Any such action by the Governmentis likely to be costly in the near-term but will benefit the fiscal position over the medium term if it is effective in reducing the degree of damage to the economy’s productive capacity. Second, the rise in the government deficit and debt ratios is both warranted and necessary and is currently affordable.
But the high level of debt will leave government finances vulnerable to future shocks and it will be important for the Government to provide a clear and credible return to much lower and sustainable deficit and debt positions. Third, the country’s ability to withstand the immediate impacts of the Covid-19 shock is partly a result of policy actions over the last decade.