The Covid-19 Economic Crisis and Factors Promoting the Smaller Use of Limited Fiscal Resources
Volume 46, Issue 2 (2025), pp. 160–172
Pub. online: 4 July 2025
Type: Article
Open Access
Open Access
Published
4 July 2025
4 July 2025
Abstract
On 11 March 2020 the World Health Organization (WHO) announced the global pandemic, and governments were forced to initiate non-pharmaceutical intervention (NPI) and disease containment measures. Governments had to come up with viable fiscal support measures and respective fiscal aid packages for the health and economic sectors, thus creating a unique opportunity to compare the quality of institutions and government effectiveness to manage, mitigate and lessen an economic crisis and a fall GDP, and measure the possibility of reaching the pre-crisis level of GDP. The analysis raised several issues, because in some countries the change in GDP in 2020 and the speed of recovery from the crisis and the attainment of the pre-crisis level of GDP of 2019 was slower, and at
the same time the size of fiscal resources used to tackle the fall in GDP were larger, and the respective public debt to GDP increased more. In order to comprehend why GDP, the fall in 2020, and the use of fiscal resources was smaller, this article aims to establish the role and statistical importance of the level of outstanding public debt, the quality of institutions, and government effectiveness as a driving factor of the respective volume of the fiscal resources used, minimising the size of the change in GDP in 2020 and promoting the recovery of GDP to the pre-crisis level.