The world is rapidly coming to terms with the new ground reality with COVID-19 encircling the globe with fear and uncertainty. This uncertainty is the new status quo and businesses all around the globe are engaged in assessing the impact of this pandemic. There is little doubt among the prominent economists that the fear and uncertainty generated by the highly contagious virus is fated to cause a global slowdown. If the global economy experts are to be believed, majority of the countries will very well witness an annual economic contraction.
Pakistan, which is now entering into the 4th week since the first reported case, would not be insulated from the slowdown and agriculture sector which contributes 20% to the GDP would witness an unprecedented decline.
A country’s paramount focus in times of a lockdown is to ensure a sufficient supply of food.
Therefore, the most mission-critical sector of the country is the agri-sector which is bound to experience a decline as witnessed in the past.
A deep dive into forecasting the impact of Coronavirus on the agri-sector, it is important to identify comparable events and track their effects.
A very pertinent correlation can be drawn by the consumption of Urea. Since the pandemic is being touted as a severe calamity to have hit Pakistan, unfortunately the last two decades serve some relevant examples of a somewhat comparable event. The two events that replicate the effect of a calamity are the tragic Earthquake in 2005 and the disastrous floods in 2010.
Both the events depicted a rather similar stories pertaining to the agri downtrend; the Urea offtakes witnessed a sharp decline at the back of poor agri sector performance after both the events.
Covid-19 pandemic impact on the agri-sector would be unprecedented. Whilst earthquakes and floods had geographically concentrated effect, the impact of this pandemic will be felt across the country. On the top of it, the international slowdown and trade restrictions would further augment the challenge.
Pakistan’s top export items are food and textile which are primarily linked to agriculture and considering the apparent slowdown in demand in the foreign importing partners, it will inevitably hurt our exports. Therefore, all the numbers hint that the agri-sector and associated input providers along with the relevant supply chain would be adversely impacted by the prevalent pandemic.
Based on the historical trends, it is estimated that the Urea industry, which has averaged 5.8M Tons for the past 5 years, will now record a significant reduction, clocking in at an estimated 5.4M tons for the current year assuming the demand to reduce in line with the past trend.
However, as the COVID 19 pandemic is first of its kind with no geographical boundaries, the impact is expected to be much higher which would bring the demand down to 5.2M tons.
This would additionally imply that the country would not only be self-sufficient in Urea supply but also be able to generate safety stocks, required to support the agri-sector on its revival expected next year.
The GoP should consider the impact of this unprecedented calamity on the agri-sector while planning the resource allocation in the post-corona paradigm.
