Financial Impact of Coronavirus on Pakistan

Abstract

The primary objective of this research paper was to study the financial impact of Coronavirus (COVID-19) on Pakistan's economy as a whole by studying major listed industrial sectors of the country. The analysis was conducted by thoroughly studying pre- COVID-19 and post-COVID-19 situation. To perform this task, the data sample for pre- COVID19 was collected from 1" January 2019 to 25 February 2020 since the initial case of Coronavirus appeared in Pakistan on 26 February 2020. Further, for the post-COVID-19 data sample from 26 February 2020 till 31 May 2020 was gathered. Both return and risk volatility analysis was conducted, by applying respective methodologies separately to two sets of data to gain a better understanding of the after-effects of Coronavirus. For return volatility analysis, Event Methodology was used by calculating abnormal returns, while for risk volatility study, the ARCH model was applied. Hypothesis testing mainly involved an assessment of the effect of COVID-19 on each of the 15 sectors selected for Pakistan based on its Market Capitalisation share in the country. The analysis showed that overall all of the sectors got a serious hit with a different magnitude due to the outbreak of pandemic in the country. The most severely got affected were the ones that did not have any support from the government of Pakistan in the form of subsidy or aid. Also, the ones that could not rely on technology to transform its business model. Interestingly, COVID-19 along with calamities for many individuals and long- established businesses resulted in new opportunities as well. This involved mostly the dire need to establish strong IT technology to take all of the businesses online since the customers shifted to prevent catching virus through physical contact. Pakistan, being a developing country had to face a lot of problems as a result and many of its vulnerabilities got to light when the entire country's operations were exposed due to novel coronavirus, depicting how the country lacked in terms of technological infrastructure.