Simon Wren-Lewis's picture
Affiliation: 
University of Oxford
Credentials: 
Professor of economics

Voting history

Will COVID-19 Cause Permanent Damage to the UK Economy?

Question 2: Which aspect of the economy poses the greatest risk for a slow recovery?

Answer:
Consumer demand
Confidence level:
Confident
Comment:
By ending lockdown too early in the UK, there is a real risk that a significant proportion of consumers will not resume social consumption, and that may lead to persistent unemployment and bankruptcies.

Question 1: How quickly will the economy rebound (e.g. to the pre-pandemic trend) once the COVID-19 pandemic has been contained and absent major policy interventions? 

Answer:
The economy will rapidly return to its pre-crisis growth trend, but there will be a permanent effect on the level of GDP
Confidence level:
Confident
Comment:
A key point not emphasised enough is that the answer depends critically on how well the pandemic is managed by the government. A V shaped recovery is possible if the government gets its pandemic management right, but if it fails to lockdown quickly, or ends lockdown to early, (both of which are true in the UK) then scarring effects will be significant.

COVID-19 and UK Public Finances

Question 2: What is the best way to (eventually) reduce public deficits and debt?

Answer:
Tax increases
Confidence level:
Confident

Question 1: How urgently should the UK government address the rise in public debt?

Answer:
Budgetary policy should not be used to address public deficits and debts in the foreseeable future
Confidence level:
Extremely confident
Comment:
Only when the economic recovery from the pandemic is complete, and as a result interest rates are rising, will it be the time to consider what action, if any, to take on budgetary policy. In particular concerns about the deficit should not be used to prevent any fiscal stimulus that may be required to get the economy going again once the pandemic is over.

Covid-19: Economic Policy Response

Question 3: Which would be the maximal public debt you would be willing to tolerate if used effectively (as in your answers to 1 and 2 above) to support an economic recovery?

Answer:
>140% of GDP
Confidence level:
Extremely confident
Comment:
This should not be an issue.

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