Economic policy makers are faced with a triple whammy, caused by COVID-19, trying to hammer out a formula that would not backfire for three increasingly risky trade-offs. First, the trade-off between flattening the infection curve through isolation and lockdown measures on one hand and the cost of the consequential economic slowdown on the other. Second, the trade-off between providing extensive and effective countercyclical fiscal policy to stimulate growth and the risk of losing the grip over the fiscal deficit and public debt. Third, providing the adequate level of credit to the most hard-hit sectors and the risk of a surge in non-performing loans, which would undermine the banking sector’s ability to withstand the storm.
Mona Bedeir
Senior Economist
Tel.: +202 3300 5722