THE post-pandemic years, marked by extreme volatility in the global oil and commodity markets as well as slowing growth amidst soaring inflation and decades-high interest rates, have been tough for the world economy — more so for the developing nations. These challenges worsened with post- Covid-19 energy and food supply disruptions, as well as the wars in Ukraine and Gaza. Countries like Pakistan, where lives were devastated by the sharp spike in the cost of living and rising unemployment, have borne the brunt. Nevertheless, the outgoing year saw some sanity return to the commodity markets as countries started to put the aftermath of the pandemic and conflicts behind them. Central banks around the world, including the Federal Reserve, began cutting interest rates as inflation decelerated. Economies such as Pakistan followed suit, as the pace of increase in domestic prices dramatically reduced, and the pressures of expensive energy imports on their international reserves eased.

The outlook for 2025 started to appear as more stable, even bright — until the US presidential elections returned Donald Trump to the White House. For many, it might get tougher in 2025, with European Central Bank president Christine Lagarde predicting uncertainty “in abundance” in 2025. Indeed, much of this uncertainty has been generated by Mr Trump’s threat to impose 10-20pc tariffs on all imports and 60pc on Chinese goods. It is still anyone’s guess whether the American president-elect will push ahead with his plans, or if those threats are just his way of putting the US in an advantageous position when it comes to trade negotiations with its major trading partners — China and Europe. “If a Donald Trump presidency enacts US import tariffs that spark a trade war, that could mean a fresh dose of inflation, a global slowdown or both,” says a recent Reuters report. China and Europe have already begun recalibrating their economic and financial policies to preserve their growth in anticipation of Mr Trump’s tariffs. Pakistan may not be affected directly. But higher Fed rates, a rise in global commodity prices, or a slowdown could impact our economy indirectly — and quite significantly. Are we ready for what might be coming? Being a small economy, there is not much that we can do about what threatens to hit us. Yet we can take some tough decisions to reduce the impact of the anticipated storm by revamping and restructuring the economy.

Published in Dawn, December 27th, 2024