Electronic Research Journal of Social Sciences and Humanities Vol 2: Issue III

ISSN: 2706 – 8242 www.eresearchjournal.com Jul - Sep 2020

The Coronomics and World Economy: Impacts on Pakistan

by
Muhammad Fahim Khan
PhD Scholar, University of Peshawar, Peshawar, KPK, Pakistan
Email:[email protected]
Ph: +923339827170

Shujahat Ali
PhD Scholar, University of Peshawar, Peshawar, KPK, Pakistan
Email:[email protected]
Ph: +923319089315

Nabila Aftab1
PhD Scholar, University of Peshawar, Peshawar, KPK, Pakistan
Email:[email protected]

Abstract

The Coronomics is the study of the economic impacts of Coronavirus, widely

known as COVID-19. Since its inception in China, it has claimed thousands of
human lives while living millions in quarantine because of viral infections. Where
it brings major human suffering, it also creates global economic disruptions
worldwide. It impedes growth and smooth operation of supply chains, production
facilities, travel, commodity market, and consumers worldwide driven by the
threats of COVID-19. The whole world passes through the same pattern i.e.
lockdown and curfews of varying degrees leaving markets and workplaces dead. It
not only stops revenue generation but also incurs a great cost to states while dealing
with global pandemic amid public health. Therefore, its economic impacts on small
and developing economies are more disturbing and destabilizing. The economies
like Pakistan are indebted along with negative growth are facing a shortage of
resources to fight with it let alone bearing revenue loss.

Keywords: Pandemic Covid-19, Global Economy, Economy of Pakistan, Impacts on Developing

Countries, Economic Index

Introduction:
Initially, COVID-19 was first reported in Wuhan, China but made its way outward within
weeks spreading all around the world. There had been 81,000 cases reported in China which further
spiked up when other countries start reported COVID-19 because of physical transmission or travel
history of the patient. The current statistics show that more than 150 states have been infected and
reported cases of COVID-19 varying from tens to thousands with multiple deaths. According to
global health agencies, the world has half a million positive COVID-19 cases causing 23,000

1
Corresponding author

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deaths so far. Apparently, COVID-19 knows no boundaries and has reported in every continent of
the world (Gutiérrez, 2020).
The trajectory and pattern of its spread are seen identical in each state but few of them
reflect potential spike due to certain reasons. After China, Europe became the epicenter of the
pandemic as reported by the World Health Organization whereby Asian states reported slow-
moving graphs of its spread. Italy, a European state far away from China, reported deaths as equal
to reported positive cases in China i.e. 81,000. The increase in numbers of patients can also vary
due to contributing factors for example Italy has one of the best and vibrant health systems which
might lead to test more patients than other countries but the number of deaths has no justification
(Moulds, 2020).
That is why it is pertinent to study why it has been observing an upward trajectory
worldwide. The study shows a number of reasons including but not limited to travel history to
China, physical contact with COVID-19 patients, and mass gatherings. But it is not always
necessary it would get reported positive as the evolution of symptoms defines the status. Medical
researchers fear that there might be a number of people with undetected COVID-19 who
unintendedly pass on the virus to other people. They argue that people with a strong immune
system can withstand the symptoms of COVID-19 and may remain unreported.
Another contributing factor involves the degree of tests. It is not obligatory for the states
to test each and every citizen because of a short number of kits and incurred costs. As new research
reveals that there were 37000 people in Wuhan with symptoms of COVID-19 but the authorities
were not aware of them as they could not reach laboratories for testing. Consequently, such a
bigger number of patients are more prone to spread the virus than isolated patients. A study at the
Huazhong University of Technology in China reveals that roughly 59% of infected people in China
remain untested and undetected. This argument dwells well the reasons why COVID-19 made its
way to the rest of the world (Wang & Hao, 2020).
The following map reflects the spreading pattern and its frequency worldwide:

Fig 1 Global Pattern of Economic Loss

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 Electronic Research Journal of Social Sciences and Humanities Vol 2: Issue III
ISSN: 2706 – 8242 www.eresearchjournal.com Jul - Sep 2020

Global Pattern of Economic Loss:

The outbreak of COVID-19 in China impedes global business activity starting from China
spread in the entire world. The global impacts on the economy are diverse ranging from loss in
stock markets, loss in traveling and shipping industry, the burden on interest rates, demand and
supply imbalance in health equipment, least market activity, and consumer isolation, to speak of
the least.
Global share markets have seen a potential downturn since the dawn of January this year.
Share markets hit hard and often crashed because of panic buying and purchasing. Russian drop
in oil prices further aggravated the financial market crisis worldwide. The Dow and FTSE, stock
share companies, have recorded the lowest profit since 1987. Due to the pressure on business
activity, multiple central banks reduced interest rates to keep the business flowing smoothly. The
decline in interest rates makes borrowing cheaper which in turn helps in boosting business activity.
The US Federal Reserve and Bank of England are major agencies that resort to these measures
(OECD, 2020).
Because of slow business activity, growth prospects remain uncertain. The rise of the
pandemic in China and its worldwide proliferation risked global growth by ½ percent. Moreover,
global GDP growth is projected to decline by 5 % from 2.9% to 2.4%. In addition, it shakes
consumer confidence in the market and services. The travel industry and supply chain hit hard in
G 20 economies as they announce nationwide lockdowns amid COVID-19 as all these economies
are heavily dependent and deeply connected with the Chinese economy. The travel industry is
widely damaged by travel banns as more than 100 countries announced travel banns, self-
quarantine as people are no longer visiting worldwide for business or holidays. When Japan
announced the postponement of Olympics 2020 amid pandemic COVID-19, it is expected to lose
39 million visitors (Talmazan, 2020).
In addition, customers are no longer attracted to the markets. On the one side, governments
shut the markets down and if they are open, people are advised not to visit markets unless
necessary. This leaves drastic impacts on the hoteling and restaurant industry, food industry,
shopping centers, and other consumer places. Fearing the spread of COVID-19, factories have
slowed down production as labor is not allowed to work. This global downturn started in China
where investments, selling and production sharply fell. Europe followed the same pattern when
Italy and Spain start reported hundreds of daily positive cases which led to forced public
quarantine.
Another global industry suffered in negative because of the global economic crisis or
Coronomics and that is the automobile industry. Car sales decline worldwide as governments
announce unnecessary traveling. The public panic does not allow customers to go out for car
purchase. During the first half of February, car sales in China dropped down by 92% (Brown &
Jones, 2020).

Covid-19 and Major Economies:

If the economy is boosting, it implies more jobs are being created and more money is being
earned but COVID-19 has hit global economies hard. Starting from the study of the economy of
China, it appears that COVID-19 has left brutal effects on the Chinese economy causing record
low growth since the 1970s. Chinese media group Caixin claims that the purchasing index in China
dropped to 26% from 51.8 last month. Major production units and small business enterprises suffer
alike and record losses nationwide. Major companies like Foxconn, iPhone producers in China,

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claim that they cannot return back to normal production within a month as it will take more time.
Hu, an analyst reports that data over the economy is disturbing and the government is willing to
announce as it has no other choice. He further claims that the initially projected growth of the first
quarter is badly hit and unlikely to recover (Laura, 2020).
Apart from China, international retailers i.e. Starbucks and Ikea, bag major losses.
Thousands of overseas stop traveling to China. The shutdown in China forces economic downturn
worldwide. Hyundai, a South Korean automobile company, has halted production because it could
not get imports of car parts from China. China is a major supplier of automobile parts worldwide
leaving industry mired into a loss (OECD, 2020).
Italy has been the epicenter of COVID-19 in Europe which records more deaths than China
and obvious relative economic loss. It banned direct flights from China and restrict travel activities
to and from China. Italian products are no longer reaching China worth $16 billion which China
purchases from Italy. The closing of the border with other European states brings investments
sharply down. In addition, Northern Italy is hit hard by COVID-19 and it is the region with a high
per capita GDP of $38,000 and a 67% employment rate as compared to $28,000 GDP and 59%
employment rate respectively. It implies, COVID-19 in Norther Italy brings more economic loss
as it might bring otherwise (Subacchi, 2020).
Moreover, another European major economy, England, quite hard hit because of the
COVID-19 outbreak. Currently, the growth rate of the UK is already very low because of Brexit
which varies around 1 percent. But because of COVID-19, it is expected to fall below 1 percent
by 0.2 % making it 0.8%, a record low. Although, financial indicators show stability in 2021 and
2020 but the present downturn casts dark shadows on the growth rate of upcoming years. It is
projected to be weakest in the UK since the global recession of 2008-9 (BCC, 2020).
The US appeared to be another epicenter of COVID-19 which fuels economic downturn in
states. The New York Stock Exchange partially suspended when marked observe negative spiral
by 12%. In a bid to survive this economic pressure, President Trump announced interest rates cut
neat to zero to keep hardened business struggle. The economic team of President is fearing a
recession in the US which could last up to this summer (Johnson, 2020).
In addition, the 30% decline in oil prices sent shock waves to US shale producers who are
at the receiving at end amid the crisis. The shutdown of markets and less traveling decreases the
demand domestically and globally alike because of COVID-19. The US is surpassing Italy in a
number of positive cases leaving health authorities into shock as they could not determine the
medium through which it is spreading. When it comes to the stability of the dollar as the
international currency, it contracted by half a percent against its international peers (Woodhouse,
2020).

Covid-19 and Developing Economies:

The COVID-19 knows no boundaries and has made its way around the globe leaving
millions of people vulnerable. Given the spreading pattern, economic inequalities, and social
fragility put weaker sections of society into risk. The disease is increasing the gap between rich
and poor within the states and rich and poor states in the world. It has the potential to give way to
economic inequality that would not be able to overcome in years to come. It is because the poor
have to bear the economic brunt as they come losers out of totally polarized economies. The new
research covering economic consequences of COVID-19 reveals that poor strata are more
vulnerable to catch the disease because they are unable to take precautionary measures as well as
unable to go in quarantine without food (Fisher, 2020).

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Economic disparity in the global economy is posing multiplier threats to developing states
which are facing difficulties to take necessary measures to fight the global pandemic. This
conclusion is deduced from the earlier experience of pandemics like influenza which observed
high proliferation rates of transmission and mortality. This economic inequality aggravates the
situation due to two major factors, the first is old age and the other is pre-existing health
infrastructure. Multiple global reports suggest that COVID-19 can be two times more deadly
among lower-income and middle-income societies. (HRW, 2020) Talking about the abysmal state
of readiness of developing and underdeveloped economies, data of different lower-income
countries are analyzed. Nepal is an Asian state with 28 million people but it does not have intensive
care beds more than 500 in the entire state. Its rural hospitals even lack primary intensive care
facilities which will be potentially outnumbered if the virus breakout. There is only one single
hospital at the capital that offers testing kits for COVID-19 (Maru, 2020).
Iran is another struggling economy deeply mired in the COVID-19 pandemic. Thousands
of people have been infected and hundreds of them have been found dead. 32,332 people were
tested positive in Iran and 2,378 has been expired since the first reported case. In this way, the
virus has put a grave burden on the already dead economy because of US-led sanctions. It has
already caused about a 3% contraction to the Iranian economy which is likely to deepen further.
(Khajehpour, 2020) African nations are also started reporting cases of COVID-19 which remains
relatively low than that if Europe but it could be low because of the least testing rate. It is globally
feared that the pandemic can spread with more potential than anticipated among African nations
and they would find themselves unable to cope up. WHO took an initiative to help such countries
in order to prevent human suffering? In a bid to avoid this scenario, rich countries should take
steps but it is the realization that richer economies are already consumed with resources within
their own states but still, they are encouraged to focus on poor countries for fighting COVID-19
(Holt, 2020; Woodhouse, 2020).

Case Study of Pakistan:

There’s no positive feeling in the air on Pakistan Stock Exchange’s trading desk since the
start of March month. And it all dropped like a house of cards on Monday (March 9th) when Saudi
Arabia declared a currency war against Russia to win the oil market shares after Putin’s ego hit
united states, oil producers, as crude demand dropped down with China, Europe, and the rest of
the globe coughing harder because of COVID-19 spreading.
KSE 100 was down 2106 points only moments after trade began and the circuit breaker
had to be activated to stop trading in order to decrease the temperatures of the market. But nothing
in the midst of a potential recession can offer relief for a shareholder. Karachi Stock Exchange
stands at 30,667–20pc down after a set of bullish sell-offs since then, as it went thru two weeks of
extremely volatile trade. Really a sold-off would leave the companies lacking liquidity. Inadequate
cash flow as a consequence of declining demand up and down the state with the monetary rate of
12.50 percent of the central banks would make it difficult for companies to breathe with the
Chinese virus generally around (Monnoo, 2020).
The manufacturing industry has also suffered from liquidity shortage as the completely
incompetent Imran Khan government has refused to repay the sales tax proceeds and customs duty
discounts of these companies since losing the nil-rated rank of the major export-based factories.
The last quarter of the current financial year and the first two quarters of the new FY21 financial
year will present unparalleled rates of money-shortage issues as shareholders have begun investing
in secure-haven stocks, gold, and dollar. In addition, the ports of Europe and the US are very likely
to get overloaded by China’s arriving cargo in the next several weeks. A word from President Xi

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Jinping also contains what his government says about China’s defeat of its own creation virus. If
only for the sake of trying to make a point about the international logistical scenario, if China has
finished coughing on coronavirus, and the reality that Europe and North America have struggled
to flatten the curve, the scenario for Pakistani exporters will become very complicated.
The infection spreads and the employee is either ill or self-quarantined (practicing social
distance). A backlog of cargo at Chinese, European, and North American ports will keep digging
cracks in global trade. Pakistani suppliers will experience delays in getting imports and delivering
exports to their destinations. The scarcity of demand would make it worse (Andani, 2020).
One of Pakistan’s main shortfall-powerhouses is its country’s flag carriers Pakistan
International Airlines (PIA), which has endured a gross operating loss for quite a few decades now
if the situation persists for the next two to three months, the employees will wind up furloughing.
Unless its operation will stay stopped for the next 25-35 days, the carrier would continue to run a
loss of around $63 million a month. The failure of demand is trying to hammer the worldwide
airline market, with several small, personal airlines on the brink of bankruptcy. SBP advertised a
loan program for hospitals to buy equipment and other things required to cope with the coronavirus
infection; it also proposed a program for investors wanting to develop new plants in the state. It
was something that the govt had requested from hospitals and investors. The action will be
challenged by the globe sooner or later.
As the Pakistani govt. is planning to deal with COVID-19’s medical side of weeks 4 and 5
(mark a possibly exponential spread), severe concerns are now arising as to whether or not Pakistan
will survive such a multi-pronged war financially. In the midst of a collapse of markets, stretched
spending, widespread industrial shutdowns and a broken myth of Anglo-business integrity (just
about the whole of the West has easily reneged on treaties and deals in the name of force majeure),
Pakistan’s economic situation is facing a further external account threat, this time in the form of
rapid export losses and incoming home remittances (Al Meezan, 2020). If the govt. is effective at
this crucial juncture in supporting companies and industry rapidly, not only will the losses
emerging from industrial shutdowns and discarded production be enormous, but the resulting
increase in unemployment and deprivation will also be unparalleled. All this on the back of two
years, with growth and economic development at best below average, rampant inflation, and
steadily growing rates of unemployment and deprivation. The truth is that a reconsider on the fiscal
policies has become essential for all governments, including ours. As there was a ‘Before Corona’
economic sphere, there will now also be a fresh ‘After Corona’ economic world.
Moreover, one would first have to survive the current economic destruction caused by a
global catastrophe just to get to the After-Corona point. The earlier the Pakistani govt is aware of
the current economic difficulties it faces to withstand this downturn, the better our chance of
survival will be. To those in concern or not completely knowing the economic ramifications, the
measures are already taken by the West–currently the epicenter of COVID-19 –may also be a
strong example for us to adopt in our attempts to help or even revive companies, or even for its
markets to simply remain alive.
Pakistan purchased crude oil during 8MFY20, at an average cost of about USD 61/barrel,
although Arab Light Oil has dropped to USD31/barrel (down 55 percent in CY20TD) following
the collapse of the OPEC+ cartel this month and the effects of the Corona disease outbreak. To put
this in context, each fall in the price of crude oil in USD10/barrel resulted in an import bill saving
of about USD1.8 trillion per annum based on existing demand. So if oil prices stay at the present
level, we could possibly see yearly import bill savings of more than USD 5 billion. Since the
current oil prices represent a slowdown in the global economy and extra output by oil-producing

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countries, it is ultimately projected to boost slowly, and accordingly, in our designs, we expected
oil prices in the region of about USD 40/barrel that would still represent a reasonable saving on
import bills. Although dropping oil prices and other imported commodity prices like steel,
chemicals, plastics, coal, etc. are advantageous for Pakistan, our exports will also be experiencing
a drop in textiles in particular. Textile orders will be experiencing a downturn over the next several
months due to the closing of retail outlets in the EU and the USA.
In addition to a decline in volume, foreign textile prices have also fallen and are down by
24 percent in CY20TD, so value-added textile exports should remain under stress for at least a few
quarters but are likely to recover growth once things stabilize. It should be noticed that our exports
have recovered competition and textile amounts have risen since the strong depreciation
experienced in the last couple of years.

Global and Domestic Interventions:

To combat the COVID-19 pandemic must be the topmost priority of every state. Since the
pandemic is global and its precautions are universal, each must strive to take necessary measures.
But at the same time, there are weaker economies that are unable to meet the cost of the deadly
virus. Thus, it is argued that major economies should not turn their back on poor states for the sake
of humanity. It is because these states will not be able to fight the disease on their own. African
nations are rapidly reporting the deadly positive cases along with other countries mired in endemic
poverty on continents other than Africa. There are genuine fears that the outbreak of COVID-19
in these states would prove deadly for their people (Gutiérrez, 2020). Already existed fragile health
care is not enough to cater already ill and in case of this very pandemic, hospitals would run short
of capacity and resources. WHO is of the view that poor health conditions make the proliferation
of COVID-19 more probable thus necessary precautions must be applied.
It is worth mentioning here that all major economies of the world are already suffering
from the same consequences, third world countries could not remain in isolation with contact and
it is a matter of time when the cases would sharply rise. That is why it is social and moral
responsibility of richer states that they should focus on the health system of poor states. Only by a
collective effort, this socially commutable disease can be contained. At the same time, if the
developing nations are overwhelmed, there are risks that the pandemic will rage on in
underdeveloped countries. Even if the consequences of the disease are controlled in developed
countries, its spread down the horizon cannot be curtailed (Holt, 2020).
In order to prevent this scenario, developed countries should focus on helping out poor
states having fragile basic health systems regardless of the fact that they are facing COVID-19 in
their own countries. The last few weeks observed an unprecedented lockdown in China, Europe,
and the US which led to the closure of schools, restaurants, cinemas, and other public places
including parks. Many EU countries sealed the borders to prevent the transmission of deadly
viruses (Cherelus & Salcedo, 2020). It is because health care facilities in many underdeveloped
states especially in Africa are deeply mired in the scarcity of resources. The access to hospitals
and intensive care units has been problematic even in normal conditions to an extent that studies
claim that only less than half of the population has an easy approach to health care units. In
addition, these states are already severed with other pandemics like Influenza, Ebola, and Aids
(Fisher, 2020). Under this sorry state of affairs, it would be quite easy for COVID-19 to spread
and possibly be gone out of control especially in areas where people already suffer from acute
shortages of medical facilities. In addition, these states also go through the burden of refugees,
trans-border crime, and natural disasters limiting their potential to deal with more pandemics.

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Under these circumstances, it is difficult for them to comply with WHO standards of self-isolation
and social distancing (HRW, 2020).
That is only why this disastrous pandemic needs global interventions to prevent the damage
it causing to public health and national economies. Major states are taking necessary measures to
combat the COVID-19. The US government decided to pay the weaker sections of society by
sending checks so that the people can cope up with their daily household expenses. The US has
categorized the people who are earning less than $1 million a year under the deserving category
by the end of April. In the same manner, there is a need for a holistic approach to global health.
(Fandos, 2020) Evidently, every state is trying to make efforts to minimize the risks posed by
COVID-19, including Pakistan, where there are some crucial interventions vital for containing the
novel pandemic:

Early, coordinated social distancing is absolutely essential to risk mitigation:

According to WHO, social distancing, avoiding mass gatherings, closing business,

markets, and schools, and starting work from home. World at large and especially Pakistan is
taking measures in this regard but the federal government is hesitant to announce full-scale curfew
to date in Pakistan. Pakistan has announced a partial lockdown to prevent mass gatherings across
the country.

Provision of Personal Protective Equipment (PPE) and Testing capacity:

It is observed that international trade and supply chains are decimated which impedes the
transportation of protective gear, testing kits, and ventilators to the least developing countries. In
addition, these states are facing economic constraints to meet public health requirements as
recommended by the WHO. Pakistan has allocated Rs. 50 billion for purchasing necessary
medical supplies and allocated RS.25 million to NDMA for procurement of COVID-19 testing
kits (Malik, 2020). They can only do this with extensive financial and technical support from other
countries. These donor countries, tragically, are the same ones who have been hard hit by the
pandemic. Even with the ongoing pandemic and the economic crisis, the world has the resources
to do this. We have to mobilize like never before.

Improve Medical Conditions:

Given the frequency and magnitude with COVID-19 have spread, even the best of the
health systems fail to tackle the pandemic outbreak. The states successfully fighting COVID-19 as
China claims to be, must send their teams to developed and underdeveloped countries alike to train
and equip other states. China and Cuba have taken the lead in this regard to sending the teams in
infected countries to combat this pandemic. China has sent medical teams and assistance to France,
Italy, Spain, Serbia, Iran, and Iraq. Cuba dispatched teams to Venezuela and China (Pressenza,
2020). China helped Pakistan by sending thousands of protective gear articles and testing kits in
response to millions of masks handed over to China by Pakistan (The News, 2020).

Use of Modern Technology

Technology can be helpful in fighting COVID-19 by tracking the patients, keeping the
record, and assisting the people in worrisome hours of life. This is essential for focusing scant
hospital resources on the sickest patients and avoiding hospital transmission with long queues.

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Pakistan has established Corona Command and Control Center to centrally monitor and fight the
COVID-19 (The Nation, 2020).

Access to Medical Facilities:

While the first wave of response to the COVID-19 pandemic is unlikely to have biomedical
tools available to it, preparations should now be made to ensure eventual equitable access to
vaccines and antivirals. Many states are unable to provide intensive care to thousands of people at
the same time. For this field, hospitals are being established and quarantine centers are being built.
To meet the requirements, China built a specialized hospital in 10 days. Pakistan has set up
quarantine centers out of their hospitals. A specialized budget must be allocated to combat the
disease.

Conclusion:

Evidently, monitoring, containing, and mitigating the impacts of COVID-19 is the high
priority of states and international organizations alike. Only decisive and timely policy
interventions and swift actions by health officials, Fiscal regulatory authorities, Central Banks, and
Economic reform teams can play a collective role to combat, prevent the virus and offset the
economic effects of COVID-19. Central banks are autonomous bodies in majority states of the
world that have taken measures to assist demand and market confidence by discarding tough
financial conditions by lowering interest rates, decreasing borrowing ratios for households, small
business, and ensuring market liquidity. Pakistan has also taken steps in this regard. It lowered,
although meager percentage, 0.75 % interest rate and decreased the price of petrochemicals which
acts as a major fuel to industry and energy supplies. Regulatory and supervisory responses must
aim to preserve financial stability and banking system soundness while sustaining economic
activity.

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