Save the stimulus package for the right time

I read about the government wanting to embark on stimulus spending to boost the economy due to the present situation.

Before this, there were already looming signs of an economic slowdown. But the present coronavirus epidemic has made the situation worse.

The “lockdown” to contain the virus has essentially made travel, commerce, trade, and production coming to a standstill. In other words, the economic slowdown is very much “virus” induced.

Businesses are adversely affected not because there is a lack of aggregate demand per se. It is simply a situation where both supply and demand cannot be transacted or executed.

Pump priming to boost aggregate demand under such a situation will most like yield very little results. 

It is good money going down the drain with very insignificant multiplier effects.

More so, we are incurring fiscal deficit without the corresponding positive impact on GDP growth.

A more prudent approach is to save money for now and wait for the storm to pass first. In other words, we should save the bullets for better use. 

Depleting our resources now would give us little option when we really need them.

Once travel and commerce are back to “normal”, I am sure the government stimulus programmes would be much more effective.

Don’t get me wrong. I am for government spending to help sustain the growth momentum of the economy, but the timing is the key. - Mkini