Effectiveness of Covid-19 crisis management strategies in the Eastern countries of the European Union with special regard to fiscal and monetary policy tools

Abstract

The publication of statistical data related to the last quarter of 2021 provides an excellent opportunity to evaluate the effectiveness of Covid-19 crisis management. The paper shows four different success indicators. These are the employment rate increase, the difference in the slope of GDP growth prior to and during the Covid-19 pandemic to measure the depth of the crisis, the ratio between the depth of economic decline and the required time to recover the economic output of 2019 Q4. These success indicators are compared with the increase of gross public debt. Eleven Central and Eastern European countries are compared with the EU average. Since the Hungarian economy suffered the second largest decline among the Central and Eastern European countries, but Hungary had the second fastest recovery (with a significant public debt increase) and the highest increase in employment rate, the monetary and economic tools of this country are analysed in detail. If we consider the GDP growth difference, Estonia, Slovenia and Croatia performed better than the EU average, whereas Slovakia, Romania and the Czech Republic performed worse. However, this indicator did not consider the depth of the shock that fiscal and monetary policies had to face. If we consider the second indicator – which is called the “boost” indicator, the most successful countries are in descending order: Lithuania, Poland, Estonia, Hungary, and Slovenia. Generally, the countries that were successful were those which spent a significant amount of money to avoid the credit crunch (lowering interest rate, investment boost) and offer tax relief to dedicated sectors. The general welfare spending (wage support, family subsidies, and longer unemployment benefits, health care) seemed to be inadequate in boosting the economy.