Economic crises and factors fostering smaller economic downturn and speedier recovery

COVID-19 pandemic caught the world by surprise. On March 11th, 2020, World Health Organization (WHO) announced the global pandemic, and governments started to initiate various kinds of non-pharmaceutical interventions (NPI) and disease containment measures. These NPI measures reduced the mobility of the population and slowed down business activities. State governments had to come up with viable fiscal support packages for the health and economic sectors. It created a unique opportunity for economists and academia to compare the effectiveness of different state governments and policies vis-a-vis the consequences of suddenly imposed health and economic challenges. It raised the issue of why in some countries the depth of the crisis (GDP % change) and speed of recovery from the crisis (attaining the level of 2019 GDP) was different. In order to comprehend the complexity of various factors influencing economic developments, this article aims to research economic and other social-economic factors defining the depth of the crisis and speed of recovery. The article will also try to establish whether these factors could be associated with more financial and fiscal resources needed in the due course and further increase of the outstanding public debt and debt service costs in the future. The author will be using the regression method to compare various economic variables. Results prove that stringency and NPI measures were not the only factors influencing the depth of the crisis. Research findings indicate that public debt plays a crucial role in precluding the recovery and efficient use of fiscal resources. However, the quality of institutions, governance, and confidence in government are clear contributors to the efficient use of limited fiscal resources and shallower economic crisis and speedier recovery, too.