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Pakistan's economy may contract 5.5% due to lockdowns

By Shahram Haq

Ever since the Covid-19 pandemic hit the globe, several international institutions have given various estimates about economic losses to different countries.

For Pakistan, a few estimates have been made by key financial institutions, which forecast the country’s economy will contract by up to 1.5%. However, a local business school has painted an even gloomier picture for calendar year 2020 in case the lockdown persists for nine months (March to November).

In a worst-case scenario, the think tank of Lahore School of Economics (LSE) has estimated that Pakistan may post a GDP loss of 5.5% if the lockdown continues for nine months. Utilising a general equilibrium macro (GEM) model, the LSE found that as a result of a three-month lockdown (March to May), Pakistan may experience a 2.9% contraction in GDP growth in 2020.

“This will result in a loss of 1.5 million jobs by the end of the year,” the study stressed. “Out of this, 1.2 million informal jobs will be lost while 0.3 million professionals employed in the formal sector will be rendered unemployed.”

It projected that if the lockdown was extended to six months (March to August), Pakistan would post a negative growth of 3.1% in 2020.

It would result in 1.6 million job losses by year-end, it said. Out of this, 1.3 million people will become unemployed from informal occupations and 0.3 million formal jobs will be lost. In the worst-case scenario ie a nine-month lockdown (March to November), the research said Pakistan’s economy would contract 5.5% in 2020, which would result in job losses for 2.8 million people.

The research claimed that 2.3 million jobs would be lost in the informal sector and 0.5 million jobs would be lost in the formal sector.

These estimates were made by initially adding a supply shock to the model based on the lockdown of various sectors of the economy followed by a demand shock.

The study utilised the theory that the present crisis was triggered by the supply shock just like the Great Depression of the 1930s, Asian crisis of 1998 and the financial crisis of 2008 that were all triggered by supply-side shocks. The lockdown of non-medical-cum-non-essential sectors of economies all over the globe results in a supply shock.

The supply shock leads to loss of income and output. The loss in income then results in a demand shock, primarily through reduced consumption and investment. So, the full impact on the economy comes in form of both supply and demand shocks. The think tank has estimated the supply shock based on lockdowns in various sectors in the wake of government’s directives. It is worth noting that these estimates vary considerably from the IMF’s early projection of a 1.5% contraction in GDP.

Also in The Express Tribune

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posted by S A J Shirazi @ 5/14/2020 12:05:00 PM,

How to get hired during COVID 19 pandemic

Ms. Fatima Asad Said, Managing Director at Abacus Consulting gave an online talk to to the graduating BBA class on Wednesday,May 13, 2020.


Ms. Said discussed in detail how graduates could get hired during COVID 19 pandemic.She said that uncertainty about job opportunities and disruption to regular routines could make an already stressful job search even more challenging for fresh graduates. Ms.Said said, "while it may be difficult there are measures they can take right now to help them navigate this situation to the best of their ability." ​She also  gave useful tips to the graduates regarding managing their careers. She talked about finding internships and internships alternatives during COVID 19.
Read more »

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posted by S A J Shirazi @ 5/13/2020 03:56:00 PM,

Strategic Management

Mr. Umer Khan , Founder and Trainer- Activ8 gave an online  talk via  ZOOM to the students of the undergraduate program who are enrolled in the course of “Strategic Management” on May 11,2020.

He covered the following topics in his talk:

* Career options in this tough time
* Dos and don'ts of an interview
* Nature of jobs available in this tough time
Read more »

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posted by S A J Shirazi @ 5/12/2020 04:00:00 PM,

Organizational Behavior

Ms. Mahreen Pasha, Creative Director at Ogilvy, Lahore, delivered an online session on Culture at an Advertising Agency to the MBA cohort in their course on Organizational Behavior on May 11, 2020.




Mahreen reminisced that her career in advertising began almost accidentally. She had been interested in writing creative stories, and during her pursuit of a degree in mass communications in the US she happened to choose a course on advertising. On coming back to Pakistan she worked for JWT, not for the monetary benefit it would entail but because it would allow her to learn the art of copywriting. Later, she worked at both Ogilvy and Mullen Lowe in Karachi, took a break to raise family, and joined Ogilvy Lahore where she was working now.
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posted by S A J Shirazi @ 5/12/2020 12:22:00 PM,

Budget blues

Rashid Amjad

These are challenging times, however you describe them: The Great Repression, The Great Pause or The Great Lockdown. And the unenviable task of preparing next year’s budget for a $300 billion economy and 220 million people in these most uncertain of times falls on the shoulders of the finance ministry.

To start with, there are some ground realities it must face. We are still under a stringent IMF Extended Facility Fund programme with all its conditionalities. These will most certainly be modified in the changed circumstances, but not completely ignored. It is important that we continue firmly with the programme. It would be a grave mistake if, during this period of unparalleled global uncertainty, we are seen as living up to our past reputation of a one-tranche borrower!
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posted by S A J Shirazi @ 5/12/2020 11:57:00 AM,

Estimates of the impact of the Coronavirus Pandemic on Pakistan’s Economy

Moazam Mahmood, Azam Chaudhry, Aimal Tanvir, Muaz Chaudhry
Lahore School of Economics Modelling Lab
Innovation and Technology Centre
Lahore School of Economics
6 May 2020


Estimates

We have estimated the impact of the Coronavirus pandemic on Pakistan’s GDP and employment. Using a General Equilibrium Macro (GEM) model for the Pakistan economy that the Modelling Lab Team at the Lahore School’s Innovation and Technology Centre has developed over the past two years for policy simulations and teaching. These GEM forecasts are usually made for the Annual Conference on the Management of Pakistan’s Economy. But the pandemic has intervened and needs to be assessed urgently for policy response.

To enable policy discussion and options for decision making, we have made three alternative forecasts, based on three scenarios about the duration of the lockdown in Pakistan. A three month lockdown over March-April-May gives the relatively most optimistic impact on annual GDP growth and jobs for 2020. Given that at the time of running these simulations, on the 6th of May, the rate of infections appears to be spiking to over 1000 per day, and the Prime Minister very wisely urging caution in easing the lockdown, the three month scenario looks to be overly optimistic. Accordingly we have run separate scenarios for a six month lockdown, and as a longer run eventuality, a nine month lockdown. The lockdowns are assumed to gradually ease over the period of the lockdown.

Our estimates show that as a result of the pandemic triggered lockdown, a three month lockdown, from March to May, will reduce Pakistan’s GDP by 2.9% for the calendar year of 2020. This will result in a job loss of 1.5 million by year end. Of this job loss, 1.2 million will be informal livelihoods lost, while 0.3 million will be formal jobs lost.

A six month lockdown, from March to August, will reduce Pakistan’s GDP by 3.1% for the calendar year of 2020. This will result in a job loss of 1.6 million by year end. Of this job loss, 1.3 million will be informal livelihoods lost, while 0.3 million will be formal jobs lost.

A nine month lockdown, from March to November, will reduce Pakistan’s GDP by 5.5% for the calendar year of 2020. This will result in a job loss of 2.8 million by year end. Of this job loss, 2.3 million will be informal livelihoods lost, while 0.5 million will be formal jobs lost.

Summary of methodology

This estimation exercise has been based on modelling first a supply shock to the economy, based on the lockdown of various sectors of the economy, and then a demand shock. The logic is that this crisis has unusually, compared to past economically triggered crises such as the Great Depression of the 1930s, the Asian Crisis of 1998, and the Financial Crisis of 2008, been triggered by a supply side shock. The lockdown of the non medical cum non essentialsectors of the economies all over the globe, results in a supply shock. The supply shock gives a loss in income and output. This loss in income then results in a demand shock, primarily through reduced consumption and investment. So the full impact on the economy is a double whammy of both a supply shock plus a demand shock.

We have calibrated our GEM model for Pakistan’s economy, to capture this succession of a supply shock feeding in turn a demand shock.

We have estimated the supply shock based on an imputation of lockdowns in various sectors, based on GOP’s directives. The estimate is for the calendar year 2020. So the first two months give the baseline with no shocks. The lockdown began on 15 March. Thereafter the lockdown proceeds in full for the month of April, followed by a graduated winding down over the course of the lockdown for 2020. The three month lockdown is assumed to be over March to May. The six month lockdown is assumed to be over March to August. And the nine month lockdown is assumed to be over March to November.

These supply shocks triggered by the lockdowns, are then modelled to trigger in turn demand shocks. These demand shocks are primarilymade to consumption, investment and imports – being domestic demand shocks. Exogenous demand shocks are made to exports, and remittances.

Which gives a cumulative reduction in GDP over 2020, of 2.9%, compared to 2019, for a three month lockdown. A 3.1% cumulative reduction in GDP over 2020, compared to 2019, for a six month lockdown. And an 5.5% cumulative reduction in GDP over 2020, compared to 2019, for a nine month lockdown.

It is worth noting that these estimate vary considerably from the IMF’s early estimate of a fall in GDP over 2020 of -1.5%. But are well in keeping with country estimates for instance in the Eurozone.

The model estimates that athree month lockdown with a loss in GDP of 2.9% results in a job loss of 1.5 million for 2020. A longer lockdown of six months with a loss in GDP of 3.1%, results in a job loss of 1.6 million. While a lock down of nine months, pretty much for the duration of the calendar year 2020, with a loss in GDP of 5.5%, results in a job loss of 2.8 million. The predominant job loss, is in informal livelihoods, at 1.2 million for a three month lockdown, 1.3 million for a six month lockdown, and 2.3 million for a nine month lockdown. This is in keeping with the ILO report estimating near 150 million informal jobs may be lost worldwide.

This is a first estimation made on 6 May 2020. Given that the trigger is the pandemic, its unfolding over time, and GOP’s responses to it can be expected to change the lockdown scenario. For which we will make periodic updates.
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posted by S A J Shirazi @ 5/08/2020 01:43:00 PM,

Strategic Management


Sadia Irfan, Head of HR at Fatima Group of Companies gave an online talk to the students of the undergraduate program who are enrolled in the course of "Strategic Management" Wednesday, April 22, 2020.
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posted by S A J Shirazi @ 5/06/2020 06:16:00 PM,

Managing Culture in a Digital Company

Mr. Badar Khushnood, Cofounder and Vice President of Growth at Bramerz and Fishry, delivered an online  session on “Managing Culture in a Digital Company” to the MBA cohort in their course on Organizational Behavior on May 5, 2020.


Badar summarized the culture at Bramerz as follows. First, it was an open culture. No one was boss for what was “normal”: power was exercised only when there was violation of some well-understood norms. If employees brought lunch with them and ate it in the office-space, that was fine but then they had to take the utensils themselves to the kitchen to be washed by office boys. Second, rules were applied to all. When Bramerz’ office space was declared as a non-smoking arena, any founding member who was a smoker had to respect that rule immediately.
Read more »

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posted by S A J Shirazi @ 5/06/2020 12:33:00 PM,

Export Marketing


Mr. Murshed Alam Qureshi, Director-Speedy Sourcing Solutions gave an online talk (via Zoom) to the students of undergraduate programme who are enrolled in the course of “Export Marketing” on Monday, May 04, 2020. He covered different topics including Importance of International Trade & Marketing, Evolution of Global Trade, Export of Services from Pakistan, Importance of Exports for Current Account of Pakistan and Impact of COVID 19 on Exports.
Read more »

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posted by S A J Shirazi @ 5/05/2020 04:04:00 PM,

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