Exporting outside the economic crisis induced by the Covid
The dynamics involved in international business activities are becoming more complex than ever as the world recovers from the shock of the Covid-19 pandemic and reopens its borders.
UNCTAD’s Trade and Development Report 2021 predicts that the global economy will grow by 5.3% as it recovers from the negative impact of Covid-19. It will be the fastest growing in the past five decades.
The report also suggests that the impact of the pandemic on the Global South is greater than the impact it felt during the previous financial crisis. The global economy is expected to lose around $ 13 trillion between 2020 and 2022 compared to the pre-pandemic forecast of the global production level.
More importantly, the impact of the pandemic on income levels as a percentage of GDP has been one of the highest in South and Southeast Asia, with the economic impact likely to be 20% of gross domestic product (GDP).
In addition, the rise in the prices of raw materials could seriously undermine the recovery efforts in the South, already in economic difficulty due to the health crisis.
The WTO, in a recent press release from October 2021, highlighted the upward trend in world trade as economists update their forecasts for 2021 and 2022.
The WTO predicts that the merchandise trade volume will increase by 10.8% in 2021, compared to a forecast of 8% in March 2021.
However, the press release warns of risks such as challenges for global supply chains as well as the possibility of large regional disparities, as some regions may report relatively slower recovery rates.
The WTO expects the service sector, particularly travel and leisure, to lag behind merchandise trade in terms of recovery rates. However, this does not mean that the impact of the service sector on economic growth is less important.
A recent World Bank publication titled “At Your Service? The Promise of Service-Oriented Development “focuses on the service sector’s contribution to the crucial impetus for economic transformation.
The publication reports that half of workers in low- and middle-income countries are employed in the service sector, while workers are increasingly productive.
With the use of digital technologies and the increase in the number of highly skilled activities in the service sector, there is a significant potential for increasing international business activities.
A more productive service sector can enable the manufacturing sector to improve its level of productivity by complementing manufacturing activities and enabling a more efficient mix of inputs.
Pakistani exports, imports
Based on Pakistan’s export and import data as reported by Pakistan Bureau of Statistics (PBS), he revealed that both exports and imports recovered in FY21.
Exports increased 18.3% and imports increased 26.6% over FY20 reported values.
Total exports of $ 25.3 billion are the highest on record in the country’s history, suggesting that Pakistan’s export-oriented industries have performed relatively better than several other developing countries, which struggled to trade during the pandemic.
As levels of economic growth have accelerated in Pakistan, demand for imports has also increased. Total imports in FY21 were $ 56.4 billion, one of the highest levels in the country’s history.
Pakistan’s service exports increased 9.2% in FY21 from the reported value for FY20, mainly driven by the Information and Communication Technology (ICT) sector.
Pakistan’s export growth was mainly driven by the textile sector, which recorded a 22.9% increase in exports in FY21 compared to the declared value for FY20. This continued to increase in the first two months of FY22, with growth of 28.7%.
Bed clothes, knits and towels, which are value-added goods, contributed the most to the increase in exports.
According to data retrieved from ITC’s Trademap.org, approximately $ 9.8 billion of Pakistan’s exports out of $ 13.1 billion of textile exports were destined for the United States and Europe in 2020. .
Specifically, $ 3.46 billion in exports were destined for the United States and $ 1.37 billion in shipments were destined for the United Kingdom.
The majority of products exported to Western countries were made-up textile articles and clothing.
Although Pakistan has experienced higher export growth rates than its regional competitors, challenges remain and may impact the long-term expectations of export-oriented sectors.
For example, Pakistan’s clothing exports increased in 2020 while those of regional competitors such as India and Bangladesh declined. Clothing exports from India fell by more than 20% in 2020 compared to the previous year.
With the resumption of exports from regional competitors, competition is expected to intensify in the main markets.
Another major obstacle to global trade is the deadlock in the supply chains, as shipping costs reach unprecedented levels and congestion at major ports results in a significant slowdown and higher costs of trade. .
With supply chain disruptions, preference may not only shift to imports of needed goods, but efficient logistics and border facilitation becomes increasingly crucial as exporters demand fast shipping. of their products.
In summary, recent gains in export levels should be viewed with cautious optimism. As the global economy recovers from the shock of the pandemic, the level of competitiveness of exports relative to its regional counterparts will become increasingly important. Boosting the productivity and capacity of exporters will be essential.
The author is assistant professor of economics and researcher at CBER IBA
Posted in The Express Tribune, October 25e, 2021.