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Author: Ilmārs Rimšēvičs

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The Covid-19 Economic Crisis and Factors Promoting the Smaller Use of Limited Fiscal Resources

Ilmārs Rimšēvičs

https://doi.org/10.15181/rfds.v46i2.2736

Pub. online: 4 Jul 2025 Type: Article

Open Access

Journal: Regional Formation and Development Studies Volume 46, Issue 2 (2025), pp. 160–172

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.

COVID-19 Mitigation Measures, Economic Impact and Factors in Recovery

Ilmārs Rimšēvičs

https://doi.org/10.15181/rfds.v34i2.2254

Pub. online: 4 Aug 2022 Type: Article

Open Access

Journal: Regional Formation and Development Studies Volume 34, Issue 2 (2021), pp. 179–190

Abstract

The purpose of the paper is to analyse various factors influencing the speed of recovery and the return to the Old Normal, i.e., GDP

levels of 2019 Q4. Most countries have imposed strong Covid-19 containment measures. The research paper reveals various implications

of the Covid-19 mitigation policies on GDP growth, the budget deficit and the increase in the outstanding public debt. The

analysis will show various correlations between the stringency of containment measures and the mobility of the population and the

relationship with the decrease in GDP. It concludes that the size of the fiscal response is important, but does not guarantee immediate

recovery. Besides monetary and fiscal policy, there are also other important elements, such as the strictness of the containment

measures, the size of the tourism sector, the size of the outstanding pre-crisis debt level, and the quality of governance, which for

many countries warrants a smaller decline in GDP. The paper concludes that countries with, on average, less stringent containment

measures, with less accumulated pre-crisis public debt, a smaller tourism sector and more efficient governance, tend to have a smaller

GDP slowdown and smaller budget deficits, and will recover sooner to pre-crisis levels.

Public Debt and Economic Growth in the Aftermath of the Covid-19 Economic Crisis

Ilmārs Rimšēvičs

https://doi.org/10.15181/rfds.v37i2.2429

Pub. online: 18 Jul 2022 Type: Article

Open Access

Journal: Regional Formation and Development Studies Volume 37, Issue 2 (2022), pp. 147–155

Abstract

The Great Financial Crisis (GFC) of 2008 to 2010 increased the size of the public debt and decreased the fiscal space. The problem stems from the fact that fiscal resources are limited. Many OECD countries had used a substantial part of their limited fiscal space. Researchers suspected that higher levels of public debt in the future could slow down GDP growth. The first attempts to detect the tipping point at which GDP growth stalls or loses steam were made right after the GFC. However, the discussion was left open. The Covid-19 crisis required the further use of unprecedented amounts of fiscal stimulus resources to stabilise the economic situation. The objective of this paper is to establish whether new data of elevated public debt levels in relation to GDP confirms that higher levels of debt to GDP have an impact on future GDP growth and future financial stability. Debt and GDP data from OECD countries for the years 2000 to 2026 was used in order to carry out multilinear regression analysis, establishing the relationship between debt and future GDP growth. The results provide compelling evidence that the accumulation of higher debt levels slows down GDP growth, and require more fiscal resources in the future to stabilise the economic situation, compared with countries with lower accumulated public debt levels. Hence, higher inflation will require even more resources to service the debt.

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