As the world tries to reel back from an economic recession, dismal data from Western economies have sparked fears of a double-dip recession amongst analysts and economists across the globe.
The Standard Chartered Bank has forecast US growth of 2.5 percent this year and only 1 percent in 2011, indicating that negative growth may be seen in some quarters. Renowned economist, Nouriel Roubini, forecasts a 40 percent probability of another recession.
Even the eurozone is likely to experience very sluggish growth, if not a recession, despite impressive growth seen by Germany as of late, which is being attributed to scrawny government stimulus against the critical scale of recession.
Having cut interest rates drastically and spent trillions of dollars to stimulate economies, the real deadlock lies in the fact that the governments may run out of policy options and tools to prevent another recession.
The outlook for the economies remains dicey as the government stimulus programmes to raise spending come to an end.
The local situation, however, is less likely to be affected by the overturns in the global economies. "Pakistans economy is not significantly integrated with that of the developed countries, so a very far-reaching impact will not be witnessed in most probability," said Dr Shahid Hassan, a senior economist.
Because the correlation between local and international capital markets is still in the nascent stages, though increasing, Pakistan will largely remain unscathed from the effects of another recession. In fact, decline in global demand and a consequent dip in commodity prices can instead do good for Pakistans current account.
While it is anticipated that exports from Pakistan will get hurt in case of a double-dip recession, a concentration of exports in the lower value-added products, which are relatively inelastic, will not pose a very dire threat for Pakistan, Asif Ali Qureshi, Executive Director of Invisor Securities told BR Research.
As far as external financing for Pakistan is concerned, some hitches are likely to be witnessed as the country struggles to tap international debt capital markets. No new issuance of the Eurobond was seen the last time because of the global financial crisis.
However, economists also blamed the poor credit rating of Pakistan for the tepid response to the Eurobonds.
That being said, aid inflows in the aftermath of the flood are believed to remain unharmed as these will be only a short-term challenge, and the global economies will likely keep them flowing, at least until a double-dip recession actually happens over a relatively longer term.
Thus while the world does need to brace up for another potential crisis, Pakistan should best focus on the internal predicaments that haunt its stability as a double-dip recession might only have a passing effect on the country.