Which Country is Spending The Most on their COVID-19 Bailout?
Paper by Professor Ceyhun Elgin http://web.boun.edu.tr/elgin/COVID_19.pdf
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According to the IMF, by early April countries around the world have approved more than $4.5tn worth of emergency measures. That number has only grown since. In todays video, lets learn which country has the most generous deal and the different approaches they are taking
Professor Elgin of Columbia University recently published a paper titled Economic Policy Responses to a Pandemic where he reviews the different economic policy measures adopted by 166 different countries as a response to the COVID-19 pandemic. He then constructs an Economic Stimulus Index that combines all of the adopted policy measures. In addition, he analyzes how hard-hit various countries were by the pandemic and how that affects the extent of the countries’ economic policy responses. I’ll put a link to his paper in the description below.
Japan’s response to the pandemic has been among the most aggressive, with a spending package estimated at around 20% of the country’s economy. (It is topped only by Malta, which benefits from European Union funds.)
That compares to rescue spending estimated at roughly 14% of GDP in the US, 11% in Australia, 8.4% in Canada, 5% in the UK, 1.5% in Colombia and 0.6% in Gambia.
That ranking changes significantly if measures beyond spending, such as central bank actions, are considered.
In the biggest European countries, government pledges to guarantee new loans provided to businesses hurt by the shutdowns has accounted for a major part of the response. This is put in place to keep banks lending preventing widespread bankruptcies.
In the United States the Federal Reserve has stepped in with lending programmes with a similar aim.
When we factor in those kinds of actions, France is at the top of the pack in terms of generosity and the UK is now in fifth place, rather than 47th place.
Dr. Elgin shows that the biggest responses have occurred in countries that are richer, older – and have fewer hospital beds. Countries like the US and Japan are in a better position to finance new spending, due to investor willingness to buy their bonds, which keeps the interest cost of this spending lower.
Dr. Elgin notes that that the various countries are deploying these funds quite differently.
In many countries, the aid is targeted at the poor and to those less likely to get assistance through other programmes. Many are conditioned on a person’s job or income having been affected by shutdowns.
Canada, is providing CAD 2,000 ($1,400) per month for up to four months to those who have lost income due to the pandemic.
All Americans earning under $99,000 are to receive as much as $1,200 per adult, while South Korea’s central government is sending cheques of up to 1 million won ( $820) to families in the bottom 70% income bracket.
Hong Kong,Japan and Singapore are all pursuing similar strategies mailing cheques to working age citizens.
In Europe, many countries have opted against one-off bonuses and are relying instead on the existing safety net programmes, like the UK’s Universal Credit system, to meet the needs of those who have lost their jobs.
A common strategy globally has been government programmes that help cover payrolls for companies suffering from lockdown measures. The idea is that if firms retain staff, this will allow the economy bounce back more quickly once the restrictions are lifted as companies will not have to re hire and retrain staff.
The US, has taken a different approach, dedicating more than $650bn to business loans, which do not have to be repaid if firms maintain staffing levels and spend the majority of the funds on wages within two months.
The US Paycheck Protection Program has been overwhelmed by demand and there has been controversy over large companies sucking up much of the money, which had been pitched as relief for small businesses.
Democratic lawmakers in Congress are clashing with the White House and Republicans over a new multibillion-dollar stimulus package for the US economy, even as a terrible jobs report revealed the damage to the labor market caused by coronavirus.
Citing Franklin Delano Roosevelt’s Depression-era New Deal as a precedent, Democratic party leaders on Capitol Hill are calling for urgent fiscal measures to help struggling households, and state and local governments. President Donald Trump on Friday said there was “no rush” to reach a compromise. Republicans are balking at the possible price tag, which could be as high as $2tn, and insisting on provisions to shield businesses from litigation as they reopen their doors following weeks of forced shutdowns.
