Economic Policies and COVID-19

Summary

The economy is suffering from an unprecedented health crisis caused by COVID-19. Although some countries were able to, most could not control the initial outbreak of the infection and were forced to confine people to their homes and partially or completely lockdown non-essential economic activities.

Key points

• Key points:
• Estimates for the G7 economies predict a fall of between 25% and 30% in aggregate economic activity during the isolation period.
• The motto of the monetary and fiscal authorities is to take all necessary measures to ensure that economies can be reactivated and avoid the potential more long-lasting consequences of this crisis.
• It is uncertain what the combined impact of all fiscal policies and their effects will be. But it is easy to foresee scenarios where the deficit increase ranges from 5 to 10 points of GDP, or even more.
• The better designed and more effective the policies, the greater the return on each euro spent now and the impact on growth, and the lower the cost of maintaining the sustainability of public accounts in the future.

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