Question

Governments should be allowed to run up large amounts of government debt in tackling the COVID-19 crisis. Please use the example of UK to critically comment on this statement. (250 words)

Answer 1

                                    The Covid-19 crisis has hit the global economy very badly. With the lockdown measures taken by almost all of the countries, the global economy is witnessing the most devastating economical challenge till date. In the given case, the effect of Covid-19 on the economy of UK is being considered to evaluate why it is important for the governing mechanism to run a large amount of government debt to tackle the crisis.

                                    The effects of Covid-19 on the economy of UK has been phenomenal. The economy has been shrunk by almost 6% in march alone and it is expected that it will shrink by more than 13% in 2020. The economic output is expected to plunge by more than 35% and the unemployment rate is expected to more than double to almost 10% in the near future. Thus, to accommodate these effects and to overcome them various measures have been implemented by the UK government. A €680million stimulus package has been introduced in the nation which is expected to hit the budgetary deficits to $340 million and more which would increase the government debts in the near future. Moreover, financial supports have been placed on the unemployed and the industrial sector also which plays a significant impact on the debt of the government. Thus, with the economic measures that have been taken by the UK government, it is evident that a large amount of government debt would have to be compromised so as to tackle the economic issues that have been caused by the crisis.