The aim of the government’s economic policy to deal with coronavirus should be to prevent a wave of bankruptcies among companies and a rise in unemployment caused by temporary problems, the Bank of Estonia said in a report released on March 12.
“The economic policy objective of mitigating the impact of the virus is to reduce a rapid rise in unemployment and bankruptcies,” the central bank said. “The aim is to reduce the likelihood of temporary problems causing lasting harm to people and businesses.”
The report also said: “Compared to the crisis of 2008-2009, Estonia is in a better position because there are no major imbalances in the Estonian economy and both the economy as a whole and the financial sector are in good shape.”
The bank made three recommendations to the government on how to support the economy:
– The supporting steps should be quick. The experience of countries with a high infection rate shows that the impact of the virus on the economy is extremely rapid. So it is most important to prioritize actions that can be taken quickly and have an immediate impact.
– The supporting steps should be well targeted. Preliminary data suggest that the impact of the virus on different industries is different. Therefore, it is advisable to put in place the steps to solve the problems of sectors or people that are more affected by the virus.
– Supporting steps should be planned on a temporary basis. According to current knowledge, the impact of the virus on the economy is temporary. Therefore, it would make sense for all steps, be they revenue or expenditure, to be temporary. This is the criterion that most countries have used when designing their economic policy packages.
“The steps to support the economy should be based on data and analysis,” the bank added. “Although there is little data on the Estonian economy that is frequently updated and has little delay, every effort should be made to collect and then use this information. Faster and more often.” (ERR/Business World Magazine)
