Economic headwinds are expected to subside as economic indicators are seen improving. With surplus in recent months, current account deficit is expected to remain in control; remittances a have continued to march up and outlook for currency depreciation is also stable. Plus, government’s packages, low interest rates, expected control in inflation, and debt relief on international loans will all contribute to economic revival in 2021. Economic moguls are cautiously optimistic.
This is the news on the economic front. How have the households been coping with the COVID-induced economic slowdown? Economic slowdown of 2019 was exaggerated with COVID-19 to a much greater scale with millions of job losses as the country went into the lockdown during the first wave. This was accompanied with inflation heading north. However, the situation might have improved to some extent for the households according to the latest Economic Vulnerability Assessment by Centre for Economic Research in Pakistan (CERP). Though the survey which examines the economic impact of COVID-19 on households is limited to Punjab, it can be a psychological extrapolation of the whole country.
The round-two finding (the first being conducted earlier this year) tries to study the impact on households against a number of factors like income, spending, food, financial outcomes, health outcomes, and financial and fiscal support. Survey shows notable recovery in employment outcomes. For example, that the job losses among respondents fell from almost 23 percent in round 1 in February, to 5.5 percent in round 2; percentage of those that were currently unemployed fell from 33.7 percent to 20.9 percent; and fraction of those not in the workforce declined from 3.1 percent to 1.3 percent. Overall, average incomes between February and May fell by 25 percent, while those between May and August fell by 11 percent. Segregated data also shows that recovery has been significant – albeit incomplete for higher-educated individuals who were hit harder in the initial months.
In terms of financial challenges, around a third of households in round 2 missed at least one monthly payment, which is an improvement from 48 percent of households missing at least one payment in round 1 – the most common payment being electricity bills. Similarly, household informal borrowings primarily from family and friends have also seen a decline in the second round of the EVA study.
The situation in terms of food is not too rosy as the study shows that almost half of the households in the second round versus 46 percent in first round had to make some compromise on food, including relying on less expensive food items, going to bed hungry, reducing the size of meals, or relying on help for food. This is not surprising given how inflation in food items has hit the masses. The government’s relief packages, and central bank’s focus helped slowdown the economic distress from Covid-19. However, the survey shows that in the second round of assessment, only 12 percent of households reported receiving cash or in-kind support, majority of which was through the Ehsaas program (90 percent),
The storm has not weathered; the second wave of coronavirus is becoming aggressive. And while the Prime Minister has been very vocal against a complete lockdown, the repercussions of little to no restrictions and no adherence to SOPs is eroding the little economic recovery that the country has seen in recent months due to the fiscal and monetary support by the government and the State Bank of Pakistan. A further severe resurgence of the virus and the ensuing lockdowns and restrictions could mean that the government will have to find more fiscal space for further incentives. Moreover, it will also raise unemployment and disrupt supply chains and hence increase inflation – two factors that deeply add to household insecurity. It is not over yet.
