Coronavirus hullabaloo – the pros and cons for Pakistan’s economy

February 11, 2020 (MLN): The Novel Coronavirus, the epidemic that has crept its way across 25 nations with China being the epicenter of them, has left no stone unturned in leaving a solid, hurtful impact on economies across the board. 

Initially originated and proliferated in China, the outbreak very swiftly took major regions into its grip, which ultimately led to the Asian markets suffering enormous losses. While several nations affected by the outbreak continue to report substantial losses, Pakistan is an exceptional case which despite not having a single reported case of Corona Virus, has started showing signs of extreme distress already. 

However, a research note by AKD Securities has stated that there is nothing wrong with this premature negativity, as long as there’s a considerable slowdown in the number of casualties outside of mainland China, along with signs of economic recovery in major economic zones of the country, with confirmation from both commodity markets as well as media reports.

Nonetheless, the report has pointed out some impacts of the epidemic on the economy of Pakistan, both positive and negative. The prevailing situation in China can be of huge benefit for the local manufacturers in terms of reduced competition and control over pricing, AKD believes. Citing this advantage in the context of the fertilizer sector, the report has picked FFBL, FATIMA, ICI and LOTCHEM as the major beneficiaries from the unfortunate circumstances in the neighboring country.

On the contrary, Pakistan may see itself suffering in terms of lost imports, as China has been and continues to be a major supplier of goods and services to the country. As a result of this temporary disruption in trade, sectors such as Cable & Electrical and Auto Supply Chain may suffer the most as they rely on various machinery, electrical goods, semiconductors, AC parts and compressors imported from China.

Last but not the least, two of the most important Chinese gems of Pakistan, i.e. BMR and CPEC, may witness serious commotion as the supply of major components needed for these projects may face an indefinite delay. While Pakistan has the option of importing equipment from alternate sources, such as the EU and the Far East, but it wouldn’t be possible without incurring significant cost overruns.

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