Political and Economic scenario in 2021

Last sunset of 2020 has taken place and sun of 2021 is now shining on the sky.

Politically and economically, the year of 2020 has gone worst for the politics and economy of the world. Corona virus epidemic appearing in January 2020 took politics and economy on its way. Developments of the world went in to negative. Millions of people gave their life and millions are still in the hospitals. At the end of 2020 some rays of hope has emerged on formation of its vaccines but its availability and results are still far away.

Internationally in 2021 after becoming President of USA Joe Biden regional changes would realign by favoring Israel.

Pakistan has gone with the same conditions in 2020. Millions of people have gone unemployed. Political polarization is on the weak with PTI government and PDM in the form of opposition. Both are looking confused. PTI with a team hired from general Musharraf and Zardari are doing mistakes on each day with no forward looking solutions. The prices have gone so high that its recovery is now out of question.

For 2021 whatever PTI says and what PDM says, but for sure Imran Khan may have to leave becoming another PM who has not completed his 5 years term. PDM would have no role in it but Imran Khan Egoist attitude with U turns each day would leave no option for himbut to leave the government before time.

Pakistan is projected to experience little bit economic recovery in fiscal year (FY) 2021 (which ends 30 June 2021) as the economic sentiment improves with the expected subsiding of the coronavirus disease (COVID-19) pandemic if happened and with the resumption of structural reforms if done.

The multilaterals (IMF, ADB, World Bank) have released their Updatesby revising the 2020 growth forecast for Pakistan to -0.4% and the growth forecast for 2021 to 1-2.0%. Earlier they had forecasted Pakistan to grow 2.6% this year and 3.2% next year. COVID-19 severely impacted economic activity in 2020, erasing gains achieved in the first half of the fiscal year. The suspension of travel and the closure of nonessential businesses induced concurrent demand and supply shocks.

Rising food prices pushed inflation from 6.8% in FY2019 to 10.7% in FY2020, however inflation is projected to slow to 8-9 % in FY2021. The current account deficit eased considerably as merchandise imports fell steeply due to containment disruptions, lower oil prices, and local currency depreciation. As inflationary pressures would ease, the State Bank of Pakistan cut its policy rate by a cumulative 625 basis points from March to June 2020 to 7.0% and introduced additional measures to support the economic recovery. News is that in 2021it may cut its discount rate further.

As the curve flattens and business activity resumes, the economy may show signs of resilience and recovery. The government’s rapid procurement of wheat through import, support for health and food supplies, and financial support for small and medium enterprises helped shield the poor and most vulnerable during the pandemic. But these steps have come too late.

A silver lining on the supply side may be agriculture, which remained largely unaffected as its growth accelerated from 0.6% in FY2019 to 2.7% in FY2020 despite a severe locust infestation that damaged the harvests of many crops, most notably cotton. Higher water availability enabled increased production of wheat, rice, and maize, as did government subsidies for fertilizer and an uptick in agriculture credit disbursement. However, industry contracted by 2.6% in FY2020 as shutdowns and supply chain disruptions related to COVID-19 exacerbated other adverse factors affecting the sector since FY2019.

The current account deficit eased from the equivalent of 4.8% of GDP in FY2019 to 1.1% in FY2020 as almost all imports recorded steep reductions in the wake of the pandemic. The deficit in merchandise trade narrowed by 27.9% as the global slowdown, lower oil prices, and rupee depreciation drove down merchandise imports by 18.2%. In FY2021, the current account deficit is anticipated to remain contained at the equivalent of 2.4% of GDP, unchanged from the earlier forecasts. The most dangerous indicator would be fiscal deficit reaching around Rs 3 trillion forcing Pakistan debt to further increase that is already touching Rs 44,801 billion.

Hence first half of 2021 would remain not in favor of its people with zigzags going on politically that would create further confusion that is due to end with leaving of Imran Khan with replacement of a government in combination of electables and non-electables.