Pakistan Institute of Development Economics



Is Pakistan Ready for the New Normal (Invited Lecture: Key Takeaways)

Author: Hans Timmer

Two important questions need to be addressed today—One, is there a new normal, and if yes, what it is? And two, if there is a new normal, is Pakistan ready for it?

Based on World Bank’s research and experience in other countries, yes, there will be a new normal and the years ahead will be different from what we have experienced in the past. The answer to the second question is that Pakistan is not fully ready yet for that new normal. Yet, Pakistan has a great potential to benefit more from the new normal relative to the gains secured in the past.

It is noteworthy that the world was never the same again after every major global crisis. In fact, each crisis contributed to the development of new technologies, helping to make important changes to the world’s economic power. Each time, new policies were framed and followed to address new problems or take seriously old problems paving the way for new solutions.

What we experience during a major crisis is that established firms suffer losses and  sometimes shut down. This creates an opportunity for new firms to emerge, this is how creative destruction happens. When such changes occur in economic paradigms, economists come up with different kinds of models to address emerging issues.  For example, after the 1930’s great depression, the world was never the same again. Before the 1930s, governments were spending roughly 6-7 percent of GDP, but afterward, the governments started to spend around 35 percent of GDP under the new normal. There was this new paradigm under Keynesian economics which realised that governments had a big role to play in stabilising the economy. As a result, such a great recession never happened again.


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