Answer to Question #213534 in Macroeconomics for butterflygirl

Question

Discuss the key macroeconomic effects of COVID19 (ignore health effects) on any economy of the Pacific of your choice. Identify how this economy can promote economic growth given the pandemic. Identify three macroeconomic policy interventions to support livelihood of people in such an economy

Answer 1

In Vanuatu, Covid 19 has had great macroeconomic effects on the economy. Firstly, the tourism sector which is the most vital source of revenue was hampered.  It is vital to the source of business, investment, employment, and entrepreneurial activities. This has led to slowed economic growth in Vanuatu and Fiji, pushing the economy to recession. Secondly, both local and international trade slowed significantly as a result of the closure of companies. Additionally, COVID-19 has affected various factors of production such as land, labor, and capital affecting agricultural production and output; loss of jobs, domestic and foreign investment, foreign aid, remittances.

The government can intervene with several macroeconomic policies such as creating a stimulus package with several fiscal and monetary policy instruments that can be sustainable in the short term as the country find it challenging to protect vulnerable populations as a result of the large contraction in GDP and the debt situation. Secondly,  It should improve the regional economic integration and extend markets in agriculture, manufacturing, and services outputs. This cooperation across countries, civil society and, the private sector is essential to build domestic capacity for global production. Lastly, the other macroeconomic policy responses to improve nations' capabilities should support the population to develop firms and industries and enhance jobs, increase investment in infrastructure, human capital, and growth-enhancing institutions for economic and social wellbeing.