The Effect of Coronavirus Outbreak on Government Budget in Year 2020

Document Type : Scientific-research

Authors

1 Assistant Professor of Economics, Allameh Tabataba`I University,

2 Assistant Professor of Allameh Tabatabai School of Economics

3 a

Abstract

With the outbreak of coronavirus, due to their high dependence on oil revenues, oil-exporting countries such as Iran have been affected by lower oil prices and have faced budget deficits. In order to investigate the effect of coronavirus outbreak on government budget in Iranian economy, the method of scenario analysis using Schwartz method and structural analysis (MICMAC Software) is used. In this study two key variables, "oil price" and "coronavirus outbreak" were identified and four scenarios were designed based in these variables. Our results show that with increase in oil prices (the first variable in scenarios 1 and 4), the government can be almost near its revenue targets in 2020 fiscal year. However, in scenario 1, the outbreak of coronavirus is assumed, in which case, the increase in relief expenditures and a sharp decline in tax revenues, due to business failures, can increase budget deficit to about 78.89 thousand billion tomans. However, in scenario 4, in which it is assumed that the spread of coronavirus is controlled, a sharp decline in tax revenues and an increase in relief expenditures is ruled out. In that case, it is estimated that government budget deficit would be about 64.85 thousand billion tomans. In scenarios 2 and 3, when oil prices fall, government foreign earnings fall, but if this decline is accompanied by the outbreak of coronavirus (scenario 2), it can significantly increase budget deficit (to about 83.49 thousand trillion tomans). In Scenario 3, however, part of this budget deficit is reduced due to lack of relief expenditures as a result of coronavirus control. It is suggested that the government should put on agenda a regular sale of debt securities, increase productivity of its assets and sell its share in listed and non-listed companies to reduce budget deficit.

Keywords

References

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Journal of Iranian Economic Issues
Volume 7, Issue 2
January 2021
Pages 181-221

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History

  • Receive Date: 31 May 2020
  • Revise Date: 09 August 2020
  • Accept Date: 26 August 2020

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