Fiskalinės politikos priemonių, skirtų COVID-19 sukeltiems padariniams suvaldyti, vertinimas ; Assessment of fiscal policy measures to manage the effects of the COVID-19 pandemic

Abstract

The global outbreak of the COVID-19 virus has caused a major crisis affecting the population, economies and health systems. Travelling restrictions, suspended business activities, lack of healthcare measures and loss of revenue are linked to the effects of the COVID-19 crisis. The pandemic impacted increase of unemployment, decrease of exports and imports as well as negative changes in consumer pricing and number of bankruptcies. COVID-19 has affected not only economic activities but also had a strong impact on human health with a high number of deaths. Global COVID-19 crisis management included tax and public protection measures, the application of fiscal policy also played an important role. Fiscal measures adopted to manage the consequences of the pandemic included wage support, business assistance, tax deferrals, social benefits for the most vulnerable groups of population. Fiscal policy measures applied by the states, depended on the epidemiological situation in the country, country capacities and identified priority areas. The scientific research articles summarizes national actions and measures which were applied to reduce the consequences of COVID-19, as well as analyzes the relevance of fiscal policy. After completing the analysis of the scientific sources, the aim of this final project was identified to be the – investigation of the impact of fiscal measures in order to reduce the effects of COVID-19. The object of the research – fiscal policy measures in the context of COVID-19. COVID-19 virus spread worldwide at the end of the 1st quarter of 2020. Currently recorded over a million deaths caused by the virus. Analysis of statistical data showed significant increase in unemployment in the second quarter of 2020. Also, the volume of imports and exports decreased significantly. The increase in bankruptcies was also noticeable but at the same time new companies were emerging. The world's authorities have actively responded to the spread of the virus and taken urgent actions. The IMF provided financial assistance to the countries affected by the pandemic, the EU took steps to ensure population health protection, measures to stop the spread of the virus, disinformation and supported development of vaccines (Goniewicz et al. 2020). Fiscal policy is implemented through the government expenditure and use of revenue to influence the economy (IMF, 2020). The importance of fiscal policy has become apparent during the recent financial crisis, when countries have taken steps to increase spending and cut taxes to suspend the effects of the crisis. In the case of the COVID-19 crisis, the focus is on health care, income maintenance and the provision of social benefits and business support. Researches shown that fiscal policy based on increase in government spending is most appropriate for analyzing GDP, debt-to-GDP ratios, deficit-to-GDP ratios. Also, analyzing the changes in Lithuanian real estate prices, it is assumed that the fiscal measures adopted during the COVID-19 pandemic had an impact on the smaller decline of housing prices. In the United States, fiscal measures focused on unemployment insurance, unconditional benefits and liquidity-providing measures are expected to have had the greatest impact on COVID-19 crisis management. After analysis of scientific resources was decided to analyze the effectiveness of fiscal policy measures applied during the COVID-19 crisis. After assessing the limitations of the study, the analysis is performed taking Lithuania for a case study, analyzing household consumption and long-term loan interests and their reaction to the COVID-19 economic stimulus measures. The study showed that household consumption was significantly affected by the "Plan of Measures for Economic Stimulation and Mitigation of the Spread of Coronavirus (COVID-19)", identified in 2nd aim content. Without appropriate economic stimulus measures, household consumption would be lower by about 14% in the 2nd quarter of 2020, lower by about 3% in the 3rd quarter of 2020 and lower by 4.4% in the last quarter of 2020. Analyzing the changes in long-term loan interest rates, it is assumed that this indicator changes can be explained by social benefits and liquidity ratios, therefore, without the application of these economic stimulus measures, long-term loan interest rates would be 177% lower (-0.2%) in the 2nd quarter of 2020. In the 3rd quarter of 2020, long-term loan interest rates would reach -0.39%, and in the last quarter would reach -0.02%. Thus, household consumption and long-term loan interest rates are significantly affected by the 2nd and 3rd aims of the COVID-19 consequence reduction plan prepared by Lithuania, which seeks to preserve income of the population and help businesses to maintain liquidity. In terms of global analysis, there was decided to analyze COVID-19 fiscal plans in other countries. The analysis of the fiscal plans revealed that Germany accounted for the largest share of fiscal measures (30% GDP), Sweden (16% of GDP), Austria (about 13% of GDP), France (10% of GDP). Analyzing the structure of fiscal plans, it is assumed that the largest amount of funds is allocated for business assistance, and the smaller part – for population. In the case of Lithuania, the study showed that measures to preserve the income of the population have the greatest impact on changes in household consumption. Greece (around 2% of GDP) and France (around 1.4% of GDP) accounted for the largest share of funds allocated to the population. Long-term loan interest rates are significantly affected by measures supporting business and the population. In Germany, France, Finland, Lithuania, Sweden, Austria and Greece most funds were allocated to businesses. The research has shown that the economic stimulus measures put in place during the COVID-19 pandemic did not stop the negative developments in household consumption and long-term loan interest rates. However, the applied measures mitigated the impact to the analyzed indicators throughout the COVID-19 period.