
dramatic implications on the growth of country’s GDP. In the light of these evidence, it can be stated
that COVID-19 pandemic has severely affected Pakistan’s economy mainly due to the closure of
manufacturing facilities as well as shopping malls, restaurants, parks, etc.

Figure (http://reads.spcrd.org/index.php/reads/article/view/222/234)
Economic Impact of COVID-19 on Pakistan’s Stock Market
Besides manufacturing and trading sector, the stock market has also been influenced by the
corona virus pandemic. The economic losses due to COVID-19 have also affected the global stock
markets. The severe effect of the pandemic on global stock markets have been observed in almost every
continent and Pakistani stock market is also one of the exchanges that have been influenced as a result
of COVID-19. The research shows that trade is one of the most important elements of the Pakistani
economy as it helps in bringing the foreign reserves in the country while supporting the control
exchange rate. Right after the rise of COVID cases, the concerned governmental authorities decided to
shut down the industries and offices that resulted in shrinking the economy that was evident from the
declining trends in the stock market. This declining trend was manifested on March 19 2020 when the
stock market hit the lowest value in the past five years. This situation occurred because the pandemic
situation compelled foreign investors to withdraw their investments in the developing country
(Pakistan). However, when the IMF and other developed countries approved hefty loans to combat the
pandemic damages in Pakistan, the stock market started recovering and shown positive performance.
All in all, it can be said that like other sectors and industries, the pandemic situation has also brought
negative effects on Pakistan’s stock market; however, with the international support the stock market
was able to restore its position.
Economic Impact of COVID-19 on the Travel and Tourism Sector
Tourism is one of the sectors most affected by the Covid-19 pandemic, impacting economies,
livelihoods, public services and opportunities on all continents. All parts of its vast value-chain have
been affected. The travel and tourism sector of Pakistan, like any other tourism industry in the world,
is also facing a severe crisis due to the lockdown, public gathering, and social distancing measures due
to COVID-19 as Pakistan is a developing country, so tourism industry is considered as a growing
economic booster for the country. Pakistan has been blessed with unique geographic location with very
much natural diversity which ranges from seashores to Himalayas mountain ranges. In the past, Pakistan
was badly affected by terrorism which caused a decline in the tourism industry. Also, a natural disaster
such as the 2005 earthquake also destroyed the infrastructure of the northern region of Pakistan due to
which domestic and international tourism came to zero for rehabilitation which can be seen from the
graph presented in following figure. Also, 2010 flooding further caused damages to the road network
making tourist destinations inaccessible.

Much effort was made by the government, which include the development of infrastructure and
increases safety and security measures which caused an increased in the travel and tourism industry of
Pakistan. 46.7 million Tourists were recorded in 2012. As illustrated in following figure Similar trend
has continued till 2019, where the number of foreign visitors was recoded to 1900 thousand alone,
which is the fifth-largest international tourist number in the history of Pakistan.

COVID-19 has severely affected the tourism sector of Pakistan by reducing the number of
tourists by 93.9%. Pakistan launched numerous sustainability projects such as Hazara Motorway and
Swat Motorway spending approximately 35 and 40 million respectively during 2013-2019. The
government of Pakistan was expecting a boost in tourism by 2020. Estimations by the World Travel as
well as the Tourism Council revealed net revenue of US$ 20.18 billion which was expected to contribute
7.1% to the current GDP of the country as shown in below figure. Also, the country was expecting to
increase its tourism sector to earn revenues worth 36 billion by the end of 2030.

Just like the entire world, Pakistan also observed strict measures closing borders and
implementing lockdowns to minimise the risk of spread of the virus. The lockdown was strict restricted
the free movement of the people and severely affecting the economy of the country. Figure below has
highlighted the cases, deaths, and recoveries of COVID-19 during three phases of the lockdown. The
first phase was very strict; the second included partial lockdowns, while the third phase was soft/smart
lockdown providing ease to small businesses.

Analysing the graphic shown in above figure, an increase in the number of cases can be seen
during relaxation phases. More specifically, the hotel industry of Pakistan recorded a significant loss of
over 100 million only in the month of February (strict lockdown). The rate of hotel bookings also
decreased from 95 per cent to 40 per cent during the first quarter of 2020. Due to the travel ban, the
airline and aviation sector also experienced severe economic loss causing loss of daily workers and
labours.
So, COVID-19 collectively brought both the international and domestic tourism in Pakistan to
zero, which seems a total loss of all the investment made during 2011-2019. The tourism industry has
caused a 7.1% GDP loss to Pakistan, which accounts for US$. 20.18 billion Per annum.
Economic Impact of COVID-19 on the MSMEs in Pakistan

The outbreak of coronavirus disease (COVID-19) has severely affected the global and Pakistani
economy. Major victims of the COVID-19 outbreak are micro, small, and medium-sized enterprises
(MSMEs). Micro, small, and medium-scale enterprises are the backbone of the economy of Pakistan.
According to the State Bank of Pakistan, MSMEs are essential as they comprise of approximately 90
per cent of the estimated 3.2 million business enterprises in the country and contributing 40 per cent to
Pakistan’s GDP. Also, MSMEs are also responsible for 40 per cent of the total export earnings. MSMEs
are widely spread throughout the entire country in rural as well as urban areas and comprise retail,
agriculture, trade, and service industries. COVID-19 has badly affected the business industry of
Pakistan with drastic impacts on all business enterprises. A report by the United Nations Conference on
Trade and Development (UNCTAD) stated that Pakistan is going to face worst scenarios due to the
worldwide pandemic of COVID-19 as a result of the halt of MSMEs operations. As MSMEs are
dependent heavily on the cash economy, the business operations would have a long-lasting impact. The
shutdown of production, lack of labour availability, raw material shortages, and restrictions in
transportation would also severely hamper the business operations of MSMEs. Collectively, this is
going to cause a serious dent to the national economy.
The effect of COVID-19 on the society specifically and the economy of Pakistan as a whole is
going to limit the GDP by 1.3% due to sluggishness of the national as well as the global economy. Also,
the lockdown has caused a loss of 1/3rd of the total revenues of the country with a 50% decline in the
exports. World Bank has also issued a warning that Pakistan is among one of the countries which could
fall into recession. If the outcomes of the pandemic continue longer than anticipated, then the actual
GDP growth estimated for FY20 may further limit it to 2.2% with an only possible recovery of 0.3%
during FY21. Micro-enterprise in Pakistan account for 35.7% self-employed individuals, of which
55.6% stated that businesses faced severe loss due to COVID-19 vulnerability. 87% of the micro-
enterprises in Pakistan suffered unemployment with the shutdown of service sectors. In the same
manner, small and medium-scale enterprises also suffered a severe loss with unemployment exceeding
8.1%, which was 5.8% in the previous year. The entire discussion is an indication that Pakistan has
suffered severely due to the global pandemic, and there is further suffering which is going to leave
adverse impacts on the future economic outlook of the country. The following figure is a visual
representation of the extent of influence of the COVID-19 on the economic outcomes of the MSMEs.
Future policymakers of the country would need to strategically provide prompt alternatives to help the
MSMEs to overcome the financial loss while surviving the current crisis.
 Conclusion
The above essay has discussed the impacts of COVID-19 pandemic on the economy of
Pakistan. The ongoing pandemic situation is not only affecting the health and wellbeing of the citizens,
but it has also severely dented the economic conditions of the country. Before the pandemic situation,
the Pakistani economy was recovering from poverty; however, the closure of different sectors, travel
bans, and lockdowns resulted in decreasing the GDP of the country. The essay shows that the demands
of foreign commodities faced immense decline, particularly for petroleum and oil products that have
resulted in hurting the trade of Pakistan, which makes a considerable contribution to Pakistan’s
economy. In addition, the agriculture sector and farmers are also facing problems due to unavailability
of labours, transportation issues, and rise in the prices of seeds. More so, Pakistan has also faced a
decline in its export and import due to the strict lockdowns in its five major trading partners that include
Germany, Japan, United Kingdom, US, and China. Travel bans, quarantine requirements, closure of the
restaurant industry, and halted operations of malls and markets have also declined the earning of the
citizens that directly impacted their affordability and willingness to spend money. This situation directly
resulted in lowering the GDP of the country and led it towards the economic and financial crisis. Most
importantly, the closure of SMEs, industries, and offices – due to lockdowns – resulted in the loss of
jobs and the rise of unemployment. This aspect did not only result in reducing the manufacturing and
production capacities of the industries but also deteriorated the financial conditions of the lower and
middle income families. In the area of stocks market, it faced a decline when the foreign investors
withdrew their investments; however, when IMF and other developed countries approved loans and
financial support Pakistan’s stock market started to restore its condition and is slowly recovering from
the damages that were done by the COVID-19 pandemic. All in all, like other economies of the world
the economy of Pakistan has also been severely affected by the pandemic due to closure of industries
and several other restrictions and is still going through the survival mode.
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