Governments pledge billions to stem the Covid-19 economic fallout

As the coronavirus pandemic spreads swiftly, overwhelming hospitals and raising concerns of a global recession, governments from the United States to Australia are introducing measures to mitigate the fallout of economic slowdown. 

Around 25 million people risk losing their jobs as airlines, shopping malls, hotels, and restaurants among many other businesses take a hit from the Covid-19 pandemic, says the United Nations. 

People in dozens of countries are staying indoors as health experts have cautioned that the best way to fight the disease is to avoid public gatherings and keep social distance. That has cut spending and sales, creating a cascading effect across supply chains. 

But mandatory shutdowns of businesses in some cities have raised concerns that many people will lose their jobs as employers don’t have the capacity or willingness to pay salaries regardless of making any sales or profits. 

This has prompted governments to pump hundreds of billions of dollars into financial markets to keep the global economy afloat.

Europe

The European Central Bank (ECB) has announced it will spend more than $818 billion to buy bonds from the public and private sectors. 

The measure dubbed the Pandemic Emergency Purchase Programme is aimed at helping stabilise markets and regaining confidence in the euro market. 

The ECB took the steps at a time when investors were penalising some European countries such as Italy by demanding higher returns against lending them money.  

Italy is, in particular, facing economic distress as it struggles to contain the pandemic, which has killed around 3,000 people there.

The ECB had initially suggested that it wouldn’t intervene to help cash-strapped members even as the United States took steps to ease market turmoil with additional funding. 

Its surprise U-turn however, includes measures to relax the capital requirements of banks, making it easier for them to raise funds. 

Germany plans to set up a $54 billion fund to help small businesses and self-employed people. The money will be provided in the shape of grants and loans. The fund aims to help millions of workers such as artists and caregivers.  

Turkey has pledged around $15.4 billion to fight the impact of disease. It could be used to postpone debt repayments and tax burden. 

US

Altogether, the United States is planning to spend up to $1.2 trillion to help banks, businesses and households as its stock markets continue to face decline. 

The US Federal Reserve has cut its interest rate close to zero and announced measures to pump billions of dollars into financial markets by buying bonds. 

It has also created a Money Market Mutual Fund Lending Facility (MMLF) to help money market funds meet the cash needs of small investors. 

The Fed is offering a similar facility to assist large investors. Washington’s stimulus programme may include sending cheques directly to households. 

Australia and others

In Australia, the central bank reduced interest rates to a record low of 0.25 percent and set up a $50 billion fund for businesses. 

South Korea has announced a $39 billion emergency financing plan for small and medium-sized companies. 

The Japanese government is mulling over an economic package that could exceed $275 billion. Tokyo is holding talks with business leaders to decide what steps must be taken to encourage spending. 

Japan’s hospitality industry has taken a major hit as hotel occupancy rates have fallen and planned expenditure on theme parks such as the Tokyo Disney Resort has been delayed. 

The Olympic Games which are supposed to start there from July 24 were postponed amid the uncertainty, fuelling anxieties among investors who were relying on the event.