MACROECONOMIC POLICY AS RESPONSE TO THE PANDEMIC COVID - 19

ABSTRACT

The financial crisis triggered by the pandemic of COVID-19 significantly curtailed the activities of world financial systems. With the onset of the crisis in 2020, there has been a deterioration in macroeconomic indicators a drop in GDP, an increase in the unemployment rate and an increase in public debt. Unlike the previous, expected debt crisis of 2008, the sudden corona crisis was welcomed by financial systems with significantly higher liquidity and capitalization. Despite positive expectations based on better performance of financial systems, uncertainty and the need for financial stability were present. Therefore, the highest expectations were directed towards economic policymakers, regulation and supervision of the financial systems. The impact of the emerging crisis is particularly pronounced in small and open economies such as Republic of Croatia, where there is a strong dependence on international market trends and thus a sensitivity to crises and external shocks. With the onset of the COVID-19 crisis, Republic of Croatia faced the problem of depreciation pressure on the domestic currency. It was stopped rapidly by the interventions of the Croatian National Bank, which achieved monetary and macroeconomic stability and provided assistance to the economy. Although central banks and other financial system supervisors and regulators have played an important role in overcoming the crisis and supporting the economy, uncertainty about macroeconomic stability remains. Following the COVID-19 lockdown of economies and their reopening in mid-2021, demand for goods and services has increased, leading to rising prices and inflation in Europe and the United States of America. The aim of this paper is to present the effects of the crisis caused by COVID-19 and to analyze the measures introduced to financially stabilize and support the economy.