Economic measures to fight against Coronavirus COVID-19

All the countries in the world have adopted key economic policy measures to fight against COVID-19 & limit the impact of Coronavirus pandemic. Below are the details of key Economic measures adopted by the top 10 countries by GDP.

1. United States of America

The U.S. has implemented a range of measures to fight against COVID-19 (Coronavirus), including travel restrictions, social distancing, declaration of states of emergency, closure of schools, non-essential businesses, and increased testing. Below are the monetary details :

US$483 billion (Paycheck Protection Program and Health Care Enhancement Act) includes:

• US$321 billion for additional forgivable Small Business Administration loans and guarantees to help small businesses that retain workers;
• US$62 billion for the Small Business Administration to provide grants and loans to assist small businesses;
• US$75 billion for hospitals; and
• US$25 billion for expanding virus testing.

An estimated US$2.3 trillion (around 11% of GDP) Coronavirus Aid, Relief and Economy Security Act (“CARES Act”), includes:

1. US$293 billion to provide one-time tax rebates to individuals;
2. US$268 billion to expand unemployment benefits;
3. US$25 billion to provide a food safety net for the most vulnerable;
4. US$510 billion to prevent corporate bankruptcy by providing loans, guarantees, and backstopping Federal Reserve 13(3) program;
5. US$349 billion in forgivable Small Business Administration loans and guarantees to help small businesses that retain workers;
6. US$100 billion for hospitals,
7. US$150 billion in transfers to state and local governments and
8. US$49.9 billion for international assistance (including SDR28 billion for the IMF’s New Arrangement to Borrow).

US$8.3 billion Coronavirus Preparedness and Response Supplemental Appropriations Act and US$192 billion Families First Coronavirus Response Act, They together provide around 1% of GDP for:

• Virus testing; transfers to states for Medicaid funding; development of vaccines, therapeutics, and diagnostics; support for the Centers for Disease Control and Prevention responses.
• 2 weeks paid sick leave; up to 3 months emergency leave for those infected (at 2/3 pay); food assistance; transfers to states to fund expanded unemployment insurance.
• Expansion of Small Business Administration loan subsidies. And
• US$1.25 billion in international assistance. In addition, federal student loan obligations have been suspended for 60 days.

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2. China

The Government imposed strict containment measures to fight against COVID-19 (Coronavirus), including the extension of the national Lunar New Year holiday, the lockdown of Hubei province, large-scale mobility restrictions at the national level, social distancing, and a 14-day quarantine period for returning migrant workers.

An estimated RMB 4.2 trillion (or 4.1% of GDP) of discretionary fiscal measures have been announced. Key measures include:

• Increased spending on epidemic prevention and control,
• Production of medical equipment,
• Accelerated disbursement of unemployment insurance and extension to migrant workers,
• Tax relief and waived social security contributions, and
• Public investment.

Other Monetary Measures include:

• Expansion of re-lending and re-discounting facilities by RMB 1.8 trillion to support manufacturers of medical supplies and daily necessities, micro-, small- and medium-sized firms and the agricultural sector (of which 0.8 trillion was phased out at end-June) and reduction of their interest rates by 50 bps (re-lending facilities) and 25 bps (re-discounting facility)
• Expansion of policy banks’ credit line to private firms and MSEs (RMB 350 billion)
• Introduction of new instruments to support lending to MSEs, including a zero-interest “funding-for-lending” scheme (RMB 400 billion) to finance 40% of local banks’ new unsecured loans and incentivizing them to further extend payment holidays for eligible loans by subsidizing 1% of loan principles (RMB 40 billion).

3. Japan

To fight against COVID-19 (Coronavirus), the Country took several measures targeted towards health and containment efforts. PM Abe declared the state of emergency for all prefectures on April 16, effective through May 6. 

The state of emergency enabled governors in the designated areas to request people to stay at home, order closures of schools and public facilities, build temporary medical facilities, and adopt actions to support medical and food supplies.

Economic Package of ¥117.1 trillion (21.1% of 2019 GDP):

• Develop preventive measures against the spread of infection and strengthen treatment capacity (expenditure of 0.5% of 2019 GDP),
• Protect employment and businesses (16.0% of 2019 GDP),
• Regain economic activities after containment (1.5% of 2019 GDP),
• Rebuild a resilient economic structure (2.8% of 2019 GDP), and
• Enhance readiness for the future (0.3% of 2019 GDP). 

On May 27, the Government of Japan announced the second FY2020 draft supplementary budget (passed on June 12). The package, worth ¥117.1 trillion (21.1% of 2019 GDP), covers:

• Health-related measures
• Support to businesses & households
• Transfers to the local governments, and
• Raising the ceiling of the COVID-19 reserve fund

4. Germany

The government has responded with a range of measures to (fight against COVID-19) contain the spread of the virus through border closures, closure of schools and non-essential businesses, social distancing requirements and a ban on public gatherings. 

€156 billion (4.9% of GDP) in March and €130 billion (4% of GDP) in June:

• Spending on healthcare equipment, hospital capacity and R&D (vaccine)
• Expanded access to short-term work (“Kurzarbeit”) subsidy to preserve jobs and workers’ incomes, expanded childcare benefits for low-income parents and easier access to basic income support for the self-employed
• €50 billion in grants to small business owners and self-employed persons severely affected by the Covid-19 (Coronavirus) outbreak in addition to interest-free tax deferrals until year-end and €2bn of venture capital funding for start-ups
• Temporarily expanded duration of unemployment insurance and parental leave benefits
• The stimulus package in June comprises a temporary VAT reduction, income support for families, grants for hard-hit SME’s, financial support for local governments, expanded credit guarantees for exporters and export-financing banks, and subsidies/investment in green energy and digitalization.

In addition to the federal government’s fiscal package, many local governments have announced their own measures to support their economies, amounting to €141 billion in direct support and €63bn in state-level loan guarantees.

5. India

To fight against the COVID-19 pandemic (Coronavirus) On March 24, PM Modi announced that the entire country will go under lockdown, now extended for the third time to May 31. Prior to the announcement, many containment measures had already been imposed, varying in intensity across the country, including travel restrictions; closing schools/college/universities, gyms, museums, and theatres; bans on mass gatherings; and encouraging companies to promote remote work.

India’s fiscal support measures can be divided into two broad categories: (i) direct spending and foregone or deferred revenue (about 1.9% of GDP); and (ii) below-the-line measures designed to support businesses and shore up credit provision to several sectors (about 4.9% of GDP)

A relief package of around (Rs 20 lac crore) 10% of GDP, including previously announced monetary and fiscal measures. Below is the break up of Rs 20 Lac Crore along with the remarks:

6. United Kingdom

To fight against COVID-19 (Coronavirus), the government implemented a range of measures, including travel restrictions, social distancing measures, closures of entertainment, hospitality, non-essential shops, and indoor premises, and increased testing. In the first quarter of 2020, the economy contracted by 2.2% relative to the previous quarter, with a 6.9% month-on-month contraction in March.

Tax and spending measures to support households and families during the health emergency include: 

• Additional funding for the NHS, public services, and charities (£48.5 billion).
• Measures to support businesses (£29 billion), including property tax holidays, direct grants for small firms and firms in the most-affected sectors, and compensation for sick pay leave.
• strengthening the social safety net to support vulnerable people (by £8 billion) by increasing payments under the Universal Credit scheme as well as expanding other benefits.
• Together with the British Business Bank the Coronavirus Business Interruption Loan Scheme to support SMEs and the Coronavirus Large Business Interruption Loans Scheme to support bigger firms, which carry an 80% guarantee for loans up to £5 million for the former and up to £300 million for the latter.
• In addition, the government has put in place the Bounce Bank loan scheme for SMEs with a 100% guarantee for loans amount up to £50,000.
• It is also deferring VAT payments for the second quarter of 2020 until the end of the financial year and income tax payments of the self-employed by six months.
• Trade credit insurance for business-to-business transactions will receive up to £10 billion of government guarantees through the Trade Credit Reinsurance scheme, with the scheme available for nine months. 
• The government has put in place a £1bn package to support firms driving innovation and development through grants and loans. 
• Increased public spending on infrastructure (including on green projects such as retrofitting houses to improve energy efficiency)

Employment-related measures include: 

• The government will pay 80% of the earnings of self-employed workers and furloughed employees (to a maximum of £2,500 per employee per month) initially for the period March-May. 
• For furloughed employees, the scheme has been extended until end-October.
• Starting in July employers will be allowed to furlough employees for part of the daily working hours.
• Government coverage falls to 70% of wages in September (up to £2,187) and 60% in October (up to £1,875) with employers required to contribute the difference to 80% of wages (up to £2,500).
• The scheme for the self-employed has been extended for three more months, but at a reduced level of 70% of earnings. 
• Providing firms £1,000 per furloughed employee retained until the end-January.
• Paying the minimum wage for 25 hours per week for six months for young workers at risk of long-term unemployment
•  Increased resources to enhance skills and facilitate reinsertion in the job market;

7. France

To fight against COVID-19 (Coronavirus), In mid-March, the government introduced a range of measures to reduce the spread of COVID-19, including school closures, the ban of all non-essential activities, outings, and long-distance travel, and the introduction of night-time curfews in some cities.

The authorities have legislated in April an increase in the fiscal envelope devoted to addressing the crisis to €110 billion (nearly 5% of GDP, including liquidity measures), from an initial €45 billion included in an amending budget law introduced in March. This adds to an existing package of bank loan guarantees and credit reinsurance schemes of €315 billion (close to 14% of GDP). 

• Streamlining and boosting health insurance for the sick or their caregivers;
• Increasing spending on health supplies;
• Liquidity support through postponements of social security and tax payments for companies and accelerated refund of tax credits (e.g. CIT and VAT);
• Support for wages of workers under the reduced-hour scheme;
• Direct financial support (solidarity fund) for affected microenterprises, liberal professions, and independent workers
• Postponement of rent and utility payments for affected microenterprises and SMEs
• Additional allocation for equity investments or nationalizations of companies in difficulty;
• Facilitating granting of exceptional bonuses exempt from social security contributions
• Extension of expiring unemployment benefits until the end of the lockdown and preservation of rights and benefits under the disability and active solidarity income schemes. 

8. Italy

To fight against COVID-19, Italian Government adopted a €25 billion (1.4% of GDP) “Cura Italia” emergency package, It includes:

• Funds to strengthen the Italian health care system and civil protection (€3.2 billion)
• Measures to preserve jobs and support income of laid-off workers and self-employed (€10.3 billion)
• Other measures to support businesses, including tax deferrals and postponement of utility bill payments in most affected municipalities (€6.4 billion)
• Measures to support credit supply (€5.1 billion).

On April 6, the Liquidity Decree allowed for additional state guarantees of up to €400 billion (25% of GDP). 

The guarantee envelope from this and earlier scheme is aimed to unlock more than €750 billion (close to 50% of GDP) of liquidity for businesses and households.

On May 15, the government adopted a further €55 billion (3.5% of GDP) “Relaunch” package of fiscal measures.

It provides, among other things, further income support for families (€14.5 billion), funds for the healthcare system (€3.3 billion), and other measures to support businesses, including grants for SMEs and tax deferrals (€16 billion). On July 22, the government agreed on a €25 billion (1.6% of GDP) that extends income support for families. This new package has been submitted to Parliament for approval.

9. Brazil

To fight against COVID-19 (Coronavirus), Brazil’s government took certain measures, including travel restrictions; closing educational institutions, gyms, museums, and theatres; bans on mass gatherings. Other measures are:

• To mitigate the impact of COVID-19, the authorities announced a series of fiscal measures, adding up to 11.8% of GDP, of which the direct impact in the 2020 primary deficit is estimated at 7.3% of GDP. 
• The fiscal measures include temporary income support to vulnerable households (bringing forward the 13th pension payment to retirees
• Expanding the Bolsa Familia program with the inclusion of over 1 million more beneficiaries,
• Cash transfers to informal and unemployed workers
• Advance payments of salary bonuses to low-income workers
• Employment support (partial compensation to the workers which are temporarily suspended or have a cut in working hours),
• Temporary tax breaks and credit lines for firms that preserve employment
• Lower taxes and import levies on essential medical supplies
• New transfers from the federal to state governments to support higher health spending and as a cushion against the expected fall in revenues
• Public banks are expanding credit lines for businesses and households, with a focus on supporting working capital (credit lines add up to 4.5% of GDP), and the government will back about 1% of GDP in credit lines to SMEs and micro-businesses to cover payroll costs, working capital and investment

10. Canada

To fight against COVID-19 (Coronavirus), Federal and provincial governments have implemented a range of measures to mitigate the spread of the virus, including travel restrictions, social distancing, and declarations of states of emergency and closures of non-essential businesses in some provinces.

Key tax and spending measures (15% of GDP, $317 billion CAD) include:

•  $20 billion (0.9% of GDP) to the health system to support increased testing, vaccine development, medical supplies, mitigation efforts, and greater support for Indigenous communities
• Around $212 billion (10% of GDP) in direct aid to households and firms, including wage subsidies, payments to workers without sick leave and access to employment insurance, an increase in existing GST tax credits and child care benefits, and a new distinctions-based Indigenous Community Support Fund
• Around $85 billion (4.0% of GDP) in liquidity support through tax deferrals.

Other measures in the financial sector include:

• OSFI, the bank regulator, lowered the Domestic Stability Buffer for D-SIBs to 1% of risk-weighted assets (previously 2.25%)
• Under the Insured Mortgage Purchase Program, the government will purchase up to $150 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC)
• The federal government announced $95 billion in credit facilities (including $13.8 billion in forgivable loans) to lend to firms under stress
• Farm Credit Canada will receive support from the federal government that will allow for an additional $5.2 billion in lending capacity to producers, agribusinesses, and food processors.

Above are a few financial and economic measures which the concerned government to fight against COVID-19, apart from these there are many reforms which the governments took such as Bank Rate reduction, regulatory measures to promote credit flows to the retail sector and micro, small, and medium enterprises (MSMEs), limit for FPI investment in corporate bonds increased, supporting digital payment in various sectors, etc.

The above data has been taken from the website of IMF.