South Korea: Fiscal Buffers Eased The COVID Crisis
(2 min read)
South Korea is an often-cited example of a country that has successfully controlled COVID. And the economic fallout looks to be significantly less pronounced there than the dramatic declines reported elsewhere. But the country’s resilience cannot all be attributed to the more effective COVID response. Also important was having significantly greater policy space than most going into the crisis, thanks to low public debt and a very prudent fiscal position, which facilitated the required response from the budgetary and monetary authorities.
A Shallow COVID Recession
As Europe and the US start to see unprecedented declines in activity data coming through in March and April readings, it is instructive to rewind a few months to compare data from when Asia was at the epicentre of the COVID crisis. There are certainly some similarities, with earlier declines in IP, PMIs and retail sales in China being replicated across Europe and the US. And China’s ongoing Q2 bounce back is expected to be the Q3 story for Europe and the US, albeit with varying magnitudes.
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