RESPONSE TO COVID-19: ROLE OF MACROECONOMICS TOOLS

Severe acute respiratory syndrome coronavirus 2 referred to as “SARS-COV-2 or COVID-19” has severe consequences in terms of economy, health, socio-culture, and as well as ecology that devastated the human lives resulting in death and other major disruptions such as reductions in income, a rise in unemployment, supply shortages, business loss creating recession across the globe. It has affected the global economy due to business closures, trade disruptions, supply-chain disruptions, reduction in productivity, and loss of lives, and shut down of travel and tourism industries that have resulted in the financial crisis. As the outbreak of disease is the consequence of globalization, urbanization, and changes of the environment, causing global threats; collective response along with preventive and preparedness measures are required to protect health and economic prosperity. As said by WHO- it has been found 13,575,158 confirmed cases along with 584,940 deaths cases of covid-19 (17th July 2020). Furthermore, according to WHO- more than 150 countries have participated in the vaccine development program; 75 countries joined the COVAX facility to help the world to cope up with the COVID-19 cases through rapid, fair, and equitable access to COVID-19 vaccines worldwide. The world has to adopt proactive measures as the virus is increasing alarmingly however it has been found government being reactive.
As discussed above, severe health crises and increasing death cases all over the world have devastated the entire economy. It is necessary to understand the macroeconomic measures that help to cope up with the recent economic downturn caused by COVID-19 pandemics. The word macro itself comprises “large” and therefore it is concerned with the large economic activities covering the whole economic system. As it is well known COVID-19 outbreak affected both the demand side and supply side economy causing demand and supply-side shock in major economies; therefore policy response is essential for recovery purposes. The fact of macroeconomics lies in terms of large aggregates like national output, total investment, total consumption, and total savings, aggregate supply, aggregate demand, general price level(inflation, deflation), wage level, and cost structure. To revive the Global Economy most of the developed and developing economies have adopted economic stimulus packages during recession periods that aim to prevent the failure of banks and business houses, reviving financial markets, creating job opportunities for the unemployed to control the further downturn of the economy. For instance- The Global Recession of 2008–2009 resulted in a sharp fall in growth rate and GDP, loss of jobs, a decline in production, income, international trade, and flow of capital and labor in the economy as a whole. As a response to the recession, most of the countries declared fiscal packaged and monetary measures to control the devastating economy.
Fiscal policy and monetary policy play a crucial role in shaping the economy from downturns for achieving certain macroeconomic goals. Fiscal policy as a macroeconomic tool helps in formulating government policy relating to budget, income, and expenditure of the government, taxation, and policy relating to output and employment. In the COVID-19 case as discussed earlier supportive fiscal packages should be formulated for people and businesses. The tax exemption to SMEs for temporary periods, distribution of food packages and programs to vulnerable groups, subsidized credit to banks to provide funding to small and medium business houses, packages for health equipment to prevent and control the virus outbreak have been essential and most prioritized for economic recovery. Unnecessary expenses that are not prioritized for COVID-19 must be cut off to use the budget packages in more prioritized and essential sectors as a quick response strategy.
The Monetary policy adopted by the central bank should focus on limiting enactments relating to several financial regulations to reduce current economic downturns. Moreover, reductions in reserve requirements, restructuring loans by providing new loans to business affected by the outbreaks, interest rate cut off, providing sufficient liquidity to financial institutions that provide fund to small and medium-sized enterprises can be the major steps that the central banks of the developed and developing countries should take as a remedy for COVID-19 outbreaks.
In conclusion, urgent health equipment, action-oriented economic policies, global cooperation, and social awareness are major concerns highlighted by the COVID-19 pandemic. The pandemic has adversely affected the world causing urgent socio-economic responses. Cooperation between the International Organizations and the countries is essential to mitigate the crisis caused by the pandemic. The role of government and the central bank is crucial to respond to the disrupted global economy through fiscal policy schemes and unconventional monetary policy for the recovery phase.