International Monetary Fund (IMF) President Kristalina Georgieva warned this week that she expects a global recession this year due to the Coronavirus (Covid-19) outbreak. In a statement released by her office in Washington, the IMF chief said that since the breakout, 80 countries had sought help from the Fund to cope with the virus consequences.
The IMF Chief warned: "The outlook for global growth is negative for 2020, and perhaps a worse recession is expected, as in the time of the global financial crisis. We expect recovery in 2021. The economic impact of the epidemic will be severe too and the recovery could be fast and strong, only if the virus was stopped quickly."
The IMF chief pointed out that "many emerging economies and low-income countries face significant challenges...that $83 billion had flown out of emerging markets since the beginning of the crisis, which was recorded as the largest capital outflow ever."
The IMF chief reminded the international community that the IMF was ready to use its $ 1 trillion credit capacity to combat the epidemic.
Most venerable in this region is the Middle East. The International Monetary Fund called this week for urgent action from Middle East governments as the coronavirus pandemic threatens a persistent slump in oil revenues and a "big drop" in growth.
The IMF said a dozen Middle Eastern and North African countries had already approached it for financial support.
It urged governments across the region to swiftly draw up rescue packages to head off a protracted recession.
"The region is likely to see a big drop in growth this year," the IMF's regional director for the Middle East and Central Asia said in a report. The fund had already substantially cut its growth projections for the region over low oil prices, civil unrest and US sanctions against Iran.
What could the global economic meltdown mean for Pakistan? It can be positive and negative. Positive - if the country can fathom the hidden opportunities emerging out of the global economic crisis and acts to cash in on the situation. It will be negative if it adopts a passive attitude and decides to flow with the global tide of recession.
The Great Depression of 1924 witnessed the bounce-back of an economy which witnessed an exponential growth in the decades that followed. Nations and corporations who had set an eye to fill in the gap created by the Depression gained immensely.
As per initial estimates, Pakistan is likely to suffer an economic loss of Rs 1.3 trillion on account of slowdown due to lockdowns across the country. This will further escalate on account of global recession in terms of cancellation of a number of export orders.
The recession in the Middle East will have a significant impact on Pakistan's economy, adversely affecting home remittances sent by our overseas workers in the region. Home or workers' remittances constitute a major source of our foreign exchange.
Most of the G20 countries have decided in favour of Coronavirus control versus their economic growth.
China appears to have moved out of the crisis and is on the way to get on with business. Countries and corporations who have an eye on the looming gap in supply and demand have the potential to gain out of looming Recession. China, already in an economic revival phase, will potentially fill in much of the gap. Although the USA is desperate to stage a comeback, it is check-mated as the virus crisis in it is only accelerating as the US has now become a country with the highest number of positive cases in the world, surpassing China's and Italy's.
Pakistan will come out of the Coronavirus peak in a month's time. Its strong textile, cement, service and agro sector can gain much out of the potential opportunity.
The IMF has volunteered to soften and lessen the loan payback conditions for poor countries facing the virus threat. It's a good news for Pakistan and it must aggressively avail the concessions.
With lower oil bills and lending rates Pakistan can significantly reduce the cost of doing business to revive its closed industry, specially the export- oriented industry. Also, with lower oil prices and support the nation can boost its agricultural growth for exports and increased local consumption.
The consequences of global recession can turn out to be a one-time opportunity for Pakistan to turn around its economy. In this game, however, speed is of essence and the winners will be early birds.
(The writer is former President of Overseas Investors Chambers of Commerce and Industry)