Global Fiscal Policies Implemented Within the Scope of Fight Against COVID-19, a Global Public Bad

Governments’ responses to COVID-19 are considerably different from each other. One of the first measures taken is to shut schools. Some countries have closed all the schools; whereas some countries closed universities on a different calender than primary schools; in other countries, though, only the children of essential workers can go to schools.

The COVID-19 outbreak has the capacity to create more damage in underdevel­oped countries than developed countries, due to their underdeveloped health systems and infrastructures, insufficient budget resources, shallow financial systems, and poor government authority and capability. This impact also reflects incomplete reporting and/or fewer tests for COVID-19 in underdeveloped and developing countries. Policy makers in these countries should first focus on the implementation of health-related measures and then focus on economic measures to reduce negative economic effects and support employees.

Countries are counting on social distance, quarantine and isolation to cope with COVID-19, as the coronavirus is spreading very rapidly with human contact and currently has no vaccine or definitive treatment. Goal of these measures is to “flatten the health curve”; therefore, limited healthcare facilities and resources can accom­modate patients without over-care, preventing unnecessary deaths due to poor care. In the absence of widespread testing and monitoring, these are the best methods known to reduce the spread, but these actions have great economic costs, especially on tourism, trade and foreign investment (Hale et al. 2020).

Unprecedented slowing down of economic activities has resulted in significant economic costs, including widespread unemployment. The duration of the crisis and the following recovery rate are unknown; thus, it is hard to assess all of these costs.

Under normal circumstances, countries in crisis can ask for help from external resources, namely the World Bank and the International Monetary Fund, but due to the global nature and magnitude of this crisis mentioned external resources will not be sufficient and it is necessary to support external resources by domestic funding. Comprehensive policy packages must be prepared for individual countries and global bodies. The negative effects caused by sudden decrease of economic activities must be alleviated by means of fiscal policy. As a short-term solution, direct payments to taxpayers, for instance, could help individuals, especially the unemployed. Busi­nesses can make use of canceled or delayed tax payments when coping with their losses. Fiscal and monetary policies serve to mobilize government resources by providing an adequate flow of liquidity to businesses and households, yet it must be ensured that they are supported with private sector financing instruments. Central banks of many developed countries cut the interest rates, and some accelerated their asset purchases process. Many middle-income countries can alleviate pressures on the balance of payments arising from the recent drop in oil prices, if their exchange rate regimes are fixed and if they can provide financing that will not allow the exchange rate to depreciate in the face of the decline in exports and the rise in the dollar (Hinh 2020).

The governments should set up assistance programs for manufacturing firms to survive the downturn, bounce back faster and stronger, and produce higher-value products. To this end, the governments must reallocate their budget and utilize the limited resources more efficiently. These expenditures could also be made by means of foreign borrowing.

Financial assistance with the aim of helping firms not shrink and retain workforce must be provided in the short term, but if it is not supported with technical training and assistance, the long-term benefits will be minimal. Policies to be implemented in the short term are as follows (Hinh 2020):

Firmalarin kuφulmeye gidip, mevcut ^altganlartnt igten ^tkarmamast ⅛in mali yardιmlarιn kisa vadede dagitilmasi gereklidir ancak teknik egitim ve yardtmla desteklenmedigi surece uzun vadeli faydalar asgari duzeyde olacaktir. Ktsa vadede uygulanabilecek politikalar

• Financial assistance must be provided as grants or low-interest loans to manu­facturing firms retaining at least some of their employees during the idle time.

• The governments must provide especially the SMEs with assistance for providing raw materials and other intermediate inputs as well as technical assistance regarding appropriate technologies used to make the medical products and equipment.

These actions may be taken during the lockdown, and during the transition period before all economic activities fully resume.

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