COVID-19 AND ITS AFFECTS ON

THE ECONOMY

PRESENTED TO: MUHAMMAD ZUBAIR

SUBMITTED BY:

RASHMEEN NAEEM (26071)

&

SOHA NAYYER (24137)

Table of Contents
COVID-19 AND ITS AFFECTS ON THE ECONOMY...........................................................................1
COVID-19 IN THE INITIAL PHASE OF THE PANDEMIC....................................................................3
EMBRACING THE NEW NORMAL.......................................................................................................4
ECONOMIC CRISIS ALL OVER THE WORLD....................................................................................5
Purchasing Managers Index..................................................................................................................5
Variation in Global Fuel Demand..........................................................................................................6
Decreased Household Consumption.....................................................................................................8
Effects on Automotive Sector................................................................................................................9
Effects of Covid on Business sector………………………………………………………………..………10

Effects of Covid on Telecommunication sector……………………………………………………..….….10

Effects of Covid on Food and Hospitality sector………………………………………………………..…11

Effects of Covid on Education sector……………………………………………………………………....11

Effects of Covid on Energy sector………………………………………………………………………….12

Conclusion……………………………………………………………………………………………...…12-15
 COVID-19 IN THE INITIAL PHASE OF THE
PANDEMIC

All of us, around the world, are victims of COVID-19. It has undeniably affected our lives
deeply and can be known as the most traumatic event of the 21 st century similar to a
World War. There is still a lot of uncertainty regarding how the crisis will actually
develop as well as the potential post-crisis scenarios, which depend on a number of
crucial variables and factors, despite the fact that millions of people have been infected
around the world and there have already been thousands of deaths. Despite the
excitement bolstered by the successful vaccine-production results just achieved,
uncertainty is probably still the overwhelming emotion.

Early on in the pandemic, which mostly affected China, Iran, Italy, and Spain, the
secrecy of the Chinese government made the virus a global threat with no known cure.
The conversation about the virus was dominated by various strategies that were
implemented to deal with the situation. The main effects were lack of trust and terror.
Ironically, along with that fear came the delusion that the epidemic may reverse some of
the bad trends we are seeing in the world, such as egotistical nationalism, ideological
fanaticism, economic avarice, and cultural divides. Everyone believed that the virus
might enable the human species as a whole to function as a single community.

However, Covid-19 shed light on aggressive clashes amongst cultures and allies. In the
European Union, the Hanseatic north has conditioned the Union's aid to the southern
Mediterranean by continuing and restating the story of the two Europes: one austere
and morally correct, the other wasteful and voluptuous. The national hoarding of
medical equipment was later rectified, but borders have reappeared in the Schengen
area, weakening the cohesion of the union.
 EMBRACING THE NEW NORMAL

The transition to localization:

The supply chain disruption is partly due to the unusual conditions. It is anticipated to
result in increased protection of domestic industry and risk aversion in addition to the
present geopolitical situation and the global crisis. More localization of supply chains is
anticipated as a result, particularly for sectors that are thought to be strategically
important and for key commodities.

"Digitalization" given a strong push:

The epidemic led most of the offices normalize working from home and made it more
common. The current environment offers urgent and genuine chances to use media to
enhance efficiency. Digital media is growing. Even the most established yet complex
businesses were being compelled to investigate the digital channels. Additionally, the
value of funding enabling technologies like cloud and data and cyber security is highly
recommended.

Move towards variable cost:

Decreasing the overall business costs is one of the most challenging as well as the
most important practices, amongst others. In order to get this done, a business should
convert its fixed costs to variable costs, whenever it is convenient for it to do so.
Increasing adaptability:

Resulting from the epidemic, nations and businesses are being compelled to move
quickly, attending to staff requirements, bolstering strong team chemistry, and
maintaining a customer-centric focus. Future politicians will need to be more adaptable,
responsive, and inclusive since regulations will need to change more quickly than the
market.

ECONOMIC CRISIS ALL OVER THE WORLD

Purchasing Managers Index

The emergence of an unpredictable Virus, COVID-19 came with uncountable crisis. The
economic condition has been shaken to the core. Due to the great lockdown, the
research concluded that the economy will contract by 3%, which is worst the financial
crisis faced in 2008-9. Looking into the Purchasing Managers Index, we can see that
The COVID-19 pandemic is partly to blame for the historically poor market performance
measures. In particular, the JPMorgan Global Purchasing Managers Index (PMI)
dropped from 52.2 points in January to 46.1 points in February, a decrease of 6.1
points. According to the most recent data, the global GDP increased at an annual pace
of just over 0.5% (at market prices), which is lower than the nearly 3% seen in January.
In the service sector, market activity has fallen to a level last seen in May 2009, while
manufacturing output has likewise declined to its lowest rate since April 2009.
Variation in Global Fuel Demand

It won't be an exaggeration to say that the demand for oil goods has never before
decreased to this extent.

Although the consumption of oil products has an impact everywhere, it is anticipated

that the demand decline would be most severe specifically in North America and Europe
given that these regions have become the main victim of the COVID-19 pandemic,
where the number of cases are still rising quickly. As a result, the individual
governments imposed essential lockdowns that stifled trade, mobility, and
subsequently, demand for oil-based products. The majority of airlines are reducing their
flight schedules by up to 50%, with most European carriers cancelling more than 90% of
their flights, according to certain leading indicators.
Additionally, in badly affected areas like Milan, Paris, and Madrid, commuter automobile
traffic has decreased by as much as 80% when lockdown measures were implemented
in Europe. Whereas, a 55% decrease in US automobile mileage is also expected.
Decreased Household Consumption

A major fall in consumer activity and spending could result in a decrease in the
consumption of luxury items.

If the government-enforced lockdown produced supply chain disruption that impacted

the availability of necessities goods, the impact would be considerably more severe.

Commercial investment will be delayed due to weak domestic demand and consumer
mood, which will increase the pressure on macroeconomic growth to make up for these
losses.

Following COVID-19, some countries are anticipated to switch their manufacturing

bases from China and follow a de-risking approach, which would increase chances to
avail it for Pakistan. How quickly the economy recovers and supply problems are
resolved will determine how much of this opportunity can be capitalised on.
Effects on Automotive Sector

The growth and profitability prospects of the automobile industry with regard to both the
domestic and international markets for Pakistani automobiles have been negatively
impacted by a number of factors, including high interest rates, the devaluation of the
Pakistani Rupee against the US dollar (which increased car prices), and the imposition
of additional custom duties. The COVID-19 lockout has made the Pakistani auto
industry's precarious growth situation much worse.

Currency devaluation was mostly to blame for the auto industry's decline because this
increased the price of raw materials and parts for automobiles, which increased the cost
of manufacture and assembly for automakers. Although automakers originally absorbed
this additional expense, they later passed it along to customers, which negatively
impacted car sales in the current fiscal year.

EFFECT ON BUSINESS SECTOR:

The overall business sector and business activities were adversely affected in covid,
and faced several issues such as financial, supply chain disruption, decrease in
demand, reduction in sales and profit. Micro, small, and medium-sized businesses
(MSMEs) were. the main victims of the COVID-19 outbreak because, in comparison to
large enterprises, MSMEs typically lack sufficient resources, especially financial and
managerial ones, and are unprepared for such disruptions likely to last longer than
anticipated. In Pakistan, MSMEs are crucial for the economy as they constitute over
90% of the estimated 3.2 million business enterprises and contribute 40% to the GDP.
From local street vendors, to general stores in Pakistan, a larger population from middle
to lower class conducts these business activities which were completely shut down for
above a year. Start up like SWVL, airlift were also deeply affected. Meanwhile, still there
were few industries that were positively impacted especially the pharmaceutical
industry.

EFFECT OF COVID ON TELECOMMUNICATION SECTOR:

Perhaps more than any other catastrophe in human history, the COVID-19 pandemic
has shown how crucially important telecommunications infrastructure is to keeping
governments, corporations, and communities linked and operating. Globally, individuals
rely on technology for knowledge, social isolation, and working from home because to
the economic and social havoc the pandemic has produced. This played an important
role for people to be connected virtually as people globally were deprived of physical
presence to reduce the risk of spread. More people were working from home and
relying on video conferencing to conduct meetings, which has resulted in a temporary
surge in data traffic and higher use of broadband services, which has benefited some
telecom providers. In fact, traffic growth shows a greater reliance on connectivity and
digital services.

EFFECT OF COVID ON FOOD & HOSPITALITY SECTOR:

A never-before-seen challenge has been presented to the hotel sector by the pandemic.
The COVID-19 curve-flattening tactics of community lockdowns, social withdrawal, stay-
at-home orders, travel bans, and mobility restrictions have led to the temporary closure
of a large number of hospitality businesses and significantly reduced demand for those
that were permitted to continue operating. Nearly all eateries were instructed to restrict
their business to take-out orders only. Hotel occupancy and income both sharply
decreased as a result of travel restrictions and government-issued stay-at-home
directives. However, the process of reopening has gradually started, and authorities
have begun to loosen restrictions. For instance, they now permit dine-in restaurants to
reopen with strict social distance guidelines but at a reduced capacity, and they are
gradually easing the restrictions on domestic and international travel. The future of
many hospitality firms strongly rely on growing demand for their services and goods
because the breakeven point in the industry is quite high due to hefty operating costs.
COVID-19 had an impact on the food industry by limiting labor mobility, altering
consumer demand, closing food manufacturing facilities, limiting food trade laws, and
placing financial strains on the food supply chain.

EFFECT OF COVID ON EDUCATION SECTOR:

The closure of schools because of COVID-19 has seriously disrupted education. New
research from several of the highest-income nations in the region suggests that the
epidemic is contributing to inequality rises and learning deficits. Lack of direct
communication between teacher and student is one of the drawbacks of emergency
remote learning. This is simply not doable with broadcasts. However, a number of
nations demonstrated initiative by utilizing other techniques, such as social media,
email, telephone, and even the post office, to enhance the distant learning experience.
Unfortunately, despite best efforts to set up a supportive remote learning experience,
evidence is emerging to show that school closures have resulted in actual learning
losses. The COVID-19 pandemic's learning deficits are anticipated to have an adverse
long-term cumulative impact on the future wellbeing of many children. These learning
losses may result in fewer opportunities for higher education, a lower participation rate
in the labor force, and poorer incomes in the future.

EFFECT OF COVID ON ENERGY SECTOR:

Refinery shutdowns, less economic activity, and reduced air traffic are all having a
significant negative impact on infrastructure, posing unprecedented dangers to the
energy and power industry. The outlook for the world's oil demand is becoming
gloomier.

The commercial and industrial sectors' demand for electricity has drastically decreased
as a result of lockdown measures. It remains to be seen whether the current crisis has
accelerated or slowed down the world's transition to renewable energy sources;
nonetheless, the short-term impact lockdowns have had on emissions is undeniable.
April’s carbon emissions were down a staggering 17% from the same month last year.
As the world awakens from hibernation and attempts to regain lost economic
momentum, navigating sustainable growth with ongoing carbon reductions represents
both an opportunity and a challenge. By coordinating policies and recovery plans with
the most recent climate research, the government is prioritizing a quicker and more
equitable transition from a grey to a green economy. Many power distribution
companies are in need of significant and immediate liquidity support. This is a major
concern for investors who rely on PPAs to recover their investments and make a return.
(Effects of COVID-19 on global e-commerce by industry.)

CONCLUSION:
As per UNCTAD, in E-commerce, most governments gave priority to immediate
pandemic measures, but others have started to focus on longer-term strategic needs for
recovery. Many developing country governments have stepped in to preserve
enterprises and people's incomes. Indonesia started a program to enhance capacity in
Asia to hasten the digitization and digitalization of micro, mid, and medium-sized
businesses. Governments must give national digital readiness a priority so that more
neighborhood businesses can participate as producers rather than just consumers in
the digital economy. In order to strengthen the digital and trading infrastructure, facilitate
digital payments, and provide suitable legal and regulatory frameworks for online
transactions and security, the research claims that changes in public policy and
corporate practices are necessary. After then, a focus on digital entrepreneurship is
required to extract value from digital trade. For this, smaller enterprises must digitalize
more quickly, and there needs to be increased focus on digital entrepreneurship,
including reskilling, particularly for women. According to the paper, nations also require
stronger legal frameworks for producing and extracting value in the digital economy as
well as greater data collection and use skills. Finally, in order to take advantage of these
opportunities, the international community needs to come up with fresh, daring, and
clever collaborations with governments and the business sector.
Consumer Awareness, Experience, and Introversion initially influenced online purchase
behaviors, and other factors had little effect. But when the COVID-19 pandemic spread,
the circumstances changed. Its influence grew along with consumer knowledge,
experience, and decision-making speed. On the other side, introversion lost its
significance.

Promptness in Decision Making and Constancy of Online Purchasing Behavior were

two characteristics that showed a weak correlation with introversion. Consumers
became less e-commerce-averse and more hesitant when making judgements, which
reduced the link between these elements. Additionally, online users gained more
knowledge. This study brought attention to a change in the variables affecting online
shoppers' purchasing decisions during the COVID-19 era. Overall, it indicated that
promptness in decision-making was becoming more crucial when making purchases
online.
Due to the COVID-19's emergence in Pakistan, the entire healthcare system
encountered a number of challenges, including: infrastructure issues, unequal access to
healthcare, opposition from various social, political, cultural, and religious groups,
political unpredictability, economic fragility, and public mistrust. The Small and Medium
Enterprises Development Authority polled 920 firms online between April 3 and April 14,
2020, and the results showed that businesses struggle to survive due to low revenue
creation and losses. Pakistan introduced a number of programs to address the
economic problems that many people experienced during the outbreak. Imran Khan, the
prime minister, introduced a relief program for those who lost their jobs or had their
source of income threatened as a result of the lockdown on May 2, 2020. Through the
Ehsaas Cash Program, he started a cash aid program to help unemployed people.

After removing the lockdown in some areas, the government let daily wage and
construction employees to continue their jobs as long as they obediently followed the
SOPs and took the appropriate safety precautions. This contributed to reducing some of
the government's financial burdens.
Pakistan's economy experienced a remarkable recovery in FY2021 and recorded
growth of 3.94 percent, exceeding the objective and outpacing both the previous two
years' growth rates of 0.47 and 2.08 percent (2.1 percent for FY2021). Despite severe
financial restrictions, the government's prompt and proper policy decisions led to a V-
shaped economic rebound.