The economic shock associated with the COVID-19 pandemic is likely to be significantly larger than anything seen since the financial crisis of 2008/09. The spread of COVID-19 has already had a high human cost, and, with public health systems struggling to cope, these costs will continue to grow. The policies put in place by governments to slow the transmission of COVID-19 have led, in many countries, to massive demand and supply shock. This has led to significant trade disruptions, drops in commodity prices, and the tightening of financial conditions in many countries. These effects have already led to large increases in unemployment and underemployment rates and will continue to threaten the survival of many firms worldwide (Loayza and Pennings, 2020). Government revenues are projected to fall as a consequence of the pandemic because of declining economic activity. As fiscal space is already limited in many countries, there is a danger that policy responses to the crisis will either be insufficient or will worsen macroeconomic conditions. Thus, the pandemic will create significant fiscal policy challenges in the government budget preparation process. (Source: http//pubdoc.worlbank.org/) Critically discuss the importance of the government budget in enhancing economic growth in the midst of the COVID-19 pandemic?
The economic shock associated with the COVID-19 pandemic is likely to be significantly
larger than anything seen since the financial crisis of 2008/09. The spread of COVID-19
has already had a high human cost, and, with public health systems struggling to cope,
these costs will continue to grow. The policies put in place by governments to slow the
transmission of COVID-19 have led, in many countries, to massive demand and supply
shock. This has led to significant trade disruptions, drops in commodity prices, and the
tightening of financial conditions in many countries. These effects have already led to
large increases in
threaten the survival of many firms worldwide (Loayza and Pennings, 2020).
Government revenues are projected to fall as a consequence of the pandemic because of
declining economic activity. As fiscal space is already limited in many countries, there is
a danger that policy responses to the crisis will either be insufficient or will worsen
challenges in the government budget preparation process.
(Source: http//pubdoc.worlbank.org/)
Critically discuss the importance of the government budget in enhancing
growth
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