Increase in duration of COVID-19 measures to severely impact Pakistan's economy: SBP

The State Bank of Pakistan (SBP) on Monday stated that the increase in the duration of measures taken to mitigate COVID-19 spread will take a much severe toll on the country’s economy.

“In the baseline case, the impact of COVID19 to the economies could be likened to any other calamities that befall us, a sudden disruption followed by a wave of reconstruction and recovery and ultimately the return to normalcy,” stated SBP in a video message.

The central bank stated that disruption caused by COVID-19 is ‘more widespread and prolonged.’ According to the SBP, the coronavirus pandemic has limited the scope of economic activity, with shopping malls, restaurants, and other public places either partially or completely closed due to lockdowns imposed to curb the virus spread.

“The longer these measures are in place, the more severe will be its impact on the economy,” warned SBP.

“If Pakistan manages to flatten the COVID19 curve soon, and reverses the containment measures in a significant manner, then we can hope for an early supply-side recovery,” stated SBP.

The central bank said that transporters, manufacturers, and retailers can all be expected to reposition themselves and make all-out efforts to compensate for the earlier losses. “However, domestic demand may remain suppressed, as higher unemployment and weak consumer confidence would weigh in.”

The SBP was, however, optimistic that growth can be boosted by adopting economic recovery policies, but increasing the spread of coronavirus will increase public health spending.

“The healthcare facilities stretched and lockdowns strictly tightened, this will further suppress economic activities, and can potentially create an existential threat to micro and small businesses.” As a result, the central bank said that more funds will be spent on healthcare and vulnerable households, whereas economic policies will be fixated on businesses' survival than growth.