Topic 1 The COVID-19 pandemic has upset the finances of governments around the world, as lockdowns sent the overall economy into a tailspin

Topic 1

The COVID-19 pandemic has upset the finances of governments around the world, as lockdowns sent the overall economy into a tailspin. Most governments, including Canada’s, introduced policies to help workers and companies adversely affected by lockdown policies and the plunge in GDP. These policies which, by necessity, had to be introduced quickly were financed by increased government borrowing.

In July, 2020, the Canadian government announced that its deficit for the fiscal year April 2020 – March 2021 would be $343 billion. This is, by one measure, 50% larger than any prior deficit run by any government in Canada.

Current GDP forecasts are for the economy to shrink in this calendar year by between 5% and 8% (a huge amount) then grow by 5%-6% in 2021. By the end of 2022, the economy is expected to be the same size as in 2019. Note that these forecasts were made before the ‘second wave’.

Your assignment is to analyse the data and provide policy recommendations to the government regarding its assistance to companies and individuals to recover from the economic displacement, and how to deal with the spiralling deficits and government debt.

Outline of the paper – Recovery, Deficits and Debt

1) Executive Summary – summarise each of the following sections into one paragraph and put together in the Executive Summary.

2) Outline three possible fiscal policy response to COVID recovery and the 2020-21 $343 billion deficit. In this section just present what the government might do and give a brief explanation (each policy response should be able to be covered in two – three paras).

3) Analyse each of the policy responses. Present the pros and cons (as well as apply the Law of Unintended Consequences) to each policy. Use data and forecasts from reputable sources – if in doubt, check with me. This is the meat of your report and will count for the most marks.

4) Recommendation. Choose one response and explain why it is best and why it is better than the other two that you examined.