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Economic shock from coronavirus

March 18th, 2020

An economist writing on Hungary’s leading independent business site calls for immediate intervention by the government and national bank to stimulate the economy and mitigate the economic shocks resulting from the coronavirus emergency.

On Portfolio, economist István Madár calls for immediate government intervention in order to soften the economic impact of the coronavirus emergency. Madár points out that quarantines and other measures to stop the spread of the virus put the economy into a steep dive. Unless the government and the National Bank intervene, the economic shock will be L-shaped rather than V-shaped, he suggests. In order to help a swift recovery, the most important thing is to protect jobs, Madár warns. He welcomes a decision by the National Bank yesterday to call for a moratorium on company loan installments but adds that more is needed to cushion the impact of the crisis. Madár recommends that the loan installment moratorium should be applied more broadly, and targeted help be offered to companies that would otherwise dismiss employees. In addition, tax cuts and lower interest rates on loans would also facilitate recovery, Madár adds. If none of the steps outlined above work, ‘helicopter money’ should also be dropped to stimulate the economy, he concludes.

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