Pakistanis may face an unprecedented level of joblessness during the fiscal year 2021 (July 2020 to June 2021) as the International Monetary Fund (IMF) expects Pakistan’s unemployment rate to rise to 5.1%.
According to the World Bank data on Pakistan’s unemployment rate, which is available since 1991, it will be the highest level the country has faced in its at least 30 years. The trend on the World Bank website shows that unemployment levels remained below 1% from at least 1991 to 2011.
The IMF, in its latest report World Economic Outlook, October 2020: A Long and Difficult Ascent, reported that the unemployment rate will increase from 4.1% and 4.5% in 2019 and 2020 respectively and to 5.1% in 2021.
The main reason for the high unemployment rate is that Pakistan faced an economic contraction for the first time in 68 years, mainly due to the COVID-19 pandemic. The economy contracted by -0.4% in 2020. The IMF report has also forecast that Pakistan’s GDP would recover a slow pace of 1% in 2021.
Meanwhile, the prices of consumer goods and services or inflation would decrease to 8.8% in 2021 from 2020’s 10.7%, according to the report.
Contrary to recent improvements Pakistan made to its current account balance when it recorded a surplus for four months during the previous fiscal year, the IMF predicts that the country would again record a higher current account deficit in 2021.
A negative current account balance is called a current account deficit and a positive current account balance is called a current account surplus.
The current account balance was improved to -1.1% in 2020 from -4.9% in 2019 after the government took several measures to halt imports during 2020. But the IMF forecasts that the country’s current account balance will deteriorate again to -2.5% in 2021.
The report focuses on the economic performance of countries around the world especially now that they have started returning to normal after the coronavirus lockdowns.
In the first chapter ‘Global Prospects and Policies Global Prospects and Policies’, the report offered a glimpse into the difficulties rekindling economic activity while the pandemic surges. During May and June, as many economies tentatively reopened from the great lockdown, the global economy started to climb from the depths to which it had plunged in April. But with the pandemic spreading and accelerating in places, many countries slowed reopening, and some are reinstating partial lockdowns.
While the swift recovery in China has surprised many, the global economy’s long ascent back to pre-pandemic levels of activity remains prone to setbacks.
The second chapter ‘Dissecting the Economic Impact’, described the nature of the economic crisis in the first seven months of the pandemic. It finds that the adoption of lockdowns was an important factor in the recession, but voluntary social distancing in response to rising infections also contributed very substantially to the economic contraction. Therefore, although easing lockdowns can lead to a partial recovery, economic activity is likely to remain subdued until health risks abate.
The third chapter ‘Mitigating Climate Change’, stressed the need to respond to climate change. Without further action to reduce greenhouse gas emissions, the planet is on course to reach temperatures not seen in millions of years, with potentially catastrophic implications, the report said.
The report suggests that an initial green investment push combined with steadily rising carbon prices would deliver the needed emission reductions at reasonable transitional global output effects, putting the global economy on a stronger and more sustainable footing over the medium term.