Global Economic Effects of COVID-19

Changes from September 28, 2021 to October 4, 2021

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Global Economic Effects of COVID-19
~~September 28~~October 4, 2021 , 2021
The COVID-19 viral pandemic is an unprecedented global phenomenon that is also a highly The COVID-19 viral pandemic is an unprecedented global phenomenon that is also a highly
personal experience with wide-ranging effects. On September 20, 2021, U.S. viral deaths personal experience with wide-ranging effects. On September 20, 2021, U.S. viral deaths
James K. Jackson,
surpassed the 675,446 total from the 1918 Spanish flu, the previous worst U.S. pandemic-related surpassed the 675,446 total from the 1918 Spanish flu, the previous worst U.S. pandemic-related
Coordinator
death total on record. The pandemic has disrupted lives across all countries and communities and death total on record. The pandemic has disrupted lives across all countries and communities and
Specialist in International Specialist in International
negatively affected global economic growth in 2020 beyond anything experienced in nearly a negatively affected global economic growth in 2020 beyond anything experienced in nearly a
Trade and Finance Trade and Finance
century. Estimates indicate the virus reduced global economic growth in 2020 to an annualized century. Estimates indicate the virus reduced global economic growth in 2020 to an annualized

rate of around -3. rate of around -3.52%, with a recovery of %, with a recovery of ~~4.2% to 5.6~~6.0% projected for 2021. Global trade is % projected for 2021. Global trade is
estimated to Martin A. Weiss
~~estimated to~~ have fallen by 5.3% in 2020, but is projected to grow by 8.0% in 2021. According to have fallen by 5.3% in 2020, but is projected to grow by 8.0% in 2021. According to
a consensus Specialist in International Specialist in International
~~a consensus~~ of forecasts, the economic downturn in 2020 was not as negative as initially of forecasts, the economic downturn in 2020 was not as negative as initially
estimated, due in Trade and Finance Trade and Finance
~~estimated, due in~~ part to the fiscal and monetary policies governments adopted in 2020. In most part to the fiscal and monetary policies governments adopted in 2020. In most
countries,
~~countries,~~ economic growth fell sharply in the second quarter of 2020, rebounded quickly in the economic growth fell sharply in the second quarter of 2020, rebounded quickly in the
third quarter, and has been mostly positive since. Although lessening, the total global economic third quarter, and has been mostly positive since. Although lessening, the total global economic
effects Andres B. Schwarzenberg
~~effects~~ continue to mount. In particular, the prolonged nature of the health crisis is affecting the continue to mount. In particular, the prolonged nature of the health crisis is affecting the
global Analyst in International Analyst in International
~~global~~ economy beyond traditional measures with potentially long-lasting and far-reaching economy beyond traditional measures with potentially long-lasting and far-reaching
Trade and Finance Trade and Finance
repercussions. Economic forecasts reflect continuing risks to a sustained global recovery posed repercussions. Economic forecasts reflect continuing risks to a sustained global recovery posed

by a resurgence of infectious cases and potential inflationary pressures associated with pent-up by a resurgence of infectious cases and potential inflationary pressures associated with pent-up
Rebecca M. Nelson
consumer demand fueled by an increase in personal savings. On the supply side, shortages reflect consumer demand fueled by an increase in personal savings. On the supply side, shortages reflect
Specialist in International Specialist in International
lingering disruptions to labor markets, production and supply chain bottlenecks, disruptions in lingering disruptions to labor markets, production and supply chain bottlenecks, disruptions in
Trade and Finance Trade and Finance
global energy markets, and shipping and transportation constraints that are adding to inflationary global energy markets, and shipping and transportation constraints that are adding to inflationary

pressures. pressures.
Karen M. Sutter
Specialist in Asian Trade Specialist in Asian Trade
As some developed economies start recovering, central banks and national governments are As some developed economies start recovering, central banks and national governments are
and Finance and Finance
weighing the impact and timing of tapering off monetary and fiscal support as a result of weighing the impact and timing of tapering off monetary and fiscal support as a result of

concerns over potential inflationary pressures against the prospect of slowing the pace of the concerns over potential inflationary pressures against the prospect of slowing the pace of the
recovery. These concerns are compounded by the emergence of new disease variants and rolling recovery. These concerns are compounded by the emergence of new disease variants and rolling
Michael D. Sutherland
pandemic hotspots that challenge national efforts to contain infections and fully restore economic pandemic hotspots that challenge national efforts to contain infections and fully restore economic
Analyst in International Analyst in International
activities. Major advanced economies , comprising 60% of global economic activity, are projected activities. Major advanced economies , comprising 60% of global economic activity, are projected
Trade and Finance Trade and Finance
to operate below their potential output level through at least 2024, which indicates lower national to operate below their potential output level through at least 2024, which indicates lower national

and individual economic welfare relative to pre-pandemic levels. Compared with the and individual economic welfare relative to pre-pandemic levels. Compared with the
synchronized nature of the global economic slowdown in the first half of 2020, the global synchronized nature of the global economic slowdown in the first half of 2020, the global

economy has shown signs of a two-track recovery that began in the third quarter of 2020 and has economy has shown signs of a two-track recovery that began in the third quarter of 2020 and has
been marked by a nascent recovery in developed economies where rates of vaccinations are high, but a slower pace of growth been marked by a nascent recovery in developed economies where rates of vaccinations are high, but a slower pace of growth
in developing economies where vaccination rates are low. in developing economies where vaccination rates are low.
As a whole, developed economies have made strides in vaccinating growing shares of their populations, raising prospects of a As a whole, developed economies have made strides in vaccinating growing shares of their populations, raising prospects of a
sustained economic recovery in late 2021 and into 2022 and, in turn, a recovery in the broader global economy. However, sustained economic recovery in late 2021 and into 2022 and, in turn, a recovery in the broader global economy. However,
new variants of the COVID-19 virus and a surge in diagnosed cases in large developing economies and resistance to new variants of the COVID-19 virus and a surge in diagnosed cases in large developing economies and resistance to
vaccinations among some populations in developed economies raise questions about the speed and strength of an economic vaccinations among some populations in developed economies raise questions about the speed and strength of an economic
recovery over the near term. A resurgence of infectious cases in Europe, Latin America, Russia, the United States, Japan, recovery over the near term. A resurgence of infectious cases in Europe, Latin America, Russia, the United States, Japan,
Brazil, India, and across much of Africa renewed calls for lockdowns and curfews and threatened to weaken or delay a Brazil, India, and across much of Africa renewed calls for lockdowns and curfews and threatened to weaken or delay a
potential sustained economic recovery into late 2021. The economic fallout from the pandemic has had a disparate impact on potential sustained economic recovery into late 2021. The economic fallout from the pandemic has had a disparate impact on
certain sectors of the economy, particularly the service sector, and certain population groups and could risk continued labor certain sectors of the economy, particularly the service sector, and certain population groups and could risk continued labor
dislocations. In some cases, workers are reconsidering their career choices and work patterns, which may imply post-dislocations. In some cases, workers are reconsidering their career choices and work patterns, which may imply post-
pandemic economies marked by more varied labor arrangements and altered urban environments. pandemic economies marked by more varied labor arrangements and altered urban environments.
The human costs in terms of lives lost will permanently affect global economic growth in addition to the cost of elevated The human costs in terms of lives lost will permanently affect global economic growth in addition to the cost of elevated
levels of poverty, lives upended, careers derailed, and increased social unrest. Some estimates indicate that 95 million people levels of poverty, lives upended, careers derailed, and increased social unrest. Some estimates indicate that 95 million people
may have entered into extreme poverty in 2020 with 80 million more undernourished compared to pre -pandemic levels. In may have entered into extreme poverty in 2020 with 80 million more undernourished compared to pre -pandemic levels. In
addition, some estimates indicate that the decline in global trade in 2020 exacted an especially heavy economic toll on trade-addition, some estimates indicate that the decline in global trade in 2020 exacted an especially heavy economic toll on trade-
dependent developing and emerging economies. This report provides an overview of the global economic costs to date and dependent developing and emerging economies. This report provides an overview of the global economic costs to date and
the response by governments and international institutions to address these effects. the response by governments and international institutions to address these effects.
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Global Economic Effects of COVID-19

Overview
The World Health Organization (WHO) first declared COVID-19 a global health emergency in The World Health Organization (WHO) first declared COVID-19 a global health emergency in
January 2020; on March 11 it announced the viral outbreak was official y a pandemic, the highest January 2020; on March 11 it announced the viral outbreak was official y a pandemic, the highest
level of health emergency.1 Since then, the emergency evolved into a global public health and level of health emergency.1 Since then, the emergency evolved into a global public health and
economic crisis that affected the $90 tril ion global economy beyond anything experienced in economic crisis that affected the $90 tril ion global economy beyond anything experienced in
nearly a century. In a variance of John Donne’s poem, “No Man is an Island,” the viral infection nearly a century. In a variance of John Donne’s poem, “No Man is an Island,” the viral infection
spread between and across countries and affected nearly every community, demonstrating the spread between and across countries and affected nearly every community, demonstrating the
highly interconnected nature of the global economy: the virus has been detected in every country highly interconnected nature of the global economy: the virus has been detected in every country
and al U.S. states.2 The focal point of infections shifted from China to Europe, especial y Italy, and al U.S. states.2 The focal point of infections shifted from China to Europe, especial y Italy,
by early March 2020, but by April, the focus had shifted to the United States, where the number by early March 2020, but by April, the focus had shifted to the United States, where the number
of infections had been accelerating. By April 2021, India, Brazil, parts of Africa and Asia of infections had been accelerating. By April 2021, India, Brazil, parts of Africa and Asia
emerged as viral hot spots with the number of infections and deaths reaching daily record levels. emerged as viral hot spots with the number of infections and deaths reaching daily record levels.
By mid-September 2021, the more virulent COVID-19 Delta variant reportedly had become the By mid-September 2021, the more virulent COVID-19 Delta variant reportedly had become the
more global y dominant strain of the virus and prompted various national leaders to cal for more global y dominant strain of the virus and prompted various national leaders to cal for
additional health measures, including reintroducing travel restrictions.3 Projections by the additional health measures, including reintroducing travel restrictions.3 Projections by the
European Center for Prevention and Disease Control (ECDC) indicated the variant was projected European Center for Prevention and Disease Control (ECDC) indicated the variant was projected
to account for 90% of coronavirus infections across much of Europe by the end of August 2021 to account for 90% of coronavirus infections across much of Europe by the end of August 2021
and “could lead to a fast and significant increase in daily cases in al age groups.”4 The Delta and “could lead to a fast and significant increase in daily cases in al age groups.”4 The Delta
variant was also growing as a share of total cases in the United States, accounting for 97.9% of al variant was also growing as a share of total cases in the United States, accounting for 97.9% of al
cases in late August 2021, according to the Center for Disease Control (CDC).5 After escaping the cases in late August 2021, according to the Center for Disease Control (CDC).5 After escaping the
initial rounds of infections, cases were growing rapidly in Australia and New Zealand, which initial rounds of infections, cases were growing rapidly in Australia and New Zealand, which
instituted restrictions on social gatherings and movement.6 COVID-19 infections were rising in instituted restrictions on social gatherings and movement.6 COVID-19 infections were rising in
Russia in June 2021, reportedly due to the unwil ingness of the populace to receive the Russian-Russia in June 2021, reportedly due to the unwil ingness of the populace to receive the Russian-
developed Sputnik V vaccine. developed Sputnik V vaccine.
According to the World Health Organization, by According to the World Health Organization, by ~~September 24~~October 4, 2021, the COVID-19 virus had , 2021, the COVID-19 virus had
sickened over sickened over ~~229.9~~234.6 mil ion people global y with over 4. mil ion people global y with over 4.78 mil ion fatalities:7 the United States mil ion fatalities:7 the United States
reported that over reported that over ~~42.2~~43.3 mil ion Americans had been diagnosed and over mil ion Americans had been diagnosed and over ~~673,728~~ 695.2 thousand people had died from had died from
the virus. At one point, more than 80 countries had closed their borders to arrivals from countries the virus. At one point, more than 80 countries had closed their borders to arrivals from countries
with infections, ordered businesses to close, instructed their populations to self-quarantine, and with infections, ordered businesses to close, instructed their populations to self-quarantine, and
closed schools to an estimated 1.5 bil ion children.8 On August 23, 2021, the closed schools to an estimated 1.5 bil ion children.8 On August 23, 2021, the ~~Food and Drug~~

1 Bill Chappell, “COVID-19: COVID-19 Is Now Officially a Pandemic, WHO Says,” 1 Bill Chappell, “COVID-19: COVID-19 Is Now Officially a Pandemic, WHO Says,” National Public Radio, March , March
11, 2020. https://www.npr.org/sections/goatsandsoda/2020/03/11/814474930/COVID-19-COVID-19-is-now-officially-11, 2020. https://www.npr.org/sections/goatsandsoda/2020/03/11/814474930/COVID-19-COVID-19-is-now-officially-
a-pandemic-who-says. a-pandemic-who-says.
2 “Mapping the Spread of the COVID-19 in the U.S. and Worldwide,” Washington Post Staff, 2 “Mapping the Spread of the COVID-19 in the U.S. and Worldwide,” Washington Post Staff, Washington Post, March , March
4, 2020. https://www.washingtonpost.com/world/2020/01/22/mapping-spread-new-COVID-19/?arc404=true.4, 2020. https://www.washingtonpost.com/world/2020/01/22/mapping-spread-new-COVID-19/?arc404=true.
3 Ang, Katerina, Delta is By Far World’s Most Dominant Coronavirus Variant, WHO Says, 3 Ang, Katerina, Delta is By Far World’s Most Dominant Coronavirus Variant, WHO Says, The Washington Post,
September 22, 2021; Gross, Anna, Leila Abboud, and John Burn-Murdoch, Delta Variant Begins to Spread, September 22, 2021; Gross, Anna, Leila Abboud, and John Burn-Murdoch, Delta Variant Begins to Spread,
T hreatening EU’s Covid Progress, T hreatening EU’s Covid Progress, Financial Tim es, June 21, 2021. https://www.ft.com/content/d4abbe5e-8650-4a76-, June 21, 2021. https://www.ft.com/content/d4abbe5e-8650-4a76-
9fea-2d3efa2ed52b. 9fea-2d3efa2ed52b.
4 Miller, Michael E., Covid-19 Updates: Merkel Warns Europe is ‘On T hin Ice’ as Concerns About Delta Variant 4 Miller, Michael E., Covid-19 Updates: Merkel Warns Europe is ‘On T hin Ice’ as Concerns About Delta Variant
Grow, Grow, The Washington Post, June 25, 2021. , June 25, 2021.
5 Center for Disease Control. https://covid.cdc.gov/covid-data-tracker/#variant-proportions. 5 Center for Disease Control. https://covid.cdc.gov/covid-data-tracker/#variant-proportions.
6 Pannett, Rachael, Sydney Enters ‘Scariest’ Phase of Pandemic as Delta Variant Spreads, Leader Says, 6 Pannett, Rachael, Sydney Enters ‘Scariest’ Phase of Pandemic as Delta Variant Spreads, Leader Says, The
Washington Post, June 24, 2021. , June 24, 2021.
7 World Health Organization. https://covid19.who.int/. 7 World Health Organization. https://covid19.who.int/.
8 “T he Day the World Stopped: How Governments Are Still Struggling to Get Ahead of the COVID-19,” 8 “T he Day the World Stopped: How Governments Are Still Struggling to Get Ahead of the COVID-19,” The
Econom ist, March 17, 2020. https://www.economist.com/international/2020/03/17/governments-are-still-struggling-to-, March 17, 2020. https://www.economist.com/international/2020/03/17/governments-are-still-struggling-to-
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Food and Drug Administration (FDA) gave full approval to the Pfizer-BioNTech coronavirus vaccine, leading Administration (FDA) gave full approval to the Pfizer-BioNTech coronavirus vaccine, leading
various institutions and the U.S. militaryvarious institutions and the U.S. military to begin mandating vaccinations for to begin mandating vaccinations for employees and employees and
members.9 members.9
As infectious cases began rising sharply in late February 2020, governments took unprecedented As infectious cases began rising sharply in late February 2020, governments took unprecedented
steps in March 2020 to lock down social activities to contain the spread of the pandemic, steps in March 2020 to lock down social activities to contain the spread of the pandemic,
inadvertently creating a global economic recession. Government responses in March 2020 were inadvertently creating a global economic recession. Government responses in March 2020 were
extraordinary in terms of the speed with which they took place, the broad scope of the fiscal and extraordinary in terms of the speed with which they took place, the broad scope of the fiscal and
monetary policies they adopted, and the number of countries that were involved, often without a monetary policies they adopted, and the number of countries that were involved, often without a
formal, coordinated plan. Initial y, governments adopted monetary policies aimed at stabilizing formal, coordinated plan. Initial y, governments adopted monetary policies aimed at stabilizing
financial markets and ensuring the flow of credit. In the second phase, governments focused financial markets and ensuring the flow of credit. In the second phase, governments focused
policy actions on fiscal measures aimed at sustaining economic growth as they adopted policy actions on fiscal measures aimed at sustaining economic growth as they adopted
quarantines and social distancing measures. In the third phase, governments shifted policies to quarantines and social distancing measures. In the third phase, governments shifted policies to
developing, purchasing and distributing vaccines. As the health and economic effects have developing, purchasing and distributing vaccines. As the health and economic effects have
evolved and persisted, the phases of government actions have become less distinct: efforts to evolved and persisted, the phases of government actions have become less distinct: efforts to
vaccinate populations have coincided with additional fiscal measures to sustain household vaccinate populations have coincided with additional fiscal measures to sustain household
income, for instance. income, for instance.
The Bureau of Economic Analysis (BEA) reported that policy actions to lock down the economy The Bureau of Economic Analysis (BEA) reported that policy actions to lock down the economy
pushed the U.S. GDP growth rate down to 9.0% in the second quarter of 2020 compared with the pushed the U.S. GDP growth rate down to 9.0% in the second quarter of 2020 compared with the
previous quarter, or at an annualized rate of -31%, the largest quarterly decline in U.S. GDP previous quarter, or at an annualized rate of -31%, the largest quarterly decline in U.S. GDP
recorded over the past 70 years.10 Subsequently, U.S. GDP grew by 7.5% in the third quarter, or at recorded over the past 70 years.10 Subsequently, U.S. GDP grew by 7.5% in the third quarter, or at
an annualized rate of 30%, based primarily on gains in personal consumption, reflecting an an annualized rate of 30%, based primarily on gains in personal consumption, reflecting an
increase in income and support through government transfer payments.11 Fourth quarter 2020 data increase in income and support through government transfer payments.11 Fourth quarter 2020 data
indicate the U.S. economy grew by slightly more than 1.0% over the third quarter, or at an indicate the U.S. economy grew by slightly more than 1.0% over the third quarter, or at an
annualized rate of 4.5%. On a year-over-year basis, U.S. real GDP is estimated to have declined annualized rate of 4.5%. On a year-over-year basis, U.S. real GDP is estimated to have declined
by 3.4% in 2020 compared with 2019.12 In the first and second quarters of 2021, the U.S. by 3.4% in 2020 compared with 2019.12 In the first and second quarters of 2021, the U.S.
economy grew at annualized rates of 6.3% and 6. economy grew at annualized rates of 6.3% and 6.57%, respectively. %, respectively.
In its September 8, 2021, Beige Book analysis, the Federal Reserve reported that economic In its September 8, 2021, Beige Book analysis, the Federal Reserve reported that economic
activity had slowed slightly in the July through August period compared with moderate to robust activity had slowed slightly in the July through August period compared with moderate to robust
growth in al 12 Federal Reserve Districts during the May to early July period. The Fed attributed growth in al 12 Federal Reserve Districts during the May to early July period. The Fed attributed
the slowdown in activity to lower levels of consumer dining and recreation activities arising from the slowdown in activity to lower levels of consumer dining and recreation activities arising from
concerns over the spread of infections by the Delta variant of the COVID-19 virus. Other sectors concerns over the spread of infections by the Delta variant of the COVID-19 virus. Other sectors
of the economy experienced slower growth as a result of labor and supply-side shortages. Low of the economy experienced slower growth as a result of labor and supply-side shortages. Low
inventory levels in the auto sector and reduced supplies of residential housing also constrained inventory levels in the auto sector and reduced supplies of residential housing also constrained
sales activity in these sectors; the Fed also reported mild gains in residential and nonresidential sales activity in these sectors; the Fed also reported mild gains in residential and nonresidential
construction and in the energy and agricultural sectors.13 In its Monetary Policy report on construction and in the energy and agricultural sectors.13 In its Monetary Policy report on
September 22, the Fed indicated the economy had recovered to the point where it could begin a September 22, the Fed indicated the economy had recovered to the point where it could begin a

get-ahead-of-the-COVID-19. get-ahead-of-the-COVID-19.
9 Guarino, Ben, Laurie McGinley and T yler Pager, Pfizer-BioNT ech Coronavirus Vaccine Gets Full FDA Approval, 9 Guarino, Ben, Laurie McGinley and T yler Pager, Pfizer-BioNT ech Coronavirus Vaccine Gets Full FDA Approval,
Potentially Persuading the Hesitant to Get a Shot, Potentially Persuading the Hesitant to Get a Shot, The Washington Post, August 23, 2021. , August 23, 2021.
10 10 Gross Domestic Product, 2nd Quarter 2020 (Advance Estimate) and Annual Update, Bureau of Economic Analysis, , Bureau of Economic Analysis,
July 30, 2020. https://www.bea.gov/news/2020/gross-domestic-product -2nd-quarter-2020-advance-estimate-and-July 30, 2020. https://www.bea.gov/news/2020/gross-domestic-product -2nd-quarter-2020-advance-estimate-and-
annual-update. annual-update.
11 11 Gross Domestic Product, Third Quarter 2020 (Advance Estimate), Bureau of Economic Analysis, October 29, 2020. Bureau of Economic Analysis, October 29, 2020.
12 12 Gross Domestic Product, Second Quarter 2021 (Advance Estimate) and Annual Update, Bureau of Economic Bureau of Economic
Analysis, July 29, 2021. Analysis, July 29, 2021.
13 13 The Beige Book: Summary of Commentary on Current Economic Conditions by ~~Federa l~~Federal Reserve District, the Federal , the Federal
Reserve System, September 8, 2021. https://www.federalreserve.gov/monetarypolicy/beige-book-default.htm. Reserve System, September 8, 2021. https://www.federalreserve.gov/monetarypolicy/beige-book-default.htm.
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gradual tapering off its monthly asset purchases in November, characterized as a “moderation in gradual tapering off its monthly asset purchases in November, characterized as a “moderation in
the pace of asset purchases,” and make adjustments to interest rates in 2022.14 the pace of asset purchases,” and make adjustments to interest rates in 2022.14
The Fed’s Beige Book analytical period occurred prior to a strong Gulf-centered hurricane in late The Fed’s Beige Book analytical period occurred prior to a strong Gulf-centered hurricane in late
August that compounded existing shipping and transportation issues through Gulf ports that were August that compounded existing shipping and transportation issues through Gulf ports that were
struggling with pandemic-related issues that had handicapped oil production, refining and struggling with pandemic-related issues that had handicapped oil production, refining and
transportation, and shipments of agricultural products. In addition, damage to housing stock, transportation, and shipments of agricultural products. In addition, damage to housing stock,
urban infrastructure, and increased need for medical assistance in Gulf Coast areas increased urban infrastructure, and increased need for medical assistance in Gulf Coast areas increased
strains on communities already struggling with the impact of the pandemic that further strains on communities already struggling with the impact of the pandemic that further
compounded efforts by workers to return to their jobs.15 compounded efforts by workers to return to their jobs.15
Through the various stages of the pandemic-related health and economic crises, governments Through the various stages of the pandemic-related health and economic crises, governments
responded with a number of policy initiatives that often attempted to balance competing policy responded with a number of policy initiatives that often attempted to balance competing policy
objectives. As the health crisis subsides and economic activity resumes, policymakers may objectives. As the health crisis subsides and economic activity resumes, policymakers may
consider evaluating the various policy approaches for lessons learned and for best practices to consider evaluating the various policy approaches for lessons learned and for best practices to
employ in addressing similar crises, should they arise. Such an evaluation could include: employ in addressing similar crises, should they arise. Such an evaluation could include:
 Assessing the short and long-term costs and benefits of fiscal policies that were  Assessing the short and long-term costs and benefits of fiscal policies that were
adopted during the crisis to address employment dislocations and support social adopted during the crisis to address employment dislocations and support social
safety nets, compared with the potential long-term impact of deficit spending on safety nets, compared with the potential long-term impact of deficit spending on
the rate of inflation and the long-term financial stability of the economy. the rate of inflation and the long-term financial stability of the economy.
 Evaluating the costs and benefits of economy-wide business and social  Evaluating the costs and benefits of economy-wide business and social
lockdowns compared with the impact and effectiveness of targeted closures or lockdowns compared with the impact and effectiveness of targeted closures or
other types of restrictions. other types of restrictions.
 Reviewing the effectiveness of monetary and fiscal policies that were adopted to  Reviewing the effectiveness of monetary and fiscal policies that were adopted to
support credit markets and sustain economic activity broadly during the initial support credit markets and sustain economic activity broadly during the initial
stages of the crisis, compared with policies targeted to assist specific sectors and stages of the crisis, compared with policies targeted to assist specific sectors and
businesses as they experienced financial distress. businesses as they experienced financial distress.
 Assessing the effectiveness of transfer payments that were directed at supporting  Assessing the effectiveness of transfer payments that were directed at supporting
the most heavily affected households, the impact of such payments on household the most heavily affected households, the impact of such payments on household
saving rates, consumption, and decisions to return to full-time employment, the saving rates, consumption, and decisions to return to full-time employment, the
necessary conditions and timing for tapering off the support, and the impact on necessary conditions and timing for tapering off the support, and the impact on
the long-term rate of growth between public versus private debt. the long-term rate of growth between public versus private debt.
 Assessing the impact that central banks and monetary authorities had on financial  Assessing the impact that central banks and monetary authorities had on financial
markets and market liquidity by intervening in sovereign debt and corporate bond markets and market liquidity by intervening in sovereign debt and corporate bond
markets during the early stages of the health and economic crisis and the impact, markets during the early stages of the health and economic crisis and the impact,
if any, on the ability of the markets to perform their traditional functions of if any, on the ability of the markets to perform their traditional functions of
pricing risk and al ocating capital. pricing risk and al ocating capital.
 Assessing the optimal combination and impact of fiscal policies during a national  Assessing the optimal combination and impact of fiscal policies during a national
or global economic crisis between assisting households, firms, or state and local or global economic crisis between assisting households, firms, or state and local
governments. governments.
 Evaluating the effectiveness of unemployment insurance systems that provide  Evaluating the effectiveness of unemployment insurance systems that provide
short-term unemployment insurance to sustain workers incomes, compared with short-term unemployment insurance to sustain workers incomes, compared with

14 14 Press Release, Board of Governors of the Federal Reserve System, September 22, 2021; Smith, Colby and Kate , Board of Governors of the Federal Reserve System, September 22, 2021; Smith, Colby and Kate
Duguid, T he Fed Prepares to T ighten: Five T akeaways From its Latest Meeting, Duguid, T he Fed Prepares to T ighten: Five T akeaways From its Latest Meeting, Financial Tim es, September 22, 2021. September 22, 2021.
https://www.ft.com/content/1cc28b4c-63ea-44c5-a0af-af681ee6a4a4. https://www.ft.com/content/1cc28b4c-63ea-44c5-a0af-af681ee6a4a4.
15 Plume, Karl, U.S. Gulf Coast Grain Exports Slowly Resume After Ida as More Power Restored, 15 Plume, Karl, U.S. Gulf Coast Grain Exports Slowly Resume After Ida as More Power Restored, Reuters, September , September
9, 2021; Mohindru, Sameer C., and Pradeep Rajan, Hurricane Ida Roils Global 9, 2021; Mohindru, Sameer C., and Pradeep Rajan, Hurricane Ida Roils Global ~~Sipping~~ Shipping Market: Sources, Market: Sources, S&P Global, ,
September 17, 2021. September 17, 2021.
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European-style job retention programs that maintain pre-crisis employment, even European-style job retention programs that maintain pre-crisis employment, even
as those jobs could disappear once the support ends.16 as those jobs could disappear once the support ends.16
Background
According to the July 2021 World Economic Outlook prepared by the International Monetary Fund (IMF), global economic growth fel to an annualized rate of around -3.2% in 2020, with a recovery of 6.0% projected for 2021 and 4.9% for 2022.17 The IMF also concluded the decline in economic activity in 2000 was more global in nature and exceeded the decline experienced during the 2009-2010 global financial crisis as a result of its effects on developing economies. In its recent forecast, the IMF projected geographic regions of the global economy would recover at different speeds, reflecting differences in the pace of vaccinations, the extent of policy support, and various structural conditions, such as the role of tourism in the economy. Through mid-September 2021, various key economic and financial indicators had rebounded Through mid-September 2021, various key economic and financial indicators had rebounded
from the depths of the pandemic-related economic recession, although not al parts of the global from the depths of the pandemic-related economic recession, although not al parts of the global
economy had recovered to pre-COVID-19 pandemic levels.economy had recovered to pre-COVID-19 pandemic levels.1718 In addition, a resurgence in viral In addition, a resurgence in viral
cases and the emergence of new and more virulent strains of the COVID-19 virus caused some cases and the emergence of new and more virulent strains of the COVID-19 virus caused some
institutions in August 2021 to lower their economic growth projections for 2021.institutions in August 2021 to lower their economic growth projections for 2021.1819 Although Although
vaccination rates increased in various developed economies, particularly the United States, vaccination rates increased in various developed economies, particularly the United States,
developing economies struggled to get access to vaccines and their populations vaccinated, and developing economies struggled to get access to vaccines and their populations vaccinated, and
consequently, to get their economies operating at or above pre-pandemic levels. Financial market consequently, to get their economies operating at or above pre-pandemic levels. Financial market
indices largely recovered from the losses experienced in March and April 2020, international oil indices largely recovered from the losses experienced in March and April 2020, international oil
prices surpassed the pre-pandemic levels, pressure appreciating the dollar had general y eased, prices surpassed the pre-pandemic levels, pressure appreciating the dollar had general y eased,
and labor markets appeared to be stabilizing. and labor markets appeared to be stabilizing.
By early September 2021, prior to the end of U.S. pandemic-related unemployment assistance, By early September 2021, prior to the end of U.S. pandemic-related unemployment assistance,
U.S. and European consumers appeared to have adjusted to pandemic restrictions by relying on U.S. and European consumers appeared to have adjusted to pandemic restrictions by relying on
unemployment benefits, personal savings, and credit to sustain consumption activities. Increased unemployment benefits, personal savings, and credit to sustain consumption activities. Increased
household and business spending, however, increased demand for a broad range of products, household and business spending, however, increased demand for a broad range of products,
including housing, food, energy, and new and used cars and trucks, that were constrained by including housing, food, energy, and new and used cars and trucks, that were constrained by
supply shortages and raised U.S. consumer and producer prices in August, which rose at a supply shortages and raised U.S. consumer and producer prices in August, which rose at a
monthly rate of 0.3% and 0.7%, or at annual rates of over 5.3% and 8.3%, respectively. monthly rate of 0.3% and 0.7%, or at annual rates of over 5.3% and 8.3%, respectively.1920
Over the long run, damage to labor markets could be problematic with a large share of the labor Over the long run, damage to labor markets could be problematic with a large share of the labor
force unable to or, in some sectors, unwil ing to return to pre-pandemic jobs. In some cases, force unable to or, in some sectors, unwil ing to return to pre-pandemic jobs. In some cases,
workers who were unemployed during the crisis reportedly reconsidered returning to their workers who were unemployed during the crisis reportedly reconsidered returning to their
previous jobs and were exploring other options, which potential y could affect the pace of the previous jobs and were exploring other options, which potential y could affect the pace of the
economic recovery.economic recovery.2021 Reportedly, employment in the U.S. child-care sector in August 2021was Reportedly, employment in the U.S. child-care sector in August 2021was
down more than 137,000 workers compared with March 2020 levels and played a role in keeping down more than 137,000 workers compared with March 2020 levels and played a role in keeping
~~1.6 mil ion women who are mothers of children under the age of 17 from returning to the labor~~
~~force.21 Similarly, economies could face long-term costs as a result of children who were held out~~
~~of in-person education for over a year that could result in lower academic performance and~~
~~graduation rates and delayed entry into the labor market. On March 31, 2021, Kristalina~~
~~Georgieva, Managing Director of the International Monetary Fund (IMF), warned that an~~

16 16 Job Retention Schemes During the COVID-19 Lockdown and Beyond, Organization for Economic Cooperation and , Organization for Economic Cooperation and
Development, August 3, 2020. Development, August 3, 2020.
17 World Economic Outlook Update, International Monetary Fund, July, 2021, p. 6. 1817 Mapping the Spread of the COVID-19. Mapping the Spread of the COVID-19.
1819 Platt, Eric and Colby Smith, Economists T rim Forecasts and Investors Feel Jitters Over Delta Variant, Platt, Eric and Colby Smith, Economists T rim Forecasts and Investors Feel Jitters Over Delta Variant, Financial
Tim es, August 19, 2021. https://www.ft.com/content/c21958ff-80d2-4b3b-863c-c492b361b2a4. , August 19, 2021. https://www.ft.com/content/c21958ff-80d2-4b3b-863c-c492b361b2a4.
19 20 Consumer Price Index August 2021, Bureau of Labor Statistics, September 14, 2021; , Bureau of Labor Statistics, September 14, 2021; Producer Price Index August
2021. Bureau of Labor Statistics, September 10, 2021. . Bureau of Labor Statistics, September 10, 2021.
2021 Dodd, Darren, Businesses Suffer Labor Pains as Economies Reopen, Dodd, Darren, Businesses Suffer Labor Pains as Economies Reopen, Financial Times, June 21, 2021. , June 21, 2021.
https://www.ft.com/content/e47575aa-b6ec-4635-a0be-f4e623dacbdb. https://www.ft.com/content/e47575aa-b6ec-4635-a0be-f4e623dacbdb.
~~21 The Employment Situation August 2021, Bureau of Labor Statistics, September 3, 2021; Long, Heather, T he Pay is~~
~~Absolute Crap: Child-care Workers Are Quitting Rapidly: A Red Flag for the Economy, The Washington Post,~~
~~September 20, 2021.~~
~~Congressional Research Service~~

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~~Global Economic Effects of COVID-19~~
Congressional Research Service 4 Global Economic Effects of COVID-19 1.6 mil ion women who are mothers of children under the age of 17 from returning to the labor force.22 Similarly, economies could face long-term costs as a result of children who were held out of in-person education for over a year that could result in lower academic performance and graduation rates and delayed entry into the labor market. On March 31, 2021, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), warned that an
emerging market debt crisis could unfold as the global economy begins recovering and interest emerging market debt crisis could unfold as the global economy begins recovering and interest
rates rise, which could cause a capital outflow from developing economies. rates rise, which could cause a capital outflow from developing economies.2223
Economic Policy Challenges
Over the course of the pandemic and economic crises, policymakers have had to adjust to the Over the course of the pandemic and economic crises, policymakers have had to adjust to the
changing nature of the crises, while implementing targeted policies that address what had been changing nature of the crises, while implementing targeted policies that address what had been
expected to be short-term problems without creating distortions in economies that can outlast the expected to be short-term problems without creating distortions in economies that can outlast the
impact of the virus itself. Initial y, policymakers were overwhelmed by the quickly changing impact of the virus itself. Initial y, policymakers were overwhelmed by the quickly changing
nature of the global health crisis and the immediate economic effects. The extended health crisis, nature of the global health crisis and the immediate economic effects. The extended health crisis,
however, has created wide-ranging spil -over effects beyond those typical y associated with however, has created wide-ranging spil -over effects beyond those typical y associated with
monetary and fiscal policies in ways that have hampered national economic recoveries and monetary and fiscal policies in ways that have hampered national economic recoveries and
reinforced a more wide-spread global trade and economic crisis. During the initial stages of the reinforced a more wide-spread global trade and economic crisis. During the initial stages of the
pandemic, policymakers weighed the impact of policies that addressed the immediate economic pandemic, policymakers weighed the impact of policies that addressed the immediate economic
effects at the expense of longer-term considerations such as debt accumulation. Initial y, many effects at the expense of longer-term considerations such as debt accumulation. Initial y, many
policymakers felt constrained in their ability to respond to the crisis as a result of limited policymakers felt constrained in their ability to respond to the crisis as a result of limited
flexibility for monetary and fiscal support within conventional standards, given the broad-based flexibility for monetary and fiscal support within conventional standards, given the broad-based
synchronized slowdown in global economic growth, especial y in manufacturing and trade, which synchronized slowdown in global economic growth, especial y in manufacturing and trade, which
had developed prior to the viral outbreak. had developed prior to the viral outbreak.
Initial y, the economic effects of the pandemic had been expected to arise from short-term supply Initial y, the economic effects of the pandemic had been expected to arise from short-term supply
issues as factory output fel , because workers were quarantined to reduce the spread of the virus issues as factory output fel , because workers were quarantined to reduce the spread of the virus
through social interaction. The drop in China’s GDP growth rate of 8.7% in the first quarter of through social interaction. The drop in China’s GDP growth rate of 8.7% in the first quarter of
2020, as indicated in 2020, as indicated in Table 1, had broad international repercussions that became evident in the , had broad international repercussions that became evident in the
second quarter of 2020 as firms experienced delays in supplies of intermediate and finished goods second quarter of 2020 as firms experienced delays in supplies of intermediate and finished goods
through supply chains. Concerns grew, however, that virus-related supply shocks had created through supply chains. Concerns grew, however, that virus-related supply shocks had created
more prolonged and wide-ranging demand shocks as reduced activity by consumers and more prolonged and wide-ranging demand shocks as reduced activity by consumers and
businesses led to a lower rate of economic growth in most countries and most areas. Nearly every businesses led to a lower rate of economic growth in most countries and most areas. Nearly every
country experienced a decline in economic activity in the second quarter of 2020, with the notable country experienced a decline in economic activity in the second quarter of 2020, with the notable
exception of China, which experienced a rebound in its rate of growth by 10% over the previous exception of China, which experienced a rebound in its rate of growth by 10% over the previous
quarter and was one of a few number of countries to post an overal positive rate of growth in quarter and was one of a few number of countries to post an overal positive rate of growth in
2020. In contrast to China’s positive rate of growth in the second quarter of 2020, a broad range 2020. In contrast to China’s positive rate of growth in the second quarter of 2020, a broad range
of countries experienced historic declines in growth, with India’s GDP fal ing by nearly 25%. of countries experienced historic declines in growth, with India’s GDP fal ing by nearly 25%.
Similarly, most countries experienced a rebound in economic growth in the third quarter of 2020, Similarly, most countries experienced a rebound in economic growth in the third quarter of 2020,
although at rates that general y were lower than the rate of decline in the second quarter, although at rates that general y were lower than the rate of decline in the second quarter,
reflecting chal enges posed by the on-going health crisis. reflecting chal enges posed by the on-going health crisis.
As demand shocks unfolded, businesses experienced reduced activity and profits and potential y As demand shocks unfolded, businesses experienced reduced activity and profits and potential y
escalating and binding credit and liquidity constraints. While manufacturing firms experienced escalating and binding credit and liquidity constraints. While manufacturing firms experienced
supply chain shocks, reduced consumer activity through social distancing affected the services supply chain shocks, reduced consumer activity through social distancing affected the services
~~sector of the economy, which accounts for two-thirds of annual U.S. economic output. In this~~
~~environment, manufacturing and services firms initial y tended to hoard cash, which affected~~
~~market liquidity. In response, the Federal Reserve, along with other central banks, lowered~~
~~interest rates where possible and expanded lending facilities to provide liquidity to financial~~
~~markets and to firms potential y facing insolvency.~~

~~22 Giles, Chris, Prepare for Emerging Markets Debt Crisis, Warns IMF Head, Financial Times, March 31, 2021.~~
~~https://www.ft.com/content/487c30f4-7f21-4787-b519-dde52264d141.~~
~~Congressional Research Service~~

5

~~Global Economic Effects of COVID-19~~
22 The Employment Situation August 2021, Bureau of Labor Statistics, September 3, 2021; Long, Heather, T he Pay is Absolute Crap: Child-care Workers Are Quitting Rapidly: A Red Flag for the Economy, The Washington Post, September 20, 2021. 23 Giles, Chris, Prepare for Emerging Markets Debt Crisis, Warns IMF Head, Financial Times, March 31, 2021. https://www.ft.com/content/487c30f4-7f21-4787-b519-dde52264d141. Congressional Research Service 5 Global Economic Effects of COVID-19 sector of the economy, which accounts for two-thirds of annual U.S. economic output. In this environment, manufacturing and services firms initial y tended to hoard cash, which affected market liquidity. In response, the Federal Reserve, along with other central banks, lowered interest rates where possible and expanded lending facilities to provide liquidity to financial markets and to firms potential y facing insolvency.
Table 1. Change in Gross Domestic Product by Major Country
Percentage change from previous period Percentage change from previous period
Country
2019
2020
2020
2021

Q1
Q2
Q3
Q4
Q1
Q2
Argentina Argentina
-2.1% -2.1%
-9.9% -9.9%
-4.1% -4.1%
-15.8% -15.8%
13.2% 13.2%
4.4% 4.4%
2.6% 2.6%
.. ..
Australia Australia
-0.3 -0.3
-2.5 -2.5
-0.3 -0.3
-7.0 -7.0
3.6 3.6
3.2 3.2
1.9 1.9
0.7 0.7
Austria Austria
1.4 1.4
-6.3 -6.3
-2.6 -2.6
-10.6 -10.6
11.6 11.6
-3.1 -3.1
-1.1 -1.1
4.3 4.3
Belgium Belgium
1.8 1.8
-6.3 -6.3
-3.3 -3.3
-11.9 -11.9
11.8 11.8
-0.1 -0.1
1.1 1.1
1.7 1.7
Brazil Brazil
.. ..
.. ..
-2.3 -2.3
-9.0 -9.0
7.7 7.7
3.1 3.1
1.2 1.2
-0.1 -0.1
Canada Canada
1.9 1.9
-5.3 -5.3
-2.0 -2.0
-11.3 -11.3
9.1 9.1
2.2 2.2
1.4 1.4
-0.3 -0.3
Chile Chile
0.9 0.9
-5.8 -5.8
1.9 1.9
-12.7 -12.7
5.4 5.4
6.5 6.5
3.4 3.4
1.0 1.0
China China
6.1 6.1
2.3 2.3
-8.7 -8.7
10.0 10.0
2.8 2.8
3.0 3.0
0.4 0.4
1.3 1.3
Colombia Colombia
3.3 3.3
-6.8 -6.8
-2.6 -2.6
-14.8 -14.8
9.7 9.7
6.2 6.2
2.9 2.9
-2.4 -2.4
Costa Rica Costa Rica
2.2 2.2
-4.5 -4.5
-1.2 -1.2
-7.8 -7.8
2.2 2.2
2.6 2.6
1.4 1.4
.. ..
Czech R. Czech R.
3.0 3.0
-5.8 -5.8
-3.4 -3.4
-8.9 -8.9
6.8 6.8
0.7 0.7
-0.4 -0.4
1.0 1.0
Denmark Denmark
2.1 2.1
-2.1 -2.1
-0.7 -0.7
-6.4 -6.4
6.1 6.1
0.9 0.9
-0.9 -0.9
2.3 2.3
Finland Finland
1.3 1.3
-2.8 -2.8
-0.5 -0.5
-6.1 -6.1
4.6 4.6
0.5 0.5
0.1 0.1
2.1 2.1
France France
1.8 1.8
-7.9 -7.9
-5.7 -5.7
-13.5 -13.5
18.6 18.6
-1.1 -1.1
0.0 0.0
1.1 1.1
Germany Germany
1.1 1.1
-4.6 -4.6
-1.8 -1.8
-10.0 -10.0
9.0 9.0
0.7 0.7
-2.0 -2.0
1.6 1.6
Greece Greece
1.9 1.9
-8.2 -8.2
-0.4 -0.4
-13.0 -13.0
3.9 3.9
3.5 3.5
4.5 4.5
3.4 3.4
Hungary Hungary
4.6 4.6
-5.0 -5.0
-0.3 -0.3
-14.4 -14.4
10.6 10.6
1.6 1.6
2.0 2.0
2.7 2.7
India India
.. ..
.. ..
0.6 0.6
-24.5 -24.5
21.2 21.2
8.6 8.6
2.3 2.3
-10.2 -10.2
Indonesia Indonesia
5.0 5.0
-2.1 -2.1
-0.9 -0.9
-6.4 -6.4
3.1 3.1
2.3 2.3
0.3 0.3
1.3 1.3
Ireland Ireland
4.9 4.9
5.9 5.9
2.6 2.6
-2.9 -2.9
9.8 9.8
-4.6 -4.6
8.7 8.7
6.3 6.3
Israel Israel
3.8 3.8
-2.2 -2.2
-1.2 -1.2
-9.2 -9.2
8.9 8.9
2.4 2.4
-0.4 -0.4
3.9 3.9
Italy Italy
0.3 0.3
-8.9 -8.9
-5.6 -5.6
-13.1 -13.1
16.0 16.0
-1.8 -1.8
0.2 0.2
2.7 2.7
Japan Japan
0.3 0.3
-4.8 -4.8
-0.6 -0.6
-7.9 -7.9
5.4 5.4
2.8 2.8
-1.1 -1.1
0.5 0.5
Korea Korea
2.0 2.0
-1.0 -1.0
-1.3 -1.3
-3.2 -3.2
2.2 2.2
1.1 1.1
1.7 1.7
0.8 0.8
Luxembourg Luxembourg
2.3 2.3
-1.3 -1.3
-1.6 -1.6
-7.1 -7.1
9.2 9.2
1.9 1.9
1.4 1.4
.. ..
Mexico Mexico
-0.1 -0.1
-8.2 -8.2
-0.9 -0.9
-17.3 -17.3
12.7 12.7
3.3 3.3
1.1 1.1
1.5 1.5
Netherlands Netherlands
2.0 2.0
-3.8 -3.8
-1.6 -1.6
-8.4 -8.4
7.5 7.5
0.0 0.0
-0.8 -0.8
3.1 3.1
New Zealand New Zealand
2.0 2.0
-1.1 -1.1
-1.4 -1.4
-9.9 -9.9
13.9 13.9
-1.0 -1.0
1.4 1.4
2.8 2.8
Norway Norway
0.9 0.9
-0.8 -0.8
-1.5 -1.5
-4.6 -4.6
4.3 4.3
0.8 0.8
-0.6 -0.6
1.1 1.1
Poland Poland
4.7 4.7
-2.7 -2.7
-0.1 -0.1
-9.2 -9.2
7.7 7.7
-0.3 -0.3
1.3 1.3
2.1 2.1 Congressional Research Service 6 Global Economic Effects of COVID-19 Country 2019 2020 2020 2021 Q1 Q2 Q3 Q4 Q1 Q2
Portugal Portugal
2.5 2.5
-7.6 -7.6
-4.0 -4.0
-14.0 -14.0
13.4 13.4
0.2 0.2
-3.2 -3.2
4.9 4.9
Russia Russia
2.0 2.0
.. ..
-0.7 -0.7
-2.6 -2.6
0.7 0.7
-0.2 -0.2
-0.0 -0.0
.. ..
Saudi Arabia Saudi Arabia
0.3 0.3
-4.1 -4.1
-1.6 -1.6
-5.5 -5.5
2.1 2.1
1.8 1.8
-0.5 -0.5
0.6 0.6
South Africa South Africa
0.2 0.2
-7.0 -7.0
-0.4 -0.4
-16.6 -16.6
13.7 13.7
1.4 1.4
1.1 1.1
.. ..
Spain Spain
2.0 2.0
-10.8 -10.8
-5.4 -5.4
-17.8 -17.8
17.1 17.1
0.0 0.0
-0.4 -0.4
2.8 2.8
~~Congressional Research Service~~

6

~~Global Economic Effects of COVID-19~~

~~Country~~
~~2019~~
~~2020~~
~~2020~~
~~2021~~

Q1
Q2
Q3
Q4
Q1
Q2
Sweden Sweden
2.0 2.0
-2.8 -2.8
-0.8 -0.8
-8.1 -8.1
7.5 7.5
0.2 0.2
0.8 0.8
0.9 0.9
Switzerland Switzerland
1.2 1.2
-2.4 -2.4
-1.6 -1.6
-6.2 -6.2
6.4 6.4
-0.1 -0.1
-0.4 -0.4
1.8 1.8
Turkey Turkey
0.9 0.9
1.8 1.8
0.4 0.4
-10.8 -10.8
16.4 16.4
1.2 1.2
2.2 2.2
0.9 0.9
United Kingdom United Kingdom
1.4 1.4
-9.8 -9.8
-2.8 -2.8
-19.5 -19.5
16.9 16.9
1.3 1.3
-1.6 -1.6
4.8 4.8
United States United States
2.3 2.3
-3.4 -3.4
-1.3 -1.3
-8.9 -8.9
7.5 7.5
1.1 1.1
1.5 1.5
1.6 1.6
EU – 27 EU – 27
1.8 1.8
-5.9 -5.9
-3.1 -3.1
-11.3 -11.3
11.8 11.8
-0.2 -0.2
-0.1 -0.1
2.1 2.1
OECD - Total OECD - Total
1.7 1.7
-4.7 -4.7
-1.8 -1.8
-10.4 -10.4
9.4 9.4
1.1 1.1
0.6 0.6
1.7 1.7
Source: Organization for Economic Cooperation and Development, Quarterly National Accounts Dataset , Organization for Economic Cooperation and Development, Quarterly National Accounts Dataset ,
September 17, 2021. September 17, 2021.
As the economic effects persisted through the spring and summer of 2020, the impact spread As the economic effects persisted through the spring and summer of 2020, the impact spread
through trade and financial linkages to an ever-broadening group of countries, firms and through trade and financial linkages to an ever-broadening group of countries, firms and
households. These growing economic effects potential y increased liquidity constraints and credit households. These growing economic effects potential y increased liquidity constraints and credit
market tightening in global financial markets as firms hoarded cash, with negative fal out effects market tightening in global financial markets as firms hoarded cash, with negative fal out effects
on economic growth. At the same time, financial markets factored in what they anticipated would on economic growth. At the same time, financial markets factored in what they anticipated would
be an increase in government bond issuance in the United States, Europe, and elsewhere as be an increase in government bond issuance in the United States, Europe, and elsewhere as
government debt levels rose to meet spending obligations during an expected economic recession government debt levels rose to meet spending obligations during an expected economic recession
and increased fiscal spending to fight the effects of COVID-19. Unlike the 2008-2009 financial and increased fiscal spending to fight the effects of COVID-19. Unlike the 2008-2009 financial
crisis, reduced demand by consumers, labor market issues, and a reduced level of activity among crisis, reduced demand by consumers, labor market issues, and a reduced level of activity among
businesses, rather than risky trading by global banks, led to corporate credit issues and potential businesses, rather than risky trading by global banks, led to corporate credit issues and potential
insolvency. insolvency.
Liquidity and credit market issues presented policymakers with a different set of chal enges than Liquidity and credit market issues presented policymakers with a different set of chal enges than
addressing supply-side constraints. As a result, the focus of government policy expanded from a addressing supply-side constraints. As a result, the focus of government policy expanded from a
health crisis to macroeconomic and financial market issues that were addressed through a health crisis to macroeconomic and financial market issues that were addressed through a
combination of monetary, fiscal, and other policies, including border closures, quarantines, and combination of monetary, fiscal, and other policies, including border closures, quarantines, and
restrictions on social interactions. Essential y, while businesses attempted to address worker and restrictions on social interactions. Essential y, while businesses attempted to address worker and
output issues at the firm level, national leaders attempted to implement fiscal policies to prevent output issues at the firm level, national leaders attempted to implement fiscal policies to prevent
economic growth from contracting sharply by assisting workers and businesses that faced economic growth from contracting sharply by assisting workers and businesses that faced
financial strains, and central bankers adjusted monetary policies to address mounting credit financial strains, and central bankers adjusted monetary policies to address mounting credit
market issues. market issues.
In the initial stages of the health crisis, households were concerned about a repeat of the loss of In the initial stages of the health crisis, households were concerned about a repeat of the loss of
wealth they experienced during the 2008-2009 financial crisis when the value of their primary wealth they experienced during the 2008-2009 financial crisis when the value of their primary
residence dropped sharply. Instead, home prices rose in the United States and Europe as supply residence dropped sharply. Instead, home prices rose in the United States and Europe as supply
bottlenecks raised the cost of construction materials and demand for housing increased due in part bottlenecks raised the cost of construction materials and demand for housing increased due in part
to low interest rates. Simultaneously, rising rates of unemployment and job losses raised concerns to low interest rates. Simultaneously, rising rates of unemployment and job losses raised concerns
that defaults on mortgages and delinquencies on rent payments could increase and would require that defaults on mortgages and delinquencies on rent payments could increase and would require
some financial institutions to provide loan forbearance or other mechanism to provide financial some financial institutions to provide loan forbearance or other mechanism to provide financial
assistance. In the first stages of the economic downturn, mortgage defaults threatened to assistance. In the first stages of the economic downturn, mortgage defaults threatened to
negatively affect the market for mortgage-backed securities, the availability of funds for negatively affect the market for mortgage-backed securities, the availability of funds for
Congressional Research Service 7 Global Economic Effects of COVID-19 mortgages, and negatively affected the overal rate of economic growth. Losses in the value of mortgages, and negatively affected the overal rate of economic growth. Losses in the value of
most equity markets in the U.S., Asia, and Europe were projected at that time to affect household most equity markets in the U.S., Asia, and Europe were projected at that time to affect household
wealth, especial y that of retirees living on a fixed income and others who own equities. wealth, especial y that of retirees living on a fixed income and others who own equities.
Subsequently, increased demand for housing outside large urban areas by workers shifting to at-Subsequently, increased demand for housing outside large urban areas by workers shifting to at-
~~Congressional Research Service~~

7

~~Global Economic Effects of COVID-19~~

home work and an increase in prices for construction materials raised the prices for U.S. housing home work and an increase in prices for construction materials raised the prices for U.S. housing
by an estimated 13.2% in by an estimated 13.2% in ~~202023~~202024 and contributed to an increase in household wealth.25 ~~and contributed to an increase in household wealth.24~~
~~According to the July 2021 World Economic Outlook prepared by the International Monetary~~
~~Fund (IMF), the global economy is projected to experience a stronger recovery in 2021 and 2022~~
~~than indicated in previous forecasts, with global growth projected to increase at a rate of 6% in~~
~~2021 and 4.9% in 2022.25 The IMF also concluded the global economic recovery would occur at~~
~~different speeds across and within individual countries, reflecting differences in the pace of~~
~~vaccinations, the extent of policy support, and various structural conditions, such as the role of~~
~~tourism in the economy.~~
Within countries, the employment and earnings of youth, women, and the relatively lower-skil ed Within countries, the employment and earnings of youth, women, and the relatively lower-skil ed
workers have been affected disproportionately. The two-track nature of the economic recovery workers have been affected disproportionately. The two-track nature of the economic recovery
between developed and developing economies combined with new variants of the virus and viral between developed and developing economies combined with new variants of the virus and viral
outbreaks in some major developing economies have increased the impact of the crisis on the outbreaks in some major developing economies have increased the impact of the crisis on the
global economy and complicated economic forecasts. The IMF estimated in April 2021 the global economy and complicated economic forecasts. The IMF estimated in April 2021 the
economic fal out from the pandemic could push 95 mil ion people in Sub-Saharan Africa and economic fal out from the pandemic could push 95 mil ion people in Sub-Saharan Africa and
South Asia into extreme poverty, reversing a decades-long trend.26 However, the IMF also South Asia into extreme poverty, reversing a decades-long trend.26 However, the IMF also
concluded that spending on social programs to limit the impact of the pandemic could reduce the concluded that spending on social programs to limit the impact of the pandemic could reduce the
number of people fal ing into extreme poverty to 80 to 90 mil ion. number of people fal ing into extreme poverty to 80 to 90 mil ion.
In addition to the asynchronous recovery, the IMF concluded that support provided by central In addition to the asynchronous recovery, the IMF concluded that support provided by central
banks may have had unintended consequences of supporting equity valuations that at times may banks may have had unintended consequences of supporting equity valuations that at times may
have been misaligned with their model-estimated fundamentals and may have increased financial have been misaligned with their model-estimated fundamentals and may have increased financial
risks overal that could become problematic should interest rates rise.27 These risks could increase risks overal that could become problematic should interest rates rise.27 These risks could increase
for non-financial firms and households that had high levels of debt relative to income prior to the for non-financial firms and households that had high levels of debt relative to income prior to the
pandemic crisis. Accommodative monetary and fiscal policies intended to limit the economic pandemic crisis. Accommodative monetary and fiscal policies intended to limit the economic
impact of the crisis may have aided non-financial firms and households, but such support may impact of the crisis may have aided non-financial firms and households, but such support may
also have come at the expense of higher debt levels for most countries and the prospect of a lower also have come at the expense of higher debt levels for most countries and the prospect of a lower
rate of economic growth in the future.28 rate of economic growth in the future.28
The staggered economic recovery is projected to widen gaps in living standards between The staggered economic recovery is projected to widen gaps in living standards between
developed economies and others. Such differences in living standards are estimated to reflect developed economies and others. Such differences in living standards are estimated to reflect
differences in cumulative per capital income with losses in 2020 to 2022 projected to be differences in cumulative per capital income with losses in 2020 to 2022 projected to be
equivalent to 20% of 2019 global GDP, or about $18 tril ion. The largest losses are estimated to equivalent to 20% of 2019 global GDP, or about $18 tril ion. The largest losses are estimated to
fal disproportionately on low-income and emerging market economies. In addition, the IMF fal disproportionately on low-income and emerging market economies. In addition, the IMF
estimated that 95 mil ion people may have entered into extreme poverty in 2020 with 80 mil ion estimated that 95 mil ion people may have entered into extreme poverty in 2020 with 80 mil ion
more people being undernourished compared to pre-pandemic levels, as (1) per capita incomes more people being undernourished compared to pre-pandemic levels, as (1) per capita incomes
would remain below the pre-pandemic levels for several years, adversely affecting productivity; would remain below the pre-pandemic levels for several years, adversely affecting productivity;
(2) the demands placed on national health systems to address the pandemic could hinder the (2) the demands placed on national health systems to address the pandemic could hinder the

23treatment of other diseases; (3) business bankruptcies could reduce productivity; and (4) rising debt levels could crowd out potential borrowing and investment.29 The IMF urged G-20 leaders to maintain supportive monetary and fiscal policies to lessen the economic impact of the global recession, In particular, the IMF recommended a combination of 24 Adamczyk, Alicia, Adamczyk, Alicia, The Typical Home Price is Up a Record 13.2% Compared to Last Year, According to Zillow, ,
CNBC, June 16, 2021. https://www.cnbc.com/2021/06/16/typical-us-home-price-up-record-13point2percent-compared-CNBC, June 16, 2021. https://www.cnbc.com/2021/06/16/typical-us-home-price-up-record-13point2percent-compared-
to-last-year.html. to-last-year.html.
2425 According to the Federal Reserve, between Q1 2020 and Q1 2021, the value of U.S. household holdings of real estate According to the Federal Reserve, between Q1 2020 and Q1 2021, the value of U.S. household holdings of real estate
increased by nearly 10%, rising to $37.6 trillion and increased by nearly 10%, rising to $37.6 trillion and ~~accountin g~~accounting for 84% of household wealth. for 84% of household wealth. Financial Accounts of
the United States, Board of Governors of the Federal Reserve System, First Quarter 2021, June 10, 2021. , Board of Governors of the Federal Reserve System, First Quarter 2021, June 10, 2021.
~~25 World Economic Outlook Update, International Monetary Fund, July, 2021, p. 6.~~
26 26 Fiscal Monitor, International Monetary Fund, April 2021, p. 31. , International Monetary Fund, April 2021, p. 31.
27 27 Global Financial Stability Report, International Monetary Fund, April, 2021, p. x. , International Monetary Fund, April, 2021, p. x.
28 Ibid., p. 36. 28 Ibid., p. 36.
29 G-20 Surveillance Note, International Monetary Fund, November, 2020, p. 6. Congressional Research Service Congressional Research Service

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~~treatment of other diseases; (3) business bankruptcies could reduce productivity; and (4) rising~~
~~debt levels could crowd out potential borrowing and investment.29~~
~~The IMF urged G-20 leaders to maintain supportive monetary and fiscal policies to lessen the~~
~~economic impact of the global recession, In particular, the IMF recommended a combination of~~
accommodative monetary policies characterized by low interest rates and central bank programs accommodative monetary policies characterized by low interest rates and central bank programs
to facilitate credit availability, a continuation of fiscal support for individuals and firms, and to facilitate credit availability, a continuation of fiscal support for individuals and firms, and
engagement in a synchronized infrastructure investment program to promote growth. According engagement in a synchronized infrastructure investment program to promote growth. According
to an IMF analysis, al other things being equal, an increase in infrastructure spending by G-20 to an IMF analysis, al other things being equal, an increase in infrastructure spending by G-20
countries of one-half percent of their GDP in 2021 and 1% in 2022 through 2025 would increase countries of one-half percent of their GDP in 2021 and 1% in 2022 through 2025 would increase
global GDP by 2% in 2025, compared with under 1.2% growth for an unsynchronized approach.30 global GDP by 2% in 2025, compared with under 1.2% growth for an unsynchronized approach.30
On December 2, 2020, IMF Managing Director Kristalina Georgieva indicated the global On December 2, 2020, IMF Managing Director Kristalina Georgieva indicated the global
financial system had been resilient enough to withstand the impact of the global pandemic, but financial system had been resilient enough to withstand the impact of the global pandemic, but
she urged policymakers to “act quickly” to return economic growth to its re-pandemic levels and she urged policymakers to “act quickly” to return economic growth to its re-pandemic levels and
avoid widespread financial distress.31 The Director reportedly also urged policymakers to take avoid widespread financial distress.31 The Director reportedly also urged policymakers to take
“urgent, coordinated steps” to deliver investment in digital technology, infrastructure and the “urgent, coordinated steps” to deliver investment in digital technology, infrastructure and the
environment. She also indicated the IMF had projected that the loss of global economic output environment. She also indicated the IMF had projected that the loss of global economic output
between 2020 and 2025 as a consequence of the pandemic would total $28 tril ion and that 120 between 2020 and 2025 as a consequence of the pandemic would total $28 tril ion and that 120
mil ion jobs would be lost permanently in the tourism industry alone. The pandemic -related mil ion jobs would be lost permanently in the tourism industry alone. The pandemic -related
economic recession raised concerns over the growing debt problems in developing economies, economic recession raised concerns over the growing debt problems in developing economies,
where the IMF projected that as much as 40% of banks assets were in danger of becoming where the IMF projected that as much as 40% of banks assets were in danger of becoming
distressed. distressed.
Impact on Workers
In a report prepared for the January 25-29, 2021, World Economic Forum, the International Labor In a report prepared for the January 25-29, 2021, World Economic Forum, the International Labor
Organization (ILO) estimated that 93% of the world’s workers at that time were living under Organization (ILO) estimated that 93% of the world’s workers at that time were living under
some form of workplace restrictions as a result of the global pandemic and that 8.8% of global some form of workplace restrictions as a result of the global pandemic and that 8.8% of global
working hours were lost in 2020 relative to the fourth quarter of 2019, an amount equivalent to working hours were lost in 2020 relative to the fourth quarter of 2019, an amount equivalent to
255 mil ion full-time jobs. The ILO estimated the loss in working hours was comprised of (1) 255 mil ion full-time jobs. The ILO estimated the loss in working hours was comprised of (1)
workers who were unemployed, but actively seeking employment, (2) workers who were workers who were unemployed, but actively seeking employment, (2) workers who were
employed, but had their working hours reduced, and (3) workers who were unemployed and not employed, but had their working hours reduced, and (3) workers who were unemployed and not
actively seeking employment. Based on this approach, the ILO estimated that unemployment actively seeking employment. Based on this approach, the ILO estimated that unemployment
global y was equivalent to 0.9% of total working hours lost in 2020, while inactivity and reduced global y was equivalent to 0.9% of total working hours lost in 2020, while inactivity and reduced
hours accounted for 7.9% of total working hours lost, as indicated in hours accounted for 7.9% of total working hours lost, as indicated in Figure 1. .
Total working hours lost in 2020 compared with 2019 were highest in Europe (14.6%) and the Total working hours lost in 2020 compared with 2019 were highest in Europe (14.6%) and the
Americas (13.7%), where quarantines and lockdowns had been extensive, followed by lower-Americas (13.7%), where quarantines and lockdowns had been extensive, followed by lower-
middle income economies. The ILO also estimated that global job losses totaled 114 mil ion jobs middle income economies. The ILO also estimated that global job losses totaled 114 mil ion jobs
in 2020 relative to 2019. The share of lost worker hours due to higher rates of unemployment in 2020 relative to 2019. The share of lost worker hours due to higher rates of unemployment
were highest in Europe (6.0%), the Americas (2.7%), including the United States, and Arab States were highest in Europe (6.0%), the Americas (2.7%), including the United States, and Arab States
(1.7%).32 The ILO also estimated that an increase in global economic activity through part of the (1.7%).32 The ILO also estimated that an increase in global economic activity through part of the
fourth quarter was equal to an increase of 130 mil ion full-time jobs. fourth quarter was equal to an increase of 130 mil ion full-time jobs.

~~29 G-20 Surveillance Note, International Monetary Fund, November, 2020, p. 6.~~
30 Ibid., p. 10. 30 Ibid., p. 10.
31 Wheatley, Jonathan, IMF Chief Warns Against Complacency on Global Economy, 31 Wheatley, Jonathan, IMF Chief Warns Against Complacency on Global Economy, Financial Times, December 2, , December 2,
2020. https://www.ft.com/content/fda34b47-33d2-457e-a0b6-45be6001920d. 2020. https://www.ft.com/content/fda34b47-33d2-457e-a0b6-45be6001920d.
32 32 ILO Monitor: COVID-19 and the World of Work, Seventh Edition, International Labor Organization, January 15, , International Labor Organization, January 15,
2021, p. 2. 2021, p. 2.
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Figure 1. Composition of Working-Hours Lost by Region, 2020

Source: ILO Monitor: COVID-19 and the World of Work, International Labor Organization, 2021. International Labor Organization, 2021.
In July 2021, the OECD estimated the pandemic-related recession cost 22 mil ion jobs in OECD In July 2021, the OECD estimated the pandemic-related recession cost 22 mil ion jobs in OECD
countries in 2020 and that 114 mil ion jobs had been lost global y, compared with 2019.33 The countries in 2020 and that 114 mil ion jobs had been lost global y, compared with 2019.33 The
estimate concluded that unprecedented government fiscal policies supported worker’s incomes, estimate concluded that unprecedented government fiscal policies supported worker’s incomes,
thereby likely limiting the impact of shutdowns and social restrictions on labor markets. thereby likely limiting the impact of shutdowns and social restrictions on labor markets.
Nevertheless, the OECD concluded the unique nature of the crisis accentuated and deepened Nevertheless, the OECD concluded the unique nature of the crisis accentuated and deepened
economic and social divides along skil levels, education, income, and gender bases in OECD economic and social divides along skil levels, education, income, and gender bases in OECD
countries and amplified longstanding trends toward increasing economic inequalities in many countries and amplified longstanding trends toward increasing economic inequalities in many
OECD countries.34 OECD countries.34
A number of economists and others estimated that pandemic-related disruptions to labor markets A number of economists and others estimated that pandemic-related disruptions to labor markets
in developed and developing economies could have long-lasting effects. One group of economists in developed and developing economies could have long-lasting effects. One group of economists
estimated that even after the pandemic recedes and economic activity ramps up, firms may not estimated that even after the pandemic recedes and economic activity ramps up, firms may not
abandon the labor-saving lessons they learned, with fewer jobs created in retail stores, restaurants, abandon the labor-saving lessons they learned, with fewer jobs created in retail stores, restaurants,
auto dealerships, and meat-packing facilities, among other places.35 Other analysts estimated the auto dealerships, and meat-packing facilities, among other places.35 Other analysts estimated the
pandemic could affect the structure of work in three main areas by pandemic could affect the structure of work in three main areas by
1. Creating a permanent presence of telework, which could account for 20% to 25% 1. Creating a permanent presence of telework, which could account for 20% to 25%
of workers in developed economies and 20% in developing economies working of workers in developed economies and 20% in developing economies working
from home three to five times per week, which could reduce demand for public from home three to five times per week, which could reduce demand for public
transportation, restaurants, and retail stores; transportation, restaurants, and retail stores;
2. Increasing the level of e-commerce that could disrupt jobs in travel and leisure, 2. Increasing the level of e-commerce that could disrupt jobs in travel and leisure,
low-wage jobs in brick-and-mortar stores and restaurants, and increase jobs in low-wage jobs in brick-and-mortar stores and restaurants, and increase jobs in
distribution centers. distribution centers.
3. Accelerating the adoption of artificial intel igence (AI) and robotics.36 3. Accelerating the adoption of artificial intel igence (AI) and robotics.36
Analysts with the Pew Research Center surveyed American workers in January 2021 who were Analysts with the Pew Research Center surveyed American workers in January 2021 who were
unemployed and looking for work. The results indicated that half of those surveyed were unemployed and looking for work. The results indicated that half of those surveyed were

33 OECD Employment Outlook 2021: Navigating the COVID-19 Crisis and Recovery, Organization for Economic 33 OECD Employment Outlook 2021: Navigating the COVID-19 Crisis and Recovery, Organization for Economic
Cooperation and Development, July 2021, p. 4. Cooperation and Development, July 2021, p. 4.
34 Ibid34 Ibid, ., p. 5. p. 5.
35 Autor, David, and Elizabeth Reynolds, 35 Autor, David, and Elizabeth Reynolds, The Nature of Work After the COVID Crisis: Too Few Low-Wage Jobs, T he , T he
Hamilton Project, Brookings Institution, July 2020, p. 2 Hamilton Project, Brookings Institution, July 2020, p. 2
36 McKinsey Global Institute, 36 McKinsey Global Institute, The Future of Work After COVID-19, February 18, 2021. , February 18, 2021.
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pessimistic about finding another job in the near future and two-thirds had considered changing pessimistic about finding another job in the near future and two-thirds had considered changing
their occupations, a sentiment shared across income levels. The other third indicated they had their occupations, a sentiment shared across income levels. The other third indicated they had
already engaged in re-skil ing through job retraining programs or educational activities.37 already engaged in re-skil ing through job retraining programs or educational activities.37
U.S. Labor Market
In the United States, labor markets were recovering, but by September 2021 the overal rate of In the United States, labor markets were recovering, but by September 2021 the overal rate of
unemployment remained above pre-pandemic rates. In testimony before the Senate and House in unemployment remained above pre-pandemic rates. In testimony before the Senate and House in
mid-July 2021, Federal Reserve Chairman Jerome Powel indicated that vaccinations had led to a mid-July 2021, Federal Reserve Chairman Jerome Powel indicated that vaccinations had led to a
reopening of the economy and “strong economic growth and improvements in the labor market,” reopening of the economy and “strong economic growth and improvements in the labor market,”
but that there was stil a long way to go.38 He indicated the rate of unemployment had fal en, but but that there was stil a long way to go.38 He indicated the rate of unemployment had fal en, but
the rate was stil elevated and the official published rate understated the actual shortfal in the rate was stil elevated and the official published rate understated the actual shortfal in
employment as a result of a workforce participation rate that remained below pre-pandemic employment as a result of a workforce participation rate that remained below pre-pandemic
levels. The Federal Reserve also indicated in an accompanying monetary policy report the levels. The Federal Reserve also indicated in an accompanying monetary policy report the
pandemic-related economic recession was disproportionately affecting certain groups in the pandemic-related economic recession was disproportionately affecting certain groups in the
economy: lower-wage and less-educated workers, racial and ethnic minorities, and women.39 economy: lower-wage and less-educated workers, racial and ethnic minorities, and women.39
According to the Census Bureau, between March 2020 and February 2021, 115 mil ion According to the Census Bureau, between March 2020 and February 2021, 115 mil ion
Americans experienced a loss in employment income and 37 mil ion qualified for and received Americans experienced a loss in employment income and 37 mil ion qualified for and received
unemployment insurance. In addition, an estimated 26 mil ion households reported receiving unemployment insurance. In addition, an estimated 26 mil ion households reported receiving
Supplemental Nutritional Assistance Program (SNAP) in February 2021, while nearly 12 mil ion Supplemental Nutritional Assistance Program (SNAP) in February 2021, while nearly 12 mil ion
households with children were estimated not to have had enough to eat.40 households with children were estimated not to have had enough to eat.40
Additional y, the Census Bureau data indicate the stimulus checks appropriated under the Additional y, the Census Bureau data indicate the stimulus checks appropriated under the
COVID-19 Aid, Relief, and Economic Security Act (P.L. 116-136) were used by households to COVID-19 Aid, Relief, and Economic Security Act (P.L. 116-136) were used by households to
cover usual expenses such as food, housing, and gas. The Census Bureau reported that cover usual expenses such as food, housing, and gas. The Census Bureau reported that
 By late summer 2020, 76.5 mil ion American adults reported that it was  By late summer 2020, 76.5 mil ion American adults reported that it was
somewhat or very difficult for them to pay usual expenses: that number rose to somewhat or very difficult for them to pay usual expenses: that number rose to
89.7 mil ion by December 2020. 89.7 mil ion by December 2020.
 Households accumulated debt to meet their usual expenses with roughly 30% of  Households accumulated debt to meet their usual expenses with roughly 30% of
adults using credit cards, taking out loans or borrowing from family and friends adults using credit cards, taking out loans or borrowing from family and friends
between June and December 2020 to pay for usual expenses. between June and December 2020 to pay for usual expenses.
 In June 2020, 33.7 mil ion adults were using debt rather than income to pay their  In June 2020, 33.7 mil ion adults were using debt rather than income to pay their
expenses. By late December, that number had increased to 43.7 mil ion adults. expenses. By late December, that number had increased to 43.7 mil ion adults.
 Households used the second stimulus check under the Consolidated  Households used the second stimulus check under the Consolidated
Appropriations Act of 2021 (P.L. 116-260) to cover usual expenses and reduced Appropriations Act of 2021 (P.L. 116-260) to cover usual expenses and reduced
the number of al adults in households struggling to cover usual costs to 80.5 the number of al adults in households struggling to cover usual costs to 80.5
mil ion. Households also used the second stimulus check to pay down debt.41 mil ion. Households also used the second stimulus check to pay down debt.41

37 Parker, Kim, Ruth Igielnik, and Rakesh Kochhar 37 Parker, Kim, Ruth Igielnik, and Rakesh Kochhar Unemployed Americans are Feeling the Emotional Strain of Job
Loss; Most Have Considered Changing Occupations, Pew Research Center. February 10, 2021. , Pew Research Center. February 10, 2021.
38 Powell, Jerome, H., T estimony before the House Financial Services Committee and the Senate Committee on 38 Powell, Jerome, H., T estimony before the House Financial Services Committee and the Senate Committee on
Banking, Housing, and Urban Affairs, July 15, 2021. Banking, Housing, and Urban Affairs, July 15, 2021.
39 Board of Governors of the Federal Reserve System, 39 Board of Governors of the Federal Reserve System, Monetary Policy Report, July 9, 2021. , July 9, 2021.
40 Monte M., Lindsay, Historical Look at Unemployment, Sectors Shows Magnitude of COVID-19 Impact on 40 Monte M., Lindsay, Historical Look at Unemployment, Sectors Shows Magnitude of COVID-19 Impact on
Economy, Economy, Census Bureau, March 15, 2021, https://www.census.gov/library/stories/2021/03/putting-economic-impact - March 15, 2021, https://www.census.gov/library/stories/2021/03/putting-economic-impact -
of-pandemic-in-context.html. of-pandemic-in-context.html.
41 Perez-Lopez, Daniel J. and Lindsay M. Monte, Household Pulse Survey Shows Stimulus Payments Have Eased 41 Perez-Lopez, Daniel J. and Lindsay M. Monte, Household Pulse Survey Shows Stimulus Payments Have Eased
Financial Hardship, Financial Hardship, Census Bureau, March 24, 2021. https://www.census.gov/library/stories/2021/03/many -american-, March 24, 2021. https://www.census.gov/library/stories/2021/03/many -american-
households-use-stimulus-payments-to-pay-down-debt.html. households-use-stimulus-payments-to-pay-down-debt.html.
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During the During the 7879-week period from mid-March 2020 to -week period from mid-March 2020 to ~~mid~~end-September, 2021, 94 mil ion Americans -September, 2021, 94 mil ion Americans
(more than half the 160 mil ion civilian work force) had filed for unemployment insurance at (more than half the 160 mil ion civilian work force) had filed for unemployment insurance at
some point during the preceding 18 months.42 On a seasonal y adjusted basis, the number of some point during the preceding 18 months.42 On a seasonal y adjusted basis, the number of
insured unemployed individuals was 2.8 mil ion on September insured unemployed individuals was 2.8 mil ion on September 1118, 2021, down from a peak of 25 , 2021, down from a peak of 25
mil ion in mid-May, 2020. As indicated in mil ion in mid-May, 2020. As indicated in Figure 2, weekly claims have fal en from the sharp weekly claims have fal en from the sharp
increases recorded in increases recorded in April and May, 2020. On a week-over-week basis, new claims totaled April and May, 2020. On a week-over-week basis, new claims totaled
~~351~~362,000 in the week ending September ,000 in the week ending September 1825, 2021, rising by , 2021, rising by 1611,000 from the previous week’s total ,000 from the previous week’s total
of of ~~335~~351,000. This number is above the average number of weekly claims recorded prior to the ,000. This number is above the average number of weekly claims recorded prior to the
pandemic of about 200,000. In the week ending September pandemic of about 200,000. In the week ending September 411, 2021, , 2021, ~~11.2~~5.0 mil ion people claimed mil ion people claimed
benefits in al programs, down benefits in al programs, down ~~856,440~~6.2 mil ion from the previous week’s total. from the previous week’s total.
The insured unemployment rate for the week ending September The insured unemployment rate for the week ending September 1118, 2021, was 2., 2021, was 2.~~1%, up 0.2~~0%, down 0.1
percentage percentage ~~points~~point from the previous week. As workers approached, or surpassed, the traditional from the previous week. As workers approached, or surpassed, the traditional
26-week maximum for receiving standard unemployment benefits they had been able to apply for 26-week maximum for receiving standard unemployment benefits they had been able to apply for
benefits under the extended Pandemic Emergency Unemployment Compensation (PEUC) benefits under the extended Pandemic Emergency Unemployment Compensation (PEUC)
program or the Pandemic Unemployment Assistance (PUA) program.43 Between September program or the Pandemic Unemployment Assistance (PUA) program.43 Between September 411, ,
2021, and 2021, and ~~August 28~~September 4, 2021, claims under the PEUC program fel by , 2021, claims under the PEUC program fel by ~~161,240 to 3.6~~2.3 mil ion to 1.0 mil ion, while mil ion, while
claims under the PUA program fel by claims under the PUA program fel by ~~591,108 to 4.9~~3.8 mil ion to 1.1 mil ion. mil ion. Benefits were extended by P.L. Benefits were extended by P.L.
116-260, signed by President Trump on December 27, 2020. Subsequently, benefits were 116-260, signed by President Trump on December 27, 2020. Subsequently, benefits were
extended again through September 6, 2021, by the American Rescue Plan Act of 2021, P.L. 117-2, extended again through September 6, 2021, by the American Rescue Plan Act of 2021, P.L. 117-2,
signed by President Biden on March 11, 2021. On September 6, 2021, unemployment benefits signed by President Biden on March 11, 2021. On September 6, 2021, unemployment benefits
under the two pandemic-related programs expired. under the two pandemic-related programs expired.
In June, 2021, 26 states announced they were ending early the extended pandemic-related federal In June, 2021, 26 states announced they were ending early the extended pandemic-related federal
benefits, potential y affecting more than 7.5 mil ion workers. Some state leaders argued the benefits, potential y affecting more than 7.5 mil ion workers. Some state leaders argued the
extended unemployment benefits enabled workers to remain unemployed, thereby creating a extended unemployment benefits enabled workers to remain unemployed, thereby creating a
labor shortage and hobbling a return to full economic activity. The nearly equal division of states labor shortage and hobbling a return to full economic activity. The nearly equal division of states
between those that maintained and those that ended the pandemic-related unemployment benefits between those that maintained and those that ended the pandemic-related unemployment benefits
prior to the September scheduled cutoff provided economists and other analysts the opportunity prior to the September scheduled cutoff provided economists and other analysts the opportunity
to assess the impact of the extended unemployment benefits on employment decisions. In general, to assess the impact of the extended unemployment benefits on employment decisions. In general,
most assessments concluded the benefits played a smal role in workers’ decisions to return to most assessments concluded the benefits played a smal role in workers’ decisions to return to
work. Instead, such decisions were prompted by concerns over the spread of the virus, childcare work. Instead, such decisions were prompted by concerns over the spread of the virus, childcare
arrangements, the status of schools openings, and retirements. In some cases, job openings were arrangements, the status of schools openings, and retirements. In some cases, job openings were
fil ed by individuals who had dropped out of the labor market, rather than by those recently fil ed by individuals who had dropped out of the labor market, rather than by those recently
unemployed, which altered the composition of the labor market rather than changing the rate of unemployed, which altered the composition of the labor market rather than changing the rate of
unemployment.44 unemployment.44

42 42 Unemployment Insurance Weekly Claims, Department of Labor, September , Department of Labor, September 1630, 2021. https://www.dol.gov/; Romm, , 2021. https://www.dol.gov/; Romm,
T ony and Jeff Stein, 2.4 Million Americans Filed Jobless Claims Last Week, Bringing Nine Week T otal to 38.6 T ony and Jeff Stein, 2.4 Million Americans Filed Jobless Claims Last Week, Bringing Nine Week T otal to 38.6
Million, Million, Washington Post, May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment- May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment-
claims-coronavirus/ claims-coronavirus/
43 Both programs were authorized under P.L. 116-136, March 27, 2020, the Coronavirus Aid, Relief, and Economic 43 Both programs were authorized under P.L. 116-136, March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security (CARES) Act, with benefits ending by December 31, 2020Security (CARES) Act, with benefits ending by December 31, 2020 . T he PUA program provided 39 weeks of . T he PUA program provided 39 weeks of
unemployment assistance, including $600 weekly benefits (expired in August 2020), under certain conditions, for unemployment assistance, including $600 weekly benefits (expired in August 2020), under certain conditions, for
workers who had exhausted regular unemployment benefits, were not eligible for regular benefits, or wereworkers who had exhausted regular unemployment benefits, were not eligible for regular benefits, or were not eligible not eligible
for benefits under the PEUC program. On December for benefits under the PEUC program. On December ~~2 7~~27, 2020, President T rump signed the Consolidated , 2020, President T rump signed the Consolidated
Appropriations Act of 2021 (P.L. 116-260), extending PUA benefits for 11 weeks. T he PEUC program provided 13 Appropriations Act of 2021 (P.L. 116-260), extending PUA benefits for 11 weeks. T he PEUC program provided 13
weeks of weeks of ~~addit ional~~additional benefits to individuals who had exhausted standard unemployment assistance and met other benefits to individuals who had exhausted standard unemployment assistance and met other
eligibility requirements. Benefits were further extended through September 6, 2021, by the eligibility requirements. Benefits were further extended through September 6, 2021, by the ~~American~~America n Rescue Plan Act Rescue Plan Act
of 2021, P.L. 117-2, signed by President Biden on March 11, 2021. DOL, of 2021, P.L. 117-2, signed by President Biden on March 11, 2021. DOL, Unem ploym ent Insurance Program Letter
No. 14-21, March 15, 2021; DOL, , March 15, 2021; DOL, Unem ployment Insurance Program Letter No. 16 -20, February 25, 2021. , February 25, 2021.
44 Iacurci, Greg, 44 Iacurci, Greg, 26 States Ended Federal Unemployment Benefits Early. Data Suggests it’s Not Getting People Back to
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Figure 2. ~~Initial U.S.~~ Weekly Claims for Unemployment Insurance, 2020 and 2021
In mil ions of individual claims In mil ions of individual claims

Source: Department of Labor. Created by CRS. Department of Labor. Created by CRS.
At the beginning of the pandemic-related economic recession, the Bureau of Labor Statistics At the beginning of the pandemic-related economic recession, the Bureau of Labor Statistics
(BLS) reported on May 8, 2020, that 20 mil ion Americans lost their jobs in April 2020 as a (BLS) reported on May 8, 2020, that 20 mil ion Americans lost their jobs in April 2020 as a
consequence of business lockdowns, pushing the total number of unemployed Americans to 23 consequence of business lockdowns, pushing the total number of unemployed Americans to 23
mil ion,45 out of a total civilian labor force of 158 mil ion. The increase pushed the national mil ion,45 out of a total civilian labor force of 158 mil ion. The increase pushed the national
unemployment rate to 14.7% (with some caveats), the highest since the Great Depression of the unemployment rate to 14.7% (with some caveats), the highest since the Great Depression of the
1930s.46 In contrast, on September 3, 2021, BLS reported that nonfarm employment rose by 1930s.46 In contrast, on September 3, 2021, BLS reported that nonfarm employment rose by
235,000 in August to reach 153.2 mil ion, down from the previous month’s increase of 1,053,000; 235,000 in August to reach 153.2 mil ion, down from the previous month’s increase of 1,053,000;
the total number of unemployed Americans was 8.4 mil ion, down from the previous month’s the total number of unemployed Americans was 8.4 mil ion, down from the previous month’s
total of 8.7 mil ion;47 the unemployment rate fel to 5.3%, again with some caveats.48 total of 8.7 mil ion;47 the unemployment rate fel to 5.3%, again with some caveats.48
Financial Markets
Policymakers and financial and commodity market participants had general y estimated that a Policymakers and financial and commodity market participants had general y estimated that a
global economic recovery would take hold in the third quarter of 2020. A resurgence in infectious global economic recovery would take hold in the third quarter of 2020. A resurgence in infectious
cases in developed and developing countries starting in September 2020, however, shifted more cases in developed and developing countries starting in September 2020, however, shifted more
of the projected recovery to 2021. Various indicators in the third quarter suggested the worst of of the projected recovery to 2021. Various indicators in the third quarter suggested the worst of
the economic crisis had passed, although the extent and strength of any global economic recovery the economic crisis had passed, although the extent and strength of any global economic recovery
remained difficult to predict. As previously indicated, the rate of economic growth slowed in the remained difficult to predict. As previously indicated, the rate of economic growth slowed in the

Work, Bloomberg, August 4, 2021; Smith, Colby and Christine Zhang, End of US’s Extra Unemployment Benefits Bloomberg, August 4, 2021; Smith, Colby and Christine Zhang, End of US’s Extra Unemployment Benefits
Gives Little Boost to Labor Market , Gives Little Boost to Labor Market , Financial Tim es, September 21, 2021; Ganong, Peter, Pascal J. Noel, and Joseph September 21, 2021; Ganong, Peter, Pascal J. Noel, and Joseph
S. Vavra, S. Vavra, US Unem ploym ent Insurance Replacem ent Rates During The Pandem ic, NBER Working Paper No. 27216, , NBER Working Paper No. 27216,
May 2020; Petrosky-Nadeau, Nicolas and Robert G. Valletta, May 2020; Petrosky-Nadeau, Nicolas and Robert G. Valletta, UI Generosity and Job Acceptance: Effects of the 2020
CARES Act, Working Paper 2021-13, Federal Reserve Bank of San Francisco, June 2021. , Working Paper 2021-13, Federal Reserve Bank of San Francisco, June 2021.
45 T his total did not include 10.9 million workers who were working part time not by choice and 9.9 million individuals 45 T his total did not include 10.9 million workers who were working part time not by choice and 9.9 million individuals
who were seeking employment. who were seeking employment.
46 46 The Employment Situation-August 2020, Bureau of Labor Statistics, September 3, 2020. https://www.bls.gov/. , Bureau of Labor Statistics, September 3, 2020. https://www.bls.gov/.
47 T his total does not include 4.5 million workers who were working part time not by choice and 5.7 million individuals 47 T his total does not include 4.5 million workers who were working part time not by choice and 5.7 million individuals
who were seeking employment. who were seeking employment.
48 48 The Employment Situation-June 2020. BLS indicated that some individuals had been misclassified in previous BLS indicated that some individuals had been misclassified in previous
months. Instead of being classified as unemployed, they were misclassified as employed, but absent from work due to months. Instead of being classified as unemployed, they were misclassified as employed, but absent from work due to
coronavirus-related business closures. If such individuals had been classified as unemployed, the unemployment rate coronavirus-related business closures. If such individuals had been classified as unemployed, the unemployment rate
would have been 5 percentage points higher in April 2020. would have been 5 percentage points higher in April 2020.
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fourth quarter of 2020 and through the second quarter of 2021 in Europe and the broader OECD. fourth quarter of 2020 and through the second quarter of 2021 in Europe and the broader OECD.
The emergence of more infectious strains of the COVID-19 virus pushed governments to The emergence of more infectious strains of the COVID-19 virus pushed governments to ~~re-~~
~~impose~~reimpose lockdowns and curtail social and economic activity during the fourth quarter. Updated lockdowns and curtail social and economic activity during the fourth quarter. Updated
forecasts indicate the pandemic affected global economic growth in 2020 less negatively than had forecasts indicate the pandemic affected global economic growth in 2020 less negatively than had
been forecasted in the spring, but that the effects could last longer with a slower rate of growth in been forecasted in the spring, but that the effects could last longer with a slower rate of growth in
2021 and 2022. 2021 and 2022.
As one indicator of the economic impact of the pandemic, news concerning the pandemic As one indicator of the economic impact of the pandemic, news concerning the pandemic
dominated financial news and at times was a major factor driving market activity. For instance, dominated financial news and at times was a major factor driving market activity. For instance,
the Dow Jones Industrial Average Index (DJIA), along with other market indices, lost one-third of the Dow Jones Industrial Average Index (DJIA), along with other market indices, lost one-third of
its value between February 14, 2022 and March 23, 2020. The Index rose steadily between March its value between February 14, 2022 and March 23, 2020. The Index rose steadily between March
and November and rose nearly three percentage points on Monday, November 9, 2020, reportedly and November and rose nearly three percentage points on Monday, November 9, 2020, reportedly
on news that a COVID-19 vaccine had been developed.49 During the period November 3 through on news that a COVID-19 vaccine had been developed.49 During the period November 3 through
24, the DJIA rose over 9%. On November 24, 2020, the DJIA, along with global equities markets, 24, the DJIA rose over 9%. On November 24, 2020, the DJIA, along with global equities markets,
increased by 1.5%, and reached an index milestone of 30,000 for the first time and surpassed the increased by 1.5%, and reached an index milestone of 30,000 for the first time and surpassed the
previous high value recorded on February 14, 2020, prior to the pandemic-related economic previous high value recorded on February 14, 2020, prior to the pandemic-related economic
shutdown. Reportedly, the rise in market indices reflected a positive assessment by investors of shutdown. Reportedly, the rise in market indices reflected a positive assessment by investors of
announcements of effective vaccines against COVID-19, political developments in the United announcements of effective vaccines against COVID-19, political developments in the United
States, potential additional fiscal measures by governments to stimulate economic activity, and States, potential additional fiscal measures by governments to stimulate economic activity, and
prospects of stronger economic growth in 2021.50 The DJIA has trended upward during 2021, prospects of stronger economic growth in 2021.50 The DJIA has trended upward during 2021,
rising above 35,000 for the first time on July 23 and rising by over 14% between January 4, 2021, rising above 35,000 for the first time on July 23 and rising by over 14% between January 4, 2021,
and September 17. and September 17.
Prospects of a vaccine initial y signaled an eventual end to the business lockdowns and social Prospects of a vaccine initial y signaled an eventual end to the business lockdowns and social
restrictions and reduced demands on policymakers to implement additional fiscal and monetary restrictions and reduced demands on policymakers to implement additional fiscal and monetary
policies. Until a vaccine can be broadly distributed, however, policymakers may have to weigh policies. Until a vaccine can be broadly distributed, however, policymakers may have to weigh
continuing efforts that balance the competing requirements of households, firms, and state and continuing efforts that balance the competing requirements of households, firms, and state and
local governments. Various U.S. states reversed course in late June 2021 to impose or local governments. Various U.S. states reversed course in late June 2021 to impose or ~~re-impose~~reimpose
social distancing guidelines and close businesses that had begun opening as a result of a rise in social distancing guidelines and close businesses that had begun opening as a result of a rise in
new confirmed cases of COVID-19, raising the prospect of a delayed recovery. A prolonged new confirmed cases of COVID-19, raising the prospect of a delayed recovery. A prolonged
recovery could also increase the financial strains on smal and medium-sized firms that face recovery could also increase the financial strains on smal and medium-sized firms that face
liquidity constraints and the prospects of insolvency.51 liquidity constraints and the prospects of insolvency.51
Differences in policy approaches between countries initial y slowed a coordinated response. This Differences in policy approaches between countries initial y slowed a coordinated response. This
lack of response may have inflicted longer-term damage to the global economy by impairing lack of response may have inflicted longer-term damage to the global economy by impairing
international political, trade, and economic relations, particularly between countries that international political, trade, and economic relations, particularly between countries that
promoted nationalism and those that argued for a coordinated international response to the promoted nationalism and those that argued for a coordinated international response to the
pandemic. Policy differences also strained relations between developed and developing pandemic. Policy differences also strained relations between developed and developing
economies and between northern and southern members of the Eurozone, chal enging al iances economies and between northern and southern members of the Eurozone, chal enging al iances
and conventional concepts of national security, and raising questions about the future of global and conventional concepts of national security, and raising questions about the future of global
leadership. leadership.
In some countries, the pandemic elevated the importance of public health as a national security In some countries, the pandemic elevated the importance of public health as a national security
issue and as a national economic priority on a par with traditional national security concerns such issue and as a national economic priority on a par with traditional national security concerns such

49 T elford, T aylor, and Hamza Shaban, “ Dow Climbs More T han 800 Points as Vaccine News, Biden Victory Rev Up 49 T elford, T aylor, and Hamza Shaban, “ Dow Climbs More T han 800 Points as Vaccine News, Biden Victory Rev Up
Markets,” Markets,” Washington Post, November 9, 2020. https://www.washingtonpost.com/business/2020/11/09/stocks-, November 9, 2020. https://www.washingtonpost.com/business/2020/11/09/stocks-
markets-biden-trump-coronavirus/. markets-biden-trump-coronavirus/.
50 Smith, Colby, Camilla Hodgson, and Hudson Lockett , US Stocks Set Record High as Investors Look to New 50 Smith, Colby, Camilla Hodgson, and Hudson Lockett , US Stocks Set Record High as Investors Look to New
Administration, Administration, Financial Tim es, November 24, 2020. https://www.ft.com/content/433048a5-c489-4ddd-aebd-, November 24, 2020. https://www.ft.com/content/433048a5-c489-4ddd-aebd-
d56fb8f3edfc. d56fb8f3edfc.
51 51 Global Financial Stability Report, International Monetary Fund, October 2020, p. 1. , International Monetary Fund, October 2020, p. 1.
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as terrorism, cyberattacks, and proliferation of weapons of mass destruction.52 The pandemic- as terrorism, cyberattacks, and proliferation of weapons of mass destruction.52 The pandemic-
related economic and human costs could have long-term repercussions for economies through the related economic and human costs could have long-term repercussions for economies through the
tragic loss of life and job losses that derail careers and permanently shutter businesses. Fiscal and tragic loss of life and job losses that derail careers and permanently shutter businesses. Fiscal and
monetary measures implemented to prevent a financial crisis and sustain economic activity may monetary measures implemented to prevent a financial crisis and sustain economic activity may
have inadvertently worsened income and wealth disparities that were being affected by the have inadvertently worsened income and wealth disparities that were being affected by the
disproportionate impact of quarantines and lockdowns on services sector workers. Within some disproportionate impact of quarantines and lockdowns on services sector workers. Within some
countries, the economic fal out may have widened racial and socio-economic cleavages and countries, the economic fal out may have widened racial and socio-economic cleavages and
increased social unrest. increased social unrest.
Economic Policy Responses
After a delayed response, central banks and monetary authorities in developed and emerging After a delayed response, central banks and monetary authorities in developed and emerging
market economies engaged in an ongoing series of interventions in financial markets and national market economies engaged in an ongoing series of interventions in financial markets and national
governments adopted an array of fiscal policy initiatives to stimulate their economies. The Bank governments adopted an array of fiscal policy initiatives to stimulate their economies. The Bank
for International Settlements (BIS) characterized the pandemic as fully global in nature, eliciting for International Settlements (BIS) characterized the pandemic as fully global in nature, eliciting
a fiscal, monetary, and prudential response that surpassed that of the global financial crisis of a fiscal, monetary, and prudential response that surpassed that of the global financial crisis of
2008-2009. In addition, the BIS argued the evolving nature of the health crisis caused the 2008-2009. In addition, the BIS argued the evolving nature of the health crisis caused the
financial crisis to evolve as wel , changing from a liquidity crisis in the initial stages to a solvency financial crisis to evolve as wel , changing from a liquidity crisis in the initial stages to a solvency
crisis that could have been worse if the economic recovery had been delayed. As global economic crisis that could have been worse if the economic recovery had been delayed. As global economic
conditions deteriorated in the first quarter of 2020, large international y active banks tripled the conditions deteriorated in the first quarter of 2020, large international y active banks tripled the
amount of assets they held as loss provisions, according to BIS.53 With improving economic amount of assets they held as loss provisions, according to BIS.53 With improving economic
conditions in the second quarter, however, banks began reducing their asset holdings and by the conditions in the second quarter, however, banks began reducing their asset holdings and by the
end of 2020, loss provisions had returned to pre-pandemic levels. As a result of the potential end of 2020, loss provisions had returned to pre-pandemic levels. As a result of the potential
damage to the global economy arising from the pandemic, the BIS stated that future economic damage to the global economy arising from the pandemic, the BIS stated that future economic
historians may describe the pandemic as, “the defining moment of the 21st century.”54 historians may describe the pandemic as, “the defining moment of the 21st century.”54
For a complete list of actions193 countries have taken in response to the economic For a complete list of actions193 countries have taken in response to the economic
chal enge of COVID-19, see the list compiled by the IMF.55 chal enge of COVID-19, see the list compiled by the IMF.55
Industry Measures
During 2020, governments adopted a range of measures at both the national and international During 2020, governments adopted a range of measures at both the national and international
level to address the health and economic consequences of the COVID-19 pandemic, as indicated level to address the health and economic consequences of the COVID-19 pandemic, as indicated
in in Table 2.56 These measure include incentives to increase domestic production of vaccines and .56 These measure include incentives to increase domestic production of vaccines and
personal protective equipment (PPE) and direct state intervention through nationalization or personal protective equipment (PPE) and direct state intervention through nationalization or
through directives to increase output at facilities that produced PPE materials or to initiate through directives to increase output at facilities that produced PPE materials or to initiate
production at other facilities. In some cases, policy changes included enhanced foreign production at other facilities. In some cases, policy changes included enhanced foreign

52 Harris, Shane and Missy Ryan, T o Prepare for the Next Pandemic, the U.S. Needs to Change its National Security 52 Harris, Shane and Missy Ryan, T o Prepare for the Next Pandemic, the U.S. Needs to Change its National Security
Priorities, Experts Say, Priorities, Experts Say, Washington Post, June 16, 2020. https://www.washingtonpost.com/national-security/to-, June 16, 2020. https://www.washingtonpost.com/national-security/to-
prepare-for-the-next-pandemic-the-us-needs-to-change-its-national-security-priorities-experts-say/2020/06/16/prepare-for-the-next-pandemic-the-us-needs-to-change-its-national-security-priorities-experts-say/2020/06/16/
b99807c0-aa9a-11ea-9063-e69bd6520940_story.html. b99807c0-aa9a-11ea-9063-e69bd6520940_story.html.
53 53 BIS Quarterly Review, March 2021, Bank for International Settlements, p. 10. , Bank for International Settlements, p. 10.
54 54 Annual Economic Report 2020, Bank for International Settlements, June 2020, p. ix. , Bank for International Settlements, June 2020, p. ix.
55 See: International Monetary Fund, 55 See: International Monetary Fund, Policy Responses to COVID-19. https://www.imf.org/en/T opics/imf-and-. https://www.imf.org/en/T opics/imf-and-
covid19/Policy-Responses-to-COVID-19. covid19/Policy-Responses-to-COVID-19.
56 Countries include Australia, Canada, the European Union, France, Germany, Hungary, Italy, India, Japan, Poland, 56 Countries include Australia, Canada, the European Union, France, Germany, Hungary, Italy, India, Japan, Poland,
and Spain, among others. and Spain, among others. World Investm ent Report 2020, United Nations Conference on T rade and Development 2020, , United Nations Conference on T rade and Development 2020,
p. 93. p. 93.
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investment screening of foreign investment for “public interest” reasons that may remain after the investment screening of foreign investment for “public interest” reasons that may remain after the
pandemic crisis.57 pandemic crisis.57
The shift in approach toward the national security dimensions of foreign investment, especial y The shift in approach toward the national security dimensions of foreign investment, especial y
by developed economies, is blurring the distinction between foreign investment, trade, and by developed economies, is blurring the distinction between foreign investment, trade, and
national security and could reflect the evolving nature of the concept of national security relative national security and could reflect the evolving nature of the concept of national security relative
to foreign investment. Arguably, changes in technology and the global economy have made it to foreign investment. Arguably, changes in technology and the global economy have made it
more difficult to assess the economic costs and benefits of changes in foreign investment policies more difficult to assess the economic costs and benefits of changes in foreign investment policies
taken on national security grounds. taken on national security grounds.
Table 2. Investment Policy Instruments Adopted at the National and International
level to Address the COVID-19 Pandemic
Investment policy areas
Policy measures
Policy actions at the national level
Investment facilitation Investment facilitation
Al eviate administrative burdens and bureaucratic Al eviate administrative burdens and bureaucratic
obstacles for firms. obstacles for firms.

Use of online tools and e-platforms. Use of online tools and e-platforms.
Investment retention and aftercare by investment Investment retention and aftercare by investment
COVID-19-related information services. COVID-19-related information services.
promotion agencies (IPAs) promotion agencies (IPAs)

Administrative and operational support during the Administrative and operational support during the
crisis. crisis.

Move to online services. Move to online services.
Investment incentives Investment incentives
Financial or fiscal incentives to produce COVID-19- Financial or fiscal incentives to produce COVID-19-
related medical equipment. related medical equipment.

Incentives for conversion of production lines. Incentives for conversion of production lines.

Incentives for enhancement of contracted economic Incentives for enhancement of contracted economic
activities. activities.
State participation in crisis-affected industries State participation in crisis-affected industries
Acquisition of equity in companies, including Acquisition of equity in companies, including
nationalization. nationalization.
Local smal and medium enterprises (SMEs) and supply Local smal and medium enterprises (SMEs) and supply
Financial or fiscal support for domestic suppliers (such Financial or fiscal support for domestic suppliers (such
chains chains
as SMEs). as SMEs).
National security and public health National security and public health
Application and potential reinforcement of FDI Application and potential reinforcement of FDI
screening in pandemic-relevant industries. screening in pandemic-relevant industries.
Other State intervention in the health industry Other State intervention in the health industry
Mandatory production. Mandatory production.

Export bans. Export bans.

Import facilitation. Import facilitation.
Intel ectual property (IP) Intel ectual property (IP)
General authorization of non-voluntary licensing, to General authorization of non-voluntary licensing, to
speed up research and development (R&D). speed up research and development (R&D).

IP holder-specific non-voluntary licensing, to enable IP holder-specific non-voluntary licensing, to enable
imports of medication. imports of medication.
Policy actions at the international level
International support measures for investment International support measures for investment
International pledges in support of cross-border International pledges in support of cross-border
investment. investment.

57 57 World ~~Investm ent~~Investment Report 2020, United Nations Conference on T rade and Development, June 16, 2020, p. 96. , United Nations Conference on T rade and Development, June 16, 2020, p. 96.
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Investment policy areas
Policy measures
IIAs IIAs
Reform International Investment Agreements (IIAs) to Reform International Investment Agreements (IIAs) to
support public health policies and to minimize investor–support public health policies and to minimize investor–
State dispute risks. State dispute risks.
Intel ectual property (IP) Intel ectual property (IP)
General authorization of non-voluntary licensing, to General authorization of non-voluntary licensing, to
speed up research and development (R&D). speed up research and development (R&D).
Source: World Investment Report 2020, United Nations Conference on Trade and Development, June 16, 2020, , United Nations Conference on Trade and Development, June 16, 2020,
p. 89. p. 89.
Fiscal Measures
As indicated in As indicated in Table 3, central governments in advanced and emerging economies adopted , central governments in advanced and emerging economies adopted
various fiscal measures to provide financial support to the health sector, households, and firms, various fiscal measures to provide financial support to the health sector, households, and firms,
although the size and scope of the programs vary by country.58 These measures broadly include although the size and scope of the programs vary by country.58 These measures broadly include
tax cuts and tax deferrals for individuals and businesses, wage and income supplements to tax cuts and tax deferrals for individuals and businesses, wage and income supplements to
individuals, including expanding unemployment insurance, and other payments to businesses. individuals, including expanding unemployment insurance, and other payments to businesses.
The U.S. Congress approved historic fiscal spending packages, while other governments The U.S. Congress approved historic fiscal spending packages, while other governments
abandoned traditional borrowing caps in order to increase fiscal spending to sustain economic abandoned traditional borrowing caps in order to increase fiscal spending to sustain economic
growth. In some emerging economies, governments reportedly adopted special programs to growth. In some emerging economies, governments reportedly adopted special programs to
provide financial assistance to “informal” workers, or workers outside traditional labor markets provide financial assistance to “informal” workers, or workers outside traditional labor markets
such as family businesses.59 such as family businesses.59
In developed economies, however, as governments adopted fiscal packages to assist households, In developed economies, however, as governments adopted fiscal packages to assist households,
consumers sharply increased their savings as they faced limited spending opportunities, or a form consumers sharply increased their savings as they faced limited spending opportunities, or a form
of involuntary saving, and concerns over lost jobs, incomes, and the course of their economies, or of involuntary saving, and concerns over lost jobs, incomes, and the course of their economies, or
precautionary saving. International organizations also took steps to provide loans and other precautionary saving. International organizations also took steps to provide loans and other
financial assistance to countries in need. These and other actions have been labeled financial assistance to countries in need. These and other actions have been labeled
“unprecedented,” a term that has been used frequently to describe the pandemic and the policy “unprecedented,” a term that has been used frequently to describe the pandemic and the policy
responses. responses.
Table 3. Elements of Announced Fiscal Measures to Address COVID-19

Advanced Economies
Emerging Market Economies
Measures Measures
US US
JP JP
DE DE
FR FR
IT IT
ES ES
GB GB
BR BR
CN CN
ID ID
IN IN
KR KR
MX MX
RU RU
ZA ZA
Measures supporting the health sector

x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
Measures supporting households
Targeted Targeted
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x

x x
x x
transfer transfersa
Other Other
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x

x x
x x
labor labor
income income
supporsupportb
Wage Wage
x x
x x
x x
x x
x x
x x
x x
x x
x x

x x
x x

x x
x x
subsidies subsidies
Tax cuts Tax cuts
x x
x x
x x
x x

x x

x x
x x
x x
x x

x x
x x

58 Ibid. 58 Ibid.
59 Ibid., p. 25. 59 Ibid., p. 25.
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Advanced Economies
Emerging Market Economies
Measures Measures
US US
JP JP
DE DE
FR FR
IT IT
ES ES
GB GB
BR BR
CN CN
ID ID
IN IN
KR KR
MX MX
RU RU
ZA ZA
Tax deferral Tax deferral
x x
x x
x x

x x
x x
x x

x x
x x
x x

x x
Measures supporting firms
Tax deferral Tax deferral
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
Liquidity Liquidity
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
x x
suppor supportc
Tax cuts Tax cuts
x x
x x
x x

x x
x x
x x
x x
x x
x x
x x
x x

x x

Targeted Targeted

x x
x x
x x
x x

x x

x x
x x

x x
x x
transfers transfers
Source: Annual Economic Report 2020, Bank for International Settlements, June 2020, p. 24, based on data , Bank for International Settlements, June 2020, p. 24, based on data
col ected by the International Monetary Fund and the Organization for Economic Cooperation and col ected by the International Monetary Fund and the Organization for Economic Cooperation and
Development. Development.
Notes:
a. Includes cash and in-kind transfers to affected households. a. Includes cash and in-kind transfers to affected households.
b. Extended unemployment and sick leave benefits. b. Extended unemployment and sick leave benefits.
c. Non-budgetary measures such as equity injections, asset purchases, loans and debt assumptions or c. Non-budgetary measures such as equity injections, asset purchases, loans and debt assumptions or
government guarantees and contingent liabilities, US: United States; JP: Japan; DE: Germany; FR: France; IT: government guarantees and contingent liabilities, US: United States; JP: Japan; DE: Germany; FR: France; IT:
Italy; ES: Spain; GB: Great Britain; BR: Brazil; CN: China; ID: Indonesia; IN: India; KR: South Korea; MX: Italy; ES: Spain; GB: Great Britain; BR: Brazil; CN: China; ID: Indonesia; IN: India; KR: South Korea; MX:
Mexico; RU: Russia; ZA: South Africa. Mexico; RU: Russia; ZA: South Africa.
Fiscal Deficits
As one measure of the extent of the global fiscal and monetary responses by governments, the As one measure of the extent of the global fiscal and monetary responses by governments, the
IMF estimated that government spending and revenue measures to sustain economic activity IMF estimated that government spending and revenue measures to sustain economic activity
adopted through mid-March 2021 amounted to $16 tril ion.60 The IMF also updated its estimate adopted through mid-March 2021 amounted to $16 tril ion.60 The IMF also updated its estimate
of the increase in borrowing by governments global y to finance their fiscal responses to rise to of the increase in borrowing by governments global y to finance their fiscal responses to rise to
10.8% of global gross domestic product (GDP) in 2020, before fal ing to 9.2% in 2021 and 5.4% 10.8% of global gross domestic product (GDP) in 2020, before fal ing to 9.2% in 2021 and 5.4%
in 2022, as indicated in in 2022, as indicated in Figure 3. Other estimates indicate that central banks have committed $17 . Other estimates indicate that central banks have committed $17
tril ion to support their economies to counter pandemic-related economic effects.61 tril ion to support their economies to counter pandemic-related economic effects.61

60 60 Fiscal Monitor, International Monetary Fund, April 2021. p. 1. International Monetary Fund, April 2021. p. 1.
61 Wigglesworth, Robin, Long Live Jay Powell, the New Monarch of the Bond Market, 61 Wigglesworth, Robin, Long Live Jay Powell, the New Monarch of the Bond Market, Financial Times, June 23, , June 23,
2020. https://www.ft.com/content/5db9d0f1-3742-49f0-a6cd-16c471875b5e. 2020. https://www.ft.com/content/5db9d0f1-3742-49f0-a6cd-16c471875b5e.
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Figure 3. IMF Projected Government Fiscal Deficits Relative to GDP
In percentage shares of Gross Domestic Product In percentage shares of Gross Domestic Product

Source: Fiscal Monitor, International Monetary Fund, April 2021. Created by CRS. International Monetary Fund, April 2021. Created by CRS.
Notes: Data for 2021 and 2022 are estimates. Data for 2021 and 2022 are estimates.
Among developed economies, the fiscal deficit to GDP ratio is projected to rise to 11.7% in 2020, Among developed economies, the fiscal deficit to GDP ratio is projected to rise to 11.7% in 2020,
before fal ing to 10.4% in 2021 and 4.6% in 2022; the ratio for the United States is projected to before fal ing to 10.4% in 2021 and 4.6% in 2022; the ratio for the United States is projected to
rise to 15.8% in 2020, the highest ratio for any country or region, before fal ing to 15.0% in 2021 rise to 15.8% in 2020, the highest ratio for any country or region, before fal ing to 15.0% in 2021
and 6.1% in 2022.62 For most areas and countries, the IMF forecasts that debt to GDP ratios wil and 6.1% in 2022.62 For most areas and countries, the IMF forecasts that debt to GDP ratios wil
fal some in 2021, but fal more substantial y as percentage shares of GDP in 2022 as the fal some in 2021, but fal more substantial y as percentage shares of GDP in 2022 as the
economic recovery is projected to take hold. Some economists and others have raised concerns economic recovery is projected to take hold. Some economists and others have raised concerns
that fiscal deficits financed through borrowing in a low-interest rate environment could that fiscal deficits financed through borrowing in a low-interest rate environment could
substantial y increase the debt servicing costs on government budgets under certain conditions, substantial y increase the debt servicing costs on government budgets under certain conditions,
particularly if national economic growth rates rise, which tend to push up central banks’ interest particularly if national economic growth rates rise, which tend to push up central banks’ interest
rates, and if the accumulated debt is refinanced at those higher rates, thereby increasing debt rates, and if the accumulated debt is refinanced at those higher rates, thereby increasing debt
servicing costs.63 servicing costs.63
According to the IMF, France, Germany, Italy, Japan, and the United Kingdom announced public According to the IMF, France, Germany, Italy, Japan, and the United Kingdom announced public
sector support measures in 2020 that total more than 10% of their annual GDP.64 For developing sector support measures in 2020 that total more than 10% of their annual GDP.64 For developing
economies, the fiscal deficit to GDP ratio is projected to rise from 4.9% in 2019 to 9.8% in 2021, economies, the fiscal deficit to GDP ratio is projected to rise from 4.9% in 2019 to 9.8% in 2021,
significantly increasing their debt burden and raising prospects of defaults or debt rescheduling.65 significantly increasing their debt burden and raising prospects of defaults or debt rescheduling.65
According to some estimates, the most fiscal y vulnerable countries are Argentina, Venezuela, According to some estimates, the most fiscal y vulnerable countries are Argentina, Venezuela,
Lebanon, Jordan, Iran, Zambia, Zimbabwe, and South Africa.66 The IMF concluded that among Lebanon, Jordan, Iran, Zambia, Zimbabwe, and South Africa.66 The IMF concluded that among

62 62 Fiscal Monitor, T able 1.1. T able 1.1.
63 Hagaman, Chase, 63 Hagaman, Chase, Fiscal, Monetary, and Economic Challenges of the Post-Pandemic Economy, T he Concord , T he Concord
Coalition, February 18, 2021, Edelberg, Wendy, and Louise Sheiner, Coalition, February 18, 2021, Edelberg, Wendy, and Louise Sheiner, The Macroeconom ic Im plications of Biden’s $1.9
Trillion Fiscal Package, T he Hamilton Project, Brookings Institution, January 28, 2021. T he Hamilton Project, Brookings Institution, January 28, 2021.
64 64 Global Financial Stability Report Update. International Monetary Fund, April 2021, p. 3. . International Monetary Fund, April 2021, p. 3.
65 Ibid., p. 3 65 Ibid., p. 3
66 Wheatley, Jonathan, T ommy Stubbington, Michael Stott, Andrew England, and Joseph Cotterill, Debt Relief: Which 66 Wheatley, Jonathan, T ommy Stubbington, Michael Stott, Andrew England, and Joseph Cotterill, Debt Relief: Which
Countries Are Most Vulnerable? Countries Are Most Vulnerable? Financial Tim es, May 6, 2020. https://www.ft.com/content/31ac88a1-9131-4531-, May 6, 2020. https://www.ft.com/content/31ac88a1-9131-4531-
99be-7bfd8394e8b9. 99be-7bfd8394e8b9.
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low-income developing countries high debt levels could near-term debt vulnerabilities remain low-income developing countries high debt levels could near-term debt vulnerabilities remain
high.67 high.67
The IMF argued the actions by central banks risked creating a disconnect between the pricing of The IMF argued the actions by central banks risked creating a disconnect between the pricing of
risk in financial markets and projected economic prospects, because investors apparently had risk in financial markets and projected economic prospects, because investors apparently had
expected a quick recovery in 2020 based on continued and unprecedented central bank expected a quick recovery in 2020 based on continued and unprecedented central bank
intervention. However, a perceived or real shift in central bank intervention in financial markets intervention. However, a perceived or real shift in central bank intervention in financial markets
could negatively affect investors’ concept of risk and, in turn, negatively affect asset markets and could negatively affect investors’ concept of risk and, in turn, negatively affect asset markets and
the economic recovery.68 In addition to central banks’ actions, the IMF concluded that a number the economic recovery.68 In addition to central banks’ actions, the IMF concluded that a number
of preexisting vulnerabilities could affect the timing and the rate of the economic recovery. These of preexisting vulnerabilities could affect the timing and the rate of the economic recovery. These
vulnerabilities include corporate and household debt levels in developed and some emerging vulnerabilities include corporate and household debt levels in developed and some emerging
market economies that could become unmanageable in a prolonged recession; a rising number of market economies that could become unmanageable in a prolonged recession; a rising number of
insolvencies that could test the resilience of the banking sector; additional stresses that could insolvencies that could test the resilience of the banking sector; additional stresses that could
affect nonbank financial institutions; and the prospect of some developing economies facing high affect nonbank financial institutions; and the prospect of some developing economies facing high
external financing requirements.69 external financing requirements.69
Worker Assistance Programs
As part of their fiscal policy measures, governments in advanced economies either enhanced As part of their fiscal policy measures, governments in advanced economies either enhanced
existing worker support programs, or adopted new programs. As indicated in existing worker support programs, or adopted new programs. As indicated in Table 4, the OECD , the OECD
categorized the various job retention programs into six major groups, which the OECD estimated categorized the various job retention programs into six major groups, which the OECD estimated
had supported 60 mil ion workers in developed economies.70As would be expected, programs to had supported 60 mil ion workers in developed economies.70As would be expected, programs to
assist workers varied across countries, but they general y were comprised of increased subsidies assist workers varied across countries, but they general y were comprised of increased subsidies
for existing programs designed to support workers for work hours lost or extended wage subsidies for existing programs designed to support workers for work hours lost or extended wage subsidies
to maintain pre-pandemic employment levels. Other programs assisted individual firms in to maintain pre-pandemic employment levels. Other programs assisted individual firms in
retaining workers with the objective of facilitating a quick return to full activity once pandemic -retaining workers with the objective of facilitating a quick return to full activity once pandemic -
related restrictions are lifted.71 In some cases, benefits were increased by extending the length of related restrictions are lifted.71 In some cases, benefits were increased by extending the length of
time benefits were available and benefits were extended to workers in non-standard jobs such as time benefits were available and benefits were extended to workers in non-standard jobs such as
temporary and self-employed workers. New programs adopted by some OECD members were temporary and self-employed workers. New programs adopted by some OECD members were
designed to assist some temporary and non-standard workers quickly gain access to support designed to assist some temporary and non-standard workers quickly gain access to support
funds.72 Some countries also eased qualification requirements to facilitate workers or businesses funds.72 Some countries also eased qualification requirements to facilitate workers or businesses
gaining access to support funds gaining access to support funds
In its July 2021 updated employment outlook, the OECD concluded that many workers in OECD In its July 2021 updated employment outlook, the OECD concluded that many workers in OECD
countries had not regained full-time employment by mid-2021 and that elevated rates of countries had not regained full-time employment by mid-2021 and that elevated rates of
unemployment could persist on average beyond 2022. In addition, the OECD concluded the unemployment could persist on average beyond 2022. In addition, the OECD concluded the
longer workers go without regaining employment, the more difficult it could be for them to longer workers go without regaining employment, the more difficult it could be for them to
compete with those whose jobs had been sustained during the recession and the greater the risks compete with those whose jobs had been sustained during the recession and the greater the risks
of a rapid increase in long-term unemployment.73 The OECD also indicated that the timing of any of a rapid increase in long-term unemployment.73 The OECD also indicated that the timing of any
withdrawal of government fiscal support could affect the timing and strength of a recovery and it withdrawal of government fiscal support could affect the timing and strength of a recovery and it
urged governments to continue supporting families most in need of jobs, while providing urged governments to continue supporting families most in need of jobs, while providing

67 67 Global Financial Stability Report, April 2021,April 2021, p. 8 p. 8
68 68 Global Financial Stability Report Update. International Monetary Fund, December 2020, p. 4. . International Monetary Fund, December 2020, p. 4.
69 Ibid., pp. 6-7. 69 Ibid., pp. 6-7.
70 70 OECD Employment Outlook 2021, p. 15. , p. 15.
71 71 Job Retention Schemes During the COVID-19 Lockdown and Beyond, Organization for Economic Cooperation and , Organization for Economic Cooperation and
Development, October 12, 2020, p. 2. Development, October 12, 2020, p. 2.
72 72 OECD Employment Outlook 2021, pp. 5-6. , pp. 5-6.
73 Ibid73 Ibid, ., p. 15. p. 15.
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incentives for job creation and for returning workers. It also concluded that withdrawing support incentives for job creation and for returning workers. It also concluded that withdrawing support
too soon “to the many stil in need risks generating mass bankruptcies and job losses in sectors too soon “to the many stil in need risks generating mass bankruptcies and job losses in sectors
stil deeply affected by containment measures, making the recovery more difficult and stil deeply affected by containment measures, making the recovery more difficult and
uncertain.”74 uncertain.”74
In anticipation of governments reducing or eliminating worker support programs, the OECD In anticipation of governments reducing or eliminating worker support programs, the OECD
encouraged governments to: encouraged governments to:
 Continue providing support to firms affected by social distancing restrictions and  Continue providing support to firms affected by social distancing restrictions and
reducing delays in providing payments. reducing delays in providing payments.
 Target workers support programs to jobs that are likely to remain viable in the  Target workers support programs to jobs that are likely to remain viable in the
medium term in firms or sectors where activity can resume. medium term in firms or sectors where activity can resume.
 Use worker support programs to limit excessive layoffs in cases of temporary  Use worker support programs to limit excessive layoffs in cases of temporary
reduction in business activity and not to support firms with structural reduction in business activity and not to support firms with structural
difficulties.75 difficulties.75
Table 4. Developed Economy Worker Support Programs During COVID-19
Increased
access for
Preexisting
workers in
short-time
Increased
Increased
non-
New short-
New wage
work
access and
benefit
standard
time work
subsidy
scheme
coverage
generosity
jobs
scheme
scheme

Australia Australia
x x

Austria Austria
x x
x x
x x

Belgium Belgium
x x
x x
x x

Canada Canada
x x
x x

Chile Chile
x x
x x
x x
x x

Czech Republic Czech Republic
x x
x x
x x

Denmark Denmark
x x
x x
x x

Estonia Estonia
x x

Finland Finland
x x
x x
x x
x x

France France
x x
x x
x x
x x

Germany Germany
x x
x x
x x
x x

Greece Greece
x x

Hungary Hungary
x x

Iceland Iceland
x x

Ireland Ireland
x x
x x

Italy Italy
x x
x x
x x

Japan Japan
x x
x x
x x
x x

Korea Korea
x x
x x
x x

Latvia Latvia
x x

74 Ibid74 Ibid, ., p. 6. p. 6.
75 Ibid75 Ibid, ., p. 100. p. 100.
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Increased
access for
Preexisting
workers in
short-time
Increased
Increased
non-
New short-
New wage
work
access and
benefit
standard
time work
subsidy
scheme
coverage
generosity
jobs
scheme
scheme

Lithuania Lithuania
x x

Luxembourg Luxembourg
x x
x x
x x

Netherland Netherland
x x
x x

New Zealand New Zealand
x x

Norway Norway
x x
x x
x x

Poland Poland
x x

Portugal Portugal
x x
x x
x x

Slovak Republic Slovak Republic
x x
x x
x x

Slovenia Slovenia
x x

Spain Spain
x x
x x
x x
x x

Sweden Sweden
x x
x x
x x

Switzerland Switzerland
x x
x x
x x

Turkey Turkey
x x
x x
x x

United Kingdom United Kingdom

x x

United States United States
x x
x x
x x

Source: Job Retention Schemes During the COVID-19 Lockdown and Beyond, Organization for Economic , Organization for Economic
Cooperation and Development, October 12, 2020, p. 7. Cooperation and Development, October 12, 2020, p. 7.
Monetary and Prudential Measures
Among central banks, the Federal Reserve initiated extraordinary steps not experienced since the Among central banks, the Federal Reserve initiated extraordinary steps not experienced since the
2008-2009 global financial crisis to address the economic effects of COVID-19. According to a 2008-2009 global financial crisis to address the economic effects of COVID-19. According to a
March 2021 BIS review of the monetary policies adopted by the central banks of 11 advanced March 2021 BIS review of the monetary policies adopted by the central banks of 11 advanced
economies and 28 developing economies between February and July 2020 to address the impact economies and 28 developing economies between February and July 2020 to address the impact
of the pandemic, the banks moved quickly and on a massive scale,76 as indicated in of the pandemic, the banks moved quickly and on a massive scale,76 as indicated in Table 5.
Central banks in advanced economies acted to prevent a financial crisis by purchasing assets and Central banks in advanced economies acted to prevent a financial crisis by purchasing assets and
providing liquidity at favorable rates. In contrast, central banks in emerging economies responded providing liquidity at favorable rates. In contrast, central banks in emerging economies responded
less aggressively, in part reflecting the success of advanced economy central banks in easing less aggressively, in part reflecting the success of advanced economy central banks in easing
global financial pressures, which effectively made it possible for emerging economies to focus global financial pressures, which effectively made it possible for emerging economies to focus
their efforts on supporting domestic demand. their efforts on supporting domestic demand.
BIS grouped the central bank measures into five categories: (1) interest rates; (2) reserve policies; BIS grouped the central bank measures into five categories: (1) interest rates; (2) reserve policies;
(3) lending operations; (4) asset purchases; and (5) foreign exchange policies, including foreign (3) lending operations; (4) asset purchases; and (5) foreign exchange policies, including foreign
exchange swaps. In some cases, central banks also relaxed capital buffers and countercyclical exchange swaps. In some cases, central banks also relaxed capital buffers and countercyclical

76 Cantu, Carlos, Paolo Cavalino, Fiorella De Fiore, and James Yetnam, 76 Cantu, Carlos, Paolo Cavalino, Fiorella De Fiore, and James Yetnam, A Global Database of Central Banks’
Monetary Responses to COVID-19, BIS Working Papers No. 934,BIS Working Papers No. 934, Bank for International Settlements, March 2021, p.5. Bank for International Settlements, March 2021, p.5.
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capital buffers,77 adopted after the 2008-2009 financial crisis.78 General y, however, banks did not capital buffers,77 adopted after the 2008-2009 financial crisis.78 General y, however, banks did not
use their capital buffers to supply credit in their respective economies.79 use their capital buffers to supply credit in their respective economies.79
The five policy areas identified by BIS are: The five policy areas identified by BIS are:
  Interest rates. Interest rates were reduced in most countries, except in Japan and . Interest rates were reduced in most countries, except in Japan and
the Euro area, where interest rates were zero. In numerous countries, monetary the Euro area, where interest rates were zero. In numerous countries, monetary
authorities attempted to ease the concerns of financial market participants by authorities attempted to ease the concerns of financial market participants by
announcing they would maintain accommodative policies (low interest rates) for announcing they would maintain accommodative policies (low interest rates) for
an extended period. an extended period.
  Reserve policies. With low interest rates, some central banks adjusted reserve With low interest rates, some central banks adjusted reserve
requirements for commercial banks, which alters the amount of assets banks are requirements for commercial banks, which alters the amount of assets banks are
required to hold. Some central banks also adjusted the remuneration rate, or the required to hold. Some central banks also adjusted the remuneration rate, or the
rate the central bank uses to pay interest on required and excess reserves. Some rate the central bank uses to pay interest on required and excess reserves. Some
banks also changed compliance requirements, or the types of assets that could be banks also changed compliance requirements, or the types of assets that could be
counted as reserves. counted as reserves.
  Lending operations. Central banks adjusted lending facilities to maintain Central banks adjusted lending facilities to maintain
liquidity, either by expanding existing lending facilities or by creating new liquidity, either by expanding existing lending facilities or by creating new
programs, which accounted for 60% of lending operations. In some cases, programs, which accounted for 60% of lending operations. In some cases,
policies were targeted to specific financial market segments, particularly banks policies were targeted to specific financial market segments, particularly banks
and smal and medium-sized enterprises. and smal and medium-sized enterprises.
  Asset purchases. Central banks in advanced economies used targeted and non-. Central banks in advanced economies used targeted and non-
targeted lending operations to support monetary policies and maintain liquidity in targeted lending operations to support monetary policies and maintain liquidity in
the financial system. These goals were accomplished by increasing the size of the financial system. These goals were accomplished by increasing the size of
existing programs and by lengthening the maturities of loans. Central banks in existing programs and by lengthening the maturities of loans. Central banks in
emerging economies expanded their existing liquidity facilities by lowering emerging economies expanded their existing liquidity facilities by lowering
interest rates, broadening the types of eligible collateral, and increasing the interest rates, broadening the types of eligible collateral, and increasing the
number and types of eligible counterparties. The main difference between number and types of eligible counterparties. The main difference between
existing and new lending policies was that a large share of the new facilities existing and new lending policies was that a large share of the new facilities
targeted the private sector, including lending measures to support the flow of targeted the private sector, including lending measures to support the flow of
credit to households and non-financial corporations. In advanced economies credit to households and non-financial corporations. In advanced economies
about 40% of asset purchase programs were new facilities, while the share of about 40% of asset purchase programs were new facilities, while the share of
new programs in emerging economies accounted for over 90%. In addition, asset new programs in emerging economies accounted for over 90%. In addition, asset
purchases were split nearly evenly between public and private assets in advanced purchases were split nearly evenly between public and private assets in advanced
economies economies
  Foreign exchange. The Federal Reserve implemented foreign exchange swaps . The Federal Reserve implemented foreign exchange swaps
initial y with five countries (Canada, Euro area, Japan, UK, Switzerland), initial y with five countries (Canada, Euro area, Japan, UK, Switzerland),
followed by swap lines extended to nine other countries (Australia, Brazil, Korea, followed by swap lines extended to nine other countries (Australia, Brazil, Korea,
to relieve pressure in the dollar funding market. to relieve pressure in the dollar funding market.
Throughout the early stages of the economic crisis, central banks served as lenders of last resort Throughout the early stages of the economic crisis, central banks served as lenders of last resort
through large purchases of government debt and as the buyers or lenders of last resort for private through large purchases of government debt and as the buyers or lenders of last resort for private

77 Countercyclical capital buffers require banks to increase their capital buffers during periods of rapid 77 Countercyclical capital buffers require banks to increase their capital buffers during periods of rapid ~~growth~~gr owth in assets in assets
(when they are making a lot of loans), to ensure they have sufficient capital to absorb losses during a recession. (when they are making a lot of loans), to ensure they have sufficient capital to absorb losses during a recession.
Countercyclical Capital Buffers, Bank for International Settlements, April 3, 2020. https://www.bis.org/bcbs/ccyb/. , Bank for International Settlements, April 3, 2020. https://www.bis.org/bcbs/ccyb/.
78 Arnold, Martin, “Regulators Free up $500bn Capital for Lenders to Fight Virus Storm,” 78 Arnold, Martin, “Regulators Free up $500bn Capital for Lenders to Fight Virus Storm,” Financial Times, April 7, April 7,
2020. https://www.ft.com/content/9a677506-a44e-4f69-b852-4f34018bc45f. 2020. https://www.ft.com/content/9a677506-a44e-4f69-b852-4f34018bc45f.
79 79 Lessons Learnt From the COVID-19 Pandemic From a Financial Stability Perspective: Interim Report, Financial , Financial
Stability Board, July 13, 2021, p. 9. Stability Board, July 13, 2021, p. 9.
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sector securities, in many cases engaging in activities that previously had been considered off- sector securities, in many cases engaging in activities that previously had been considered off-
limits.80 As a result of these activities, the BIS argued that central banks effectively managed the limits.80 As a result of these activities, the BIS argued that central banks effectively managed the
initial liquidity crisis, the first of three phases often identified with financial crises. The second initial liquidity crisis, the first of three phases often identified with financial crises. The second
and third phases, insolvency and recovery, were also navigated successfully, but could stil and third phases, insolvency and recovery, were also navigated successfully, but could stil
become more chal enging the longer the pandemic-related economic crisis persists. Capital become more chal enging the longer the pandemic-related economic crisis persists. Capital
buffers were raised after the 2008-2009 financial crisis to assist banks in absorbing losses and buffers were raised after the 2008-2009 financial crisis to assist banks in absorbing losses and
staying solvent during financial crises. Some governments directed banks to freeze dividend staying solvent during financial crises. Some governments directed banks to freeze dividend
payments and halt pay bonuses. The Financial Stability Board (FSB) argued in its July 13, 2021, payments and halt pay bonuses. The Financial Stability Board (FSB) argued in its July 13, 2021,
report to the G-20 Finance Ministers and Governors that the monetary and fiscal actions taken by report to the G-20 Finance Ministers and Governors that the monetary and fiscal actions taken by
central banks and national governments, respectively, in combination with regulatory and central banks and national governments, respectively, in combination with regulatory and
supervisory measures adopted following the 2008-2009 global financial crisis effectively supervisory measures adopted following the 2008-2009 global financial crisis effectively
contained the impact of the crisis, supported the functioning of the global financial system, and contained the impact of the crisis, supported the functioning of the global financial system, and
facilitated funding to the real economy.81 facilitated funding to the real economy.81
Since the beginning of the pandemic, central banks often adopted similar policies, although not Since the beginning of the pandemic, central banks often adopted similar policies, although not
always in unison. Most central banks followed the Federal Reserve in cutting interest rates as one always in unison. Most central banks followed the Federal Reserve in cutting interest rates as one
of their main policy tools to support economic activity; the ECB (Euro Area) and Japan are of their main policy tools to support economic activity; the ECB (Euro Area) and Japan are
notable exceptions, since they had reduced their main interest rates to zero prior to the economic notable exceptions, since they had reduced their main interest rates to zero prior to the economic
recession. The low interest rates had an additional, although not necessarily intended, impact on recession. The low interest rates had an additional, although not necessarily intended, impact on
currency markets by reducing arbitrage opportunities and, thereby, reducing volatility in currency markets by reducing arbitrage opportunities and, thereby, reducing volatility in
exchange rates.82 According to some analysts, the period through mid-summer 2021 experienced exchange rates.82 According to some analysts, the period through mid-summer 2021 experienced
the longest period on record of low volatility between the dollar and the euro. the longest period on record of low volatility between the dollar and the euro.
Table 5. Selected Central Bank and Prudential Measures to Address COVID-19
Advanced Economies
Tool type Tool type
Measure Measure
US US
EA EA
JP JP
GB GB
CA CA
AU AU
CH CH
DK DK
NO NO
NZ NZ
SE SE
Interest Interest
Policy Rate cut Policy Rate cut
X X

X X
X X
X X

X X
X X
X X
Lending Lending
Liquidity provision Liquidity provision
X X
X X
X X
X X
X X
X X

X X
X X
X X
X X
operations operations
Targeted lending Targeted lending
X X
X X
X X
X X

X X
X X

X X
X X
Asset Asset
Government Government
X X
X X
X X
X X
X X
X X

X X
X X
purchases purchases
bonds bonds
Corporate paper Corporate paper
X X
X X
X X
X X
X X

X X
Corporate bonds Corporate bonds
X X
X X
X X
X X
X X

X X
Other Other

X X
X X

X X

X X
Foreign Foreign
US dol ar swap line US dol ar swap line

X X
X X
X X
X X
X X
X X
X X
X X
X X
X X
exchange exchange
Swaps Swaps

Spot intervention Spot intervention

X X

Reserve Reserve
Remuneration Remuneration

X X
X X

X X

policy policy
Required Ratio Required Ratio
X X

Compliance Compliance

80 For a review of monetary policies of the Federal Reserve, the ECB, the Bank of Japan, and the Bank of England, see 80 For a review of monetary policies of the Federal Reserve, the ECB, the Bank of Japan, and the Bank of England, see
Haas, Jacob, Christopher J. Neely, William B. Emmons, Responses of International Central Banks to the COVID -19 Haas, Jacob, Christopher J. Neely, William B. Emmons, Responses of International Central Banks to the COVID -19
Crisis, Crisis, Federal Reserve Bank of St. Louis Review, Fourth Quarter 2020. , Fourth Quarter 2020.
81 81 Lessons Learnt From the COVID-19 Pandemic, p. 10. , p. 10.
82 Duguid, Kate and T ommy Stubbington, Central Bank Sync Puts Foreign Exchange Market to Sleep, 82 Duguid, Kate and T ommy Stubbington, Central Bank Sync Puts Foreign Exchange Market to Sleep, Financial
Tim es, September 21, 2021. , September 21, 2021.
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Middle East and Asia
Tool type Tool type
Measure Measure
AE AE
DZ DZ
IL IL
KW KW
MA MA
SA SA
TR TR
ZA ZA

Interest Interest
Policy Rate cut Policy Rate cut
X X
X X
X X
X X
X X
X X
X X
X X

Lending Lending
Liquidity provision Liquidity provision

X X
X X
X X
X X
X X
X X
X X

operations operations

Targeted lending Targeted lending
X X

X X

X X
X X
X X

Asset Asset
Government Government

X X

X X
X X

purchases purchases
bonds bonds
Corporate paper Corporate paper

Corporate bonds Corporate bonds

X X

Other Other

Foreign Foreign
US dol ar swap line US dol ar swap line

exchange exchange

Swaps Swaps

X X

Spot intervention Spot intervention

X X

Reserve Reserve
Remuneration Remuneration

X X

policy policy

Required Ratio Required Ratio
X X
X X

X X

Compliance Compliance

Emerging Asia
Tool type Tool type
Measure Measure
CN CN
HK HK
ID ID
IN IN
KR KR
MY MY
PH PH
SG SG
TH TH
VN VN

Interest Interest
Policy Rate cut Policy Rate cut
X X
X X
X X
X X
X X
X X
X X

X X
X X

Lending Lending
Liquidity provision Liquidity provision
X X
X X
X X
X X
X X

X X

X X

operations operations
Targeted lending Targeted lending
X X

X X
X X

X X
X X
X X
X X

Asset Asset
Government Government

X X
X X
X X

X X

X X

purchases purchases
bonds bonds
Corporate paper Corporate paper

X X

Corporate bonds Corporate bonds

X X

X X

Other Other

Foreign Foreign
US dol ar swap line US dol ar swap line

X X

X X

exchange exchange
Swaps Swaps

X X
X X

X X

Spot intervention Spot intervention

X X
X X

Reserve Reserve
Remuneration Remuneration

X X

policy policy
Required Ratio Required Ratio
X X
X X
X X
X X

Compliance Compliance

X X
X X

Latin America

Eastern Europe
Tool type Tool type
Measure Measure
AR AR
BR BR
CL CO CL CO
MX MX
PE PE

CZ CZ
HU HU
PL PL
RO RO
Interest Interest
Policy Rate cut Policy Rate cut
X X
X X
X X
X X
X X
X X

X X
X X
X X
X X
Lending Lending
Liquidity provision Liquidity provision

X X
X X
X X
X X
X X

X X
X X
X X
X X
operations operations

Targeted lending Targeted lending
X X
X X
X X

X X
X X

X X

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Asset Asset
Government Government

X X
X X

X X
X X
X X
purchases purchases
bonds bonds

Corporate paper Corporate paper

Corporate bonds Corporate bonds

X X

Other Other

X X
X X

X X

Foreign Foreign
US dol ar swap line US dol ar swap line

X X

X X

exchange exchange

Swaps Swaps

X X
X X
X X
X X
X X

X X

Spot intervention Spot intervention

X X

X X

Reserve Reserve
Remuneration Remuneration
X X
X X

X X
X X

policy policy

Required Ratio Required Ratio
X X
X X

X X
X X
X X

X X

Compliance Compliance
X X
X X

X X

Source: Cantu, Carlos, Paolo Cavalino, Fiorel a De Fiore, and James Yetnam, Cantu, Carlos, Paolo Cavalino, Fiorel a De Fiore, and James Yetnam, A Global Database of Central Banks’
Monetary Responses to COVID-19, BIS Working Papers No. 934,BIS Working Papers No. 934, Bank for International Settlements, March 2021, Bank for International Settlements, March 2021,
p. 5. p. 5.
Notes: AE: United Arab Emirates; AR: Argentina; AU: Australia; BR: Brazil; CA: Canada; CH: Switzerland; CL: AE: United Arab Emirates; AR: Argentina; AU: Australia; BR: Brazil; CA: Canada; CH: Switzerland; CL:
Chile; CN: China; CO: Colombia; CZ: Czech Republic; DK: Denmark; DZ: Algeria; EA: Euro Area; GB: Great Chile; CN: China; CO: Colombia; CZ: Czech Republic; DK: Denmark; DZ: Algeria; EA: Euro Area; GB: Great
Britain; HK: Hong Kong; HU: Hungary; ID: Indonesia; IL: Israel; IN: India; JP: Japan; KR: South Korea; KW: Britain; HK: Hong Kong; HU: Hungary; ID: Indonesia; IL: Israel; IN: India; JP: Japan; KR: South Korea; KW:
Kuwait; MA: Morocco; MY: Malaysia; MX: Mexico; NO: Norway; NZ: New Zealand; PE: Peru; PH: the Kuwait; MA: Morocco; MY: Malaysia; MX: Mexico; NO: Norway; NZ: New Zealand; PE: Peru; PH: the
Philippines; PL: Poland; RO: Romania SG: Singapore; SA: Saudi Arabia; SE: Sweden; TH: Thailand; TR: Turkey; US: Philippines; PL: Poland; RO: Romania SG: Singapore; SA: Saudi Arabia; SE: Sweden; TH: Thailand; TR: Turkey; US:
United States; VN: Vietnam; ZA: South Africa; United States; VN: Vietnam; ZA: South Africa;
Economic Forecasts
Global Growth
As the COVID-19 pandemic began, the global economy was struggling to regain a broad-based As the COVID-19 pandemic began, the global economy was struggling to regain a broad-based
recovery. Global economic growth was being chal enged by the lingering impact of growing trade recovery. Global economic growth was being chal enged by the lingering impact of growing trade
protectionism, trade disputes among major trading partners, fal ing commodity and energy prices, protectionism, trade disputes among major trading partners, fal ing commodity and energy prices,
and economic uncertainties in Europe over the impact of the UK withdrawal from the European and economic uncertainties in Europe over the impact of the UK withdrawal from the European
Union. Individual y, each of these issues presented a solvable chal enge for the global economy. Union. Individual y, each of these issues presented a solvable chal enge for the global economy.
Collectively, however, the issues weakened the global economy and reduced the available policy Collectively, however, the issues weakened the global economy and reduced the available policy
flexibility of many national leaders, especial y among the leading developed economies. While flexibility of many national leaders, especial y among the leading developed economies. While
the economic impact has become less uncertain, the combination of policy responses may the economic impact has become less uncertain, the combination of policy responses may
continue to have a significant and enduring impact on the way businesses organize their work continue to have a significant and enduring impact on the way businesses organize their work
forces, on global supply chains, and on government responses to a global health crisis.83 As a forces, on global supply chains, and on government responses to a global health crisis.83 As a
result of the rapidly spreading virus and its compounding effects on global and national rates of result of the rapidly spreading virus and its compounding effects on global and national rates of
economic growth, forecasting the impact of the virus has been especial y chal enging. economic growth, forecasting the impact of the virus has been especial y chal enging.
In the early stages of the global economic recession, economic forecasts were compounded In the early stages of the global economic recession, economic forecasts were compounded
further by a historic drop in the price of crude oil. Since then, oil prices recovered from the low of further by a historic drop in the price of crude oil. Since then, oil prices recovered from the low of
nearly $20 per barrel in April 2020 to a range of $40 to $45 per barrel by the end of 2020, in part nearly $20 per barrel in April 2020 to a range of $40 to $45 per barrel by the end of 2020, in part
reflecting the decline in global economic activity. By early June 2021, the international price of reflecting the decline in global economic activity. By early June 2021, the international price of

83 Rowland, Christopher and Peter Whoriskey, “U.S. Health System is Showing Why It’s Not Ready for a COVID-19 83 Rowland, Christopher and Peter Whoriskey, “U.S. Health System is Showing Why It’s Not Ready for a COVID-19
Pandemic,” Pandemic,” Washington Post, March 4, 2020. https://www.washingtonpost.com/business/economy/the-us-health-, March 4, 2020. https://www.washingtonpost.com/business/economy/the-us-health-
system-is-showing-why-its-not-ready-for-a-COVID-19-pandemic/2020/03/04/7c307bb4-5d61-11ea-b29b-system-is-showing-why-its-not-ready-for-a-COVID-19-pandemic/2020/03/04/7c307bb4-5d61-11ea-b29b-
9db42f7803a7_story.html. 9db42f7803a7_story.html.
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Brent crude oil had crossed the $70 per barrel mark, where it remained through the second week Brent crude oil had crossed the $70 per barrel mark, where it remained through the second week
of September 2021. of September 2021.
Through the first half of 2021, economic forecasts turned more positive based on an expected Through the first half of 2021, economic forecasts turned more positive based on an expected
return to pre-pandemic rates of growth. Nevertheless, the economic situation has remained highly return to pre-pandemic rates of growth. Nevertheless, the economic situation has remained highly
fluid global y and for most countries and regions. Uncertainty about the length and depth of the fluid global y and for most countries and regions. Uncertainty about the length and depth of the
health crisis-related economic effects continue to influence perceptions of risk and volatility in health crisis-related economic effects continue to influence perceptions of risk and volatility in
financial markets and corporate decision-making. In addition, uncertainties concerning the global financial markets and corporate decision-making. In addition, uncertainties concerning the global
pandemic and the effectiveness of public policies intended to contain its spread and prevent a pandemic and the effectiveness of public policies intended to contain its spread and prevent a
subsequent round of infections have added to market volatility. At various times, corporations subsequent round of infections have added to market volatility. At various times, corporations
postponed investment decisions, laid off workers who previously had been furloughed, and in postponed investment decisions, laid off workers who previously had been furloughed, and in
some cases filed for bankruptcy. some cases filed for bankruptcy.
Progress in producing and administering vaccines through the first half of 2021 raised prospects Progress in producing and administering vaccines through the first half of 2021 raised prospects
that social distancing rules could be relaxed or removed, which could improve economic activity. that social distancing rules could be relaxed or removed, which could improve economic activity.
Most forecasts indicate that 2021 GDP growth rates for most countries could outpace pre-Most forecasts indicate that 2021 GDP growth rates for most countries could outpace pre-
pandemic forecasts; while economic growth in 2022 could return to more historic rates. However, pandemic forecasts; while economic growth in 2022 could return to more historic rates. However,
these forecasts may be dampened by: a resurgence in viral cases that could move governments to these forecasts may be dampened by: a resurgence in viral cases that could move governments to
reinstate business and social lockdowns, continuing shortfal s in supplies through supply chains reinstate business and social lockdowns, continuing shortfal s in supplies through supply chains
that have not fully recovered, and rising demand for construction materials that is driven by that have not fully recovered, and rising demand for construction materials that is driven by
government infrastructure projects and new residential housing construction. government infrastructure projects and new residential housing construction.
The IMF, the OECD, and The World Bank revised their forecasts downward between late 2019 The IMF, the OECD, and The World Bank revised their forecasts downward between late 2019
and mid-2020, reflecting the rapidly deteriorating state of the global economy and a marked and mid-2020, reflecting the rapidly deteriorating state of the global economy and a marked
decline in projected rates of growth. Between October 2019 and January 2021, for instance, the decline in projected rates of growth. Between October 2019 and January 2021, for instance, the
IMF lowered its global economic growth forecast for 2020 from a positive 3.4% to a negative IMF lowered its global economic growth forecast for 2020 from a positive 3.4% to a negative
3.5%. In its June 2020 forecast, the OECD forecasted the effects of a single and double wave of 3.5%. In its June 2020 forecast, the OECD forecasted the effects of a single and double wave of
infections, with the projections for a single wave reflected in infections, with the projections for a single wave reflected in Table 6. By late 2020 and early . By late 2020 and early
2021, most forecasts were revised upward to reflect assessments the recession would be less 2021, most forecasts were revised upward to reflect assessments the recession would be less
severe than had been forecasted for 2021, as indicated in severe than had been forecasted for 2021, as indicated in Figure 4. The OECD estimated in May The OECD estimated in May
2021 that global GDP had declined by 3.5% in 2020, compared with a December forecast 2021 that global GDP had declined by 3.5% in 2020, compared with a December forecast
of -4.2%, and would experience a stronger recovery in 2021 of 5.8% instead of a March forecast of -4.2%, and would experience a stronger recovery in 2021 of 5.8% instead of a March forecast
of 5.6%.84 Between January 2020 and January 2021, the World Bank also lowered its forecast of of 5.6%.84 Between January 2020 and January 2021, the World Bank also lowered its forecast of
global growth from 2.5% to a negative 4.3%. In most forecasts, advanced economies were global growth from 2.5% to a negative 4.3%. In most forecasts, advanced economies were
projected to experience the steepest declines in economic growth from 2019 to mid-June 2020. projected to experience the steepest declines in economic growth from 2019 to mid-June 2020.
Table 6. Major Economic Forecasts
Percentage changes at annual rates Percentage changes at annual rates
World
Advanced economies Developing economies
United States

2020 2021 2020 2021
2020 2020
2021 2021
2020 2020
2021 2021
2020 2020
2021 2021
International Monetary Fund
October 2019 October 2019
3.4% 3.4%
3.6% 3.6%
1.7% 1.7%
1.6% 1.6%
4.6% 4.6%
4.8% 4.8%
2.1% 2.1%
1.7% 1.7%
April 2020 April 2020
–3.0 –3.0
5.8 5.8
–6.1 –6.1
4.5 4.5
–1.0 –1.0
6.6 6.6
–5.9 –5.9
4.7 4.7
June 2020 June 2020
-4.9 -4.9
5.4 5.4
-8.0 -8.0
4.8 4.8
-3.0 -3.0
5.9 5.9
-8.0 -8.0
4.5 4.5
October 2020 October 2020
–4.4 –4.4
5.2 5.2
–5.8 –5.8
3.9 3.9
–3.3 –3.3
6.0 6.0
–4.3 –4.3
3.1 3.1

84 84 OECD Economic Outlook, Interim Report March 2021, Organization for Economic Cooperation and Development, , Organization for Economic Cooperation and Development,
March, 2021. March, 2021.
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World
Advanced economies Developing economies
United States

2020 2021 2020 2021
2020 2020
2021 2021
2020 2020
2021 2021
2020 2020
2021 2021
January 2021 January 2021
-3.5 -3.5
5.5 5.5
-4.9 -4.9
4.3 4.3
-2.4 -2.4
6.3 6.3
-3.4 -3.4
5.1 5.1
July 2021 July 2021
-3.2 -3.2
6.0 6.0
-4.6 -4.6
5.6 5.6
-2.1 -2.1
6.3 6.3
-3.5 -3.5
7.0 7.0
Organization for Economic Cooperation and Development
Nov 2019 Nov 2019
2.9 2.9
3.0 3.0
1.6 1.6
1.7 1.7
4.0 4.0
4.0 4.0
2.0 2.0
2.0 2.0
March 2020 March 2020
2.4 2.4
3.3 3.3
0.8 0.8
1.2 1.2
NA NA
NA NA
1.9 1.9
2.1 2.1
June 2020 single June 2020 single
-6.0 -6.0
5.2 5.2
-7.5 -7.5
4.8 4.8
-4.6 -4.6
5.6 5.6
-7.3 -7.3
4.1 4.1
June 2020 double June 2020 double
-7.6 -7.6
2.8 2.8
-9.3 -9.3
2.2 2.2
-6.1 -6.1
3.2 3.2
-8.5 -8.5
1.9 1.9
Sept. 2020 Sept. 2020
-7.6 -7.6
2.8 2.8
-9.3 -9.3
2,2 2,2
-6.1 -6.1
3.2 3.2
-8.5 -8.5
1.9 1.9
Dec. 2020 Dec. 2020
-4.2 -4.2
4.2 4.2
-5.5 -5.5
3,2 3,2
-3.0 -3.0
5.1 5.1
-3.7 -3.7
3.2 3.2
March 2021 March 2021
-3.4 -3.4
5.6 5.6
NA NA
NA NA
NA NA
NA NA
-3.5 -3.5
6.5 6.5
May 2021 May 2021
-3.5 -3.5
5.8 5.8
-4.8 -4.8
5.3 5.3
-2.3 -2.3
6.2 6.2
-3.5 -3.5
6.9 6.9
September 2021 September 2021
-3.4 -3.4
5.7 5.7
NA NA
NA NA
NA NA
NA NA
-3.4 -3.4
6.0 6.0
World Bank
January 2020 January 2020
2.5 2.5
2.6 2.6
1.4 1.4
1.5 1.5
4.1 4.1
4.3 4.3
1.8 1.8
1.7 1.7
June 2020 June 2020
-5.2 -5.2
4.2 4.2
-7.0 -7.0
3.9 3.9
-2.5 -2.5
4.6 4.6
-6.1 -6.1
4.0 4.0
January 2021 January 2021
-4.3 -4.3
4.0 4.0
-5.4 -5.4
3.3 3.3
-2.6 -2.6
5.0 5.0
-3.6 -3.6
3.5 3.5
Source: World Economic Outlook, various issues, International Monetary Fund; , various issues, International Monetary Fund; OECD Economic Outlook, various various
issues, Organization for Economic Cooperation and Development; issues, Organization for Economic Cooperation and Development; Global Economic Prospects, various issues, , various issues,
World Bank. World Bank.
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Figure 4. Major Economic Forecasts by Region

Source: OECD Economic Outlook, March 2021, Organization for Economic Cooperation and Development. , Organization for Economic Cooperation and Development.
March 2021; March 2021; World Economic Outlook, Update, International Monetary Fund, July, 2021; International Monetary Fund, July, 2021; Global Economic Prospects, ,
World Bank Group, January 2021, Created by CRS. World Bank Group, January 2021, Created by CRS.
Notes: The OECD estimated rates of growth as a result of two scenarios, indicated as OECD1 and OECD2. The OECD estimated rates of growth as a result of two scenarios, indicated as OECD1 and OECD2.
The first scenario assumes there is a single wave of infections from COVID-19, while the second scenario The first scenario assumes there is a single wave of infections from COVID-19, while the second scenario
estimated the effect of a two-wave scenario. estimated the effect of a two-wave scenario.
The OECD Forecast
The Organization for Economic Cooperation and Development (OECD) released an updated The Organization for Economic Cooperation and Development (OECD) released an updated
forecast in September 2021, which estimated that global economic growth had declined by 3.4% forecast in September 2021, which estimated that global economic growth had declined by 3.4%
in 2020, but also estimated that the global economy would grow at an annual rate of 5.7% in 2021 in 2020, but also estimated that the global economy would grow at an annual rate of 5.7% in 2021
and 4.5% in 2022, assuming continued strong support from macroeconomic policies and and 4.5% in 2022, assuming continued strong support from macroeconomic policies and
accommodative monetary policies.85 In the updated forecast, the rate of GDP growth in the Euro accommodative monetary policies.85 In the updated forecast, the rate of GDP growth in the Euro
area was forecast to grow at a rate of 5.3% in 2021 and the U.S. economy would grow at rate of area was forecast to grow at a rate of 5.3% in 2021 and the U.S. economy would grow at rate of
6.0%. The G20, which includes both developed and major developing economies, was projected 6.0%. The G20, which includes both developed and major developing economies, was projected
to grow by 6.1% in 2021 and by a rate of 4.8% in 2022. The OECD estimated that global GDP to grow by 6.1% in 2021 and by a rate of 4.8% in 2022. The OECD estimated that global GDP
had surpassed the pre-pandemic level, but that output levels and employment in mid-2021 had surpassed the pre-pandemic level, but that output levels and employment in mid-2021
remained 3.5% below pre-pandemic projections, which was estimated to be equivalent to an remained 3.5% below pre-pandemic projections, which was estimated to be equivalent to an
income loss of about $4.5 tril ion, or the value of a year of global GDP growth. While inflation income loss of about $4.5 tril ion, or the value of a year of global GDP growth. While inflation
began rising in developed economies, the OECD attributed the price increases to higher began rising in developed economies, the OECD attributed the price increases to higher
commodity and shipping costs and projected they would moderate by the end of 2022, unless commodity and shipping costs and projected they would moderate by the end of 2022, unless
higher rates of inflation became embedded in demands for higher wages.86 higher rates of inflation became embedded in demands for higher wages.86

85 85 OECD Economic Outlook, Interim Report: Keeping the Recovery on Track, Organization for Economic Cooperation , Organization for Economic Cooperation
and Development, September 2020. and Development, September 2020.
86 According to OECD calculations, global commodity prices were 55% higher in July and August 2021 than in the 86 According to OECD calculations, global commodity prices were 55% higher in July and August 2021 than in the
previous year and were driven by higher metals and oil prices; containerized freight prices were estimated to be two to previous year and were driven by higher metals and oil prices; containerized freight prices were estimated to be two to
three times the level of the previous year. Ibidthree times the level of the previous year. Ibid., p. 11. , p. 11.
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The OECD forecast also reflected recent analysis that an economic recovery would take place The OECD forecast also reflected recent analysis that an economic recovery would take place
over the next two years, but that “the recovery would be uneven across countries, potential y over the next two years, but that “the recovery would be uneven across countries, potential y
leading to lasting changes in the world economy.”87 In addition, the OECD concluded the leading to lasting changes in the world economy.”87 In addition, the OECD concluded the
pandemic is fragmenting the global economy through a growing number of trade and investment pandemic is fragmenting the global economy through a growing number of trade and investment
restrictions and diverging policy approaches that are being implemented on a country-by-country restrictions and diverging policy approaches that are being implemented on a country-by-country
basis. The OECD concluded further that basis. The OECD concluded further that
….as long as the vast majority of the global population is not vaccinated, all of us remain ….as long as the vast majority of the global population is not vaccinated, all of us remain
vulnerable to the emergence of new variants. Confidence could be seriously eroded by vulnerable to the emergence of new variants. Confidence could be seriously eroded by
further lockdowns, and a stop-and-go of economic activities. Firms, so far well protected further lockdowns, and a stop-and-go of economic activities. Firms, so far well protected
but often with higher debt than before the pandemic, could go bankrupt. The most but often with higher debt than before the pandemic, could go bankrupt. The most
vulnerable members of society would risk further suffering from prolonged spells of vulnerable members of society would risk further suffering from prolonged spells of
inactivity or reduced income, exacerbating inequalities, across and withininactivity or reduced income, exacerbating inequalities, across and within countries, and countries, and
potentially destabilizing economies.88 potentially destabilizing economies.88
As a consequence of the slowdown in economic activity in the fourth quarter of 2020 and As a consequence of the slowdown in economic activity in the fourth quarter of 2020 and
projected slow growth and partial recovery in 2021, the OECD estimated there would be long-projected slow growth and partial recovery in 2021, the OECD estimated there would be long-
lasting effects on the global economy, including lasting effects on the global economy, including
 Output was projected to remain around 5% below pre-crisis expectations in many  Output was projected to remain around 5% below pre-crisis expectations in many
countries in 2022, raising the specter of substantial permanent costs, countries in 2022, raising the specter of substantial permanent costs,
disproportionately affecting vulnerable populations. disproportionately affecting vulnerable populations.
 Smal er firms and entrepreneurs are more likely to go out of business.  Smal er firms and entrepreneurs are more likely to go out of business.
 Many low wage earners who lost their jobs and are only covered by  Many low wage earners who lost their jobs and are only covered by
unemployment insurance, at best, with poor prospects of finding new jobs unemployment insurance, at best, with poor prospects of finding new jobs
quickly. quickly.
 People living in poverty and usual y less wel covered by social safety nets  People living in poverty and usual y less wel covered by social safety nets
experienced a deterioration in their living standards. experienced a deterioration in their living standards.
 Children and youth from less wel -off backgrounds, and less qualified adult  Children and youth from less wel -off backgrounds, and less qualified adult
workers struggled to learn and work from home, with potential y long lasting workers struggled to learn and work from home, with potential y long lasting
damage.89 damage.89
Through the third and fourth quarters of 2020 and the first and second quarters of 2021, most Through the third and fourth quarters of 2020 and the first and second quarters of 2021, most
OECD countries had not experienced extended periods of high rates of unemployment, in part OECD countries had not experienced extended periods of high rates of unemployment, in part
due to national income and wage maintenance programs, as indicated in due to national income and wage maintenance programs, as indicated in Figure 5. The main . The main
exceptions were the United States and Canada, where unemployment rates spiked starting at the exceptions were the United States and Canada, where unemployment rates spiked starting at the
end of the first quarter 2020 and into the second quarter of 2020. By July 2021, most OECD end of the first quarter 2020 and into the second quarter of 2020. By July 2021, most OECD
economies had unemployment rates in the 6.5% to 9.0% range with some exceptions: Japan economies had unemployment rates in the 6.5% to 9.0% range with some exceptions: Japan
(2.8%) and Germany (3.6%) had rates below the OECD average of 6.2%, while Greece (14.6%), (2.8%) and Germany (3.6%) had rates below the OECD average of 6.2%, while Greece (14.6%),
Spain (14.3%), Colombia (13.7%), and Italy (9.3%) had rates that were higher than the OECD Spain (14.3%), Colombia (13.7%), and Italy (9.3%) had rates that were higher than the OECD
average. In a major difference between U.S. and EU data, EU workers absent from work due to average. In a major difference between U.S. and EU data, EU workers absent from work due to
temporary layoff are counted as employed, whereas, in the United States, they are counted as temporary layoff are counted as employed, whereas, in the United States, they are counted as
unemployed. unemployed.

87 87 OECD Economic Outlook, Interim Report March 2021, Organization for Economic Cooperation and Development. , Organization for Economic Cooperation and Development.
March 2021, p. 4. http://www.oecd.org/economic-outlook/#resources. March 2021, p. 4. http://www.oecd.org/economic-outlook/#resources.
88 88 OECD Economic Outlook May 2021, , Preliminary Version, p. 9. , p. 9.
89 Ibid., p. 8. 89 Ibid., p. 8.
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Figure 5. Unemployment Rates Among Major OECD Countries
In percentage terms In percentage terms

Source: OECD Dataset: Short-term Labor Market Statistics, Organization for Economic Cooperation and OECD Dataset: Short-term Labor Market Statistics, Organization for Economic Cooperation and
Development. Created by CRS. Development. Created by CRS.
The OECD estimated that global trade would contract by 9.5% in 2020 assuming the global The OECD estimated that global trade would contract by 9.5% in 2020 assuming the global
economy did not experience a strong second wave of infections that caused countries to economy did not experience a strong second wave of infections that caused countries to ~~re-~~
~~impose~~ reimpose stringent social and business lockdowns, as indicated in stringent social and business lockdowns, as indicated in Table 7.90 In addition to current .90 In addition to current
rates of unemployment, the OECD projected the length of time it could take in quarters, or three-rates of unemployment, the OECD projected the length of time it could take in quarters, or three-
month periods, from the end of 2019 to the second quarter of 2025 for selected OECD countries month periods, from the end of 2019 to the second quarter of 2025 for selected OECD countries
to return to return to full employment, as indicated into full employment, as indicated in Figure 6. The OECD estimated in its July 2021 . The OECD estimated in its July 2021
Employment Outlook that by the end of 2020, around 22 mil ion jobs had been lost in the OECD that by the end of 2020, around 22 mil ion jobs had been lost in the OECD
compared to 2019. The estimate indicates that four countries-Australia, Japan, New Zealand, and compared to 2019. The estimate indicates that four countries-Australia, Japan, New Zealand, and
Poland- could reach pre-pandemic rates of unemployment by mid-2021, or a year and a half after Poland- could reach pre-pandemic rates of unemployment by mid-2021, or a year and a half after
the start of the recession. On the other hand, OECD countries on average would not reach pre-the start of the recession. On the other hand, OECD countries on average would not reach pre-
pandemic pandemic level of unemployment until after the end of 2022, or three years after the start of the level of unemployment until after the end of 2022, or three years after the start of the
recession.91 Other counties were projected not to reach pre-pandemic levels of unemployment recession.91 Other counties were projected not to reach pre-pandemic levels of unemployment
until mid- 2024, or more than four years after the recession began. The OECD indicated the delay until mid- 2024, or more than four years after the recession began. The OECD indicated the delay
in returning to full employment reflected chal enges that long-term unemployment present for in returning to full employment reflected chal enges that long-term unemployment present for
workers attempting to workers attempting to ~~re-enter~~reenter the workforce.92 the workforce.92

90 Ibid90 Ibid, ., p. 13. p. 13.
91 91 OECD Employment Outlook 2021: Navigating the COVID-19 Crisis and Recovery, Organization for Economic , Organization for Economic
Cooperation and Development, July 17, 2021, p. 4. Cooperation and Development, July 17, 2021, p. 4.
92 Ibid92 Ibid, ., p. 39-40. p. 39-40.
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Figure 6. Projected Time to Full Recovery in Employment in Selected OECD
Countries
Periods are in quarters by year Q4 2019 to Q2 2025 Periods are in quarters by year Q4 2019 to Q2 2025

Source: OECD Employment Outlook 2021. OECD Employment Outlook 2021.

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Table 7. OECD, IMF and World Bank Economic Forecasts
Percentage change in Real GDP Growth Percentage change in Real GDP Growth
OECD Sep. 2021
IMF July 2021
World Bank Jan.

Projections

Projections

2021 Projections
2020 2020
2021 2021
2022 2022
2020 2020
2021 2021
2022 2022

2019 2019
2020 2020
2021 2021

World World
-3.4% -3.4%
5.7% 5.7%
4.5% 4.5%
World World
–3.2 –3.2
6.0 6.0
4.9 4.9
World World
2.3% 2.3%
-4.3% -4.3%
4.0% 4.0%
Adv. Economies Adv. Economies
-4.8 -4.8
5.3 5.3
3.8 3.8
Adv. Economies Adv. Economies
–4.6 –4.6
5.6 5.6
4.4 4.4
Adv. Economies Adv. Economies
1.6 1.6
-5.4 -5.4
3.3 3.3
Australia Australia
-2.5 -2.5
4.0 4.0
3.3 3.3
United States United States
–3.5 –3.5
7.0 7.0
4.9 4.9
United States United States
2.2 2.2
-3.6 -3.6
3.5 3.5
Canada Canada
-5.3 -5.3
5.4 5.4
4.1 4.1
Euro Area Euro Area
–6.5 –6.5
4.6 4.6
4.3 4.3
Euro Area Euro Area
1.3 1.3
-7.4 -7.4
3.6 3.6
Euro area Euro area
-6.5 -6.5
5.3 5.3
4.6 4.6
Germany Germany
–4.8 –4.8
3.6 3.6
4.1 4.1
Japan Japan
0.3 0.3
-5.3 -5.3
2.5 2.5
Germany Germany
-4.9 -4.9
2.9 2.9
4.6 4.6
France France
–8.0 –8.0
5.8 5.8
4.2 4.2
Emerging Emerging
3.6 3.6
-2.6 -2.6
5.0 5.0
France France
-8.0 -8.0
6.3 6.3
4.0 4.0
Italy Italy
–8.9 –8.9
4.9 4.9
4.2 4.2
E. Asia E. Asia
5.8 5.8
0.9 0.9
7.4 7.4
Italy Italy
-8.9 -8.9
5.9 5.9
4.1 4.1
Spain Spain
–10.8 –10.8
6.2 6.2
5.8 5.8
China China
6.1 6.1
2.0 2.0
7.9 7.9
Spain Spain
-10.8 -10.8
6.8 6.8
6.6 6.6
Japan Japan
–4.7 –4.7
2.8 2.8
3.0 3.0
Indonesia Indonesia
5.0 5.0
-2.2 -2.2
4.4 4.4
Japan Japan
-4.6 -4.6
2.5 2.5
2.1 2.1
United Kingdom United Kingdom
–9.8 –9.8
7.0 7.0
4.8 4.8
Thailand Thailand
2.4 2.4
-6.5 -6.5
4.0 4.0
Korea Korea
-0.9 -0.9
4.0 4.0
2.9 2.9
Canada Canada
–5.3 –5.3
6.3 6.3
4.5 4.5
Cen. Asia Cen. Asia
2.3 2.3
-2.9 -2.9
3.3 3.3
Mexico Mexico
-8.3 -8.3
6.3 6.3
3.4 3.4
China China
2.3 2.3
8.1 8.1
5.7 5.7
Russia Russia
1.3 1.3
-4.0 -4.0
2.6 2.6
Turkey Turkey
1.8 1.8
8.4 8.4
3.1 3.1
India India
–7.3 –7.3
9.5 9.5
8.5 8.5
Turkey Turkey
0.9 0.9
0.5 0.5
4.5 4.5
United United
-9.8 -9.8
6.7 6.7
5.2 5.2
Russia Russia
–3.0 –3.0
4.4 4.4
3.1 3.1
4.5 4.5
-3.4 -3.4
3.5 3.5
Kingdom Kingdom
Poland Poland
United States United States
-3.4 -3.4
6.0 6.0
3.9 3.9
Latin America Latin America
–7.0 –7.0
5.8 5.8
3.2 3.2
Brazil Brazil
1.4 1.4
-4.5 -4.5
3.0 3.0
Argentina Argentina
-9.9 -9.9
7.6 7.6
1.9 1.9
Brazil Brazil
–4.1 –4.1
5.3 5.3
1.9 1.9
Mexico Mexico
-0.1 -0.1
-9.0 -9.0
3.7 3.7
Brazil Brazil
-4.4 -4.4
5.2 5.2
2.3 2.3
Mexico Mexico
–8.3 –8.3
6.3 6.3
4.2 4.2
Argentina Argentina
-2.1 -2.1
-10.6 -10.6
4.9 4.9
China China
2.3 2.3
8.5 8.5
5.8 5.8
Mid. East Mid. East
–2.6 –2.6
4.0 4.0
3.7 3.7
Mid. East Mid. East
0.1 0.1
-5.0 -5.0
2.1 2.1
India India
-7.3 -7.3
9.7 9.7
7.9 7.9
Saudi Arabia Saudi Arabia
–4.1 –4.1
2.4 2.4
4.8 4.8
Saudi Arabia Saudi Arabia
0.3 0.3
-5.4 -5.4
2.0 2.0
Indonesia Indonesia
-2.1 -2.1
3.7 3.7
4.9 4.9
Africa Africa
–1.8 –1.8
3.4 3.4
4.1 4.1
Iran Iran
-6.8 -6.8
-3.7 -3.7
1.5 1.5
CRS-33 CRS-33

OECD Sep. 2021
IMF July 2021
World Bank Jan.

Projections

Projections

2021 Projections
2020 2020
2021 2021
2022 2022
2020 2020
2021 2021
2022 2022

2019 2019
2020 2020
2021 2021

S. Africa S. Africa
-7.0 -7.0
4.6 4.6
2.5 2.5
Nigeria Nigeria
–1.8 –1.8
2.5 2.5
2.6 2.6
Egypt Egypt
5.6 5.6
3.6 3.6
2.7 2.7

S. Africa S. Africa
–7.0 –7.0
4.0 4.0
2.2 2.2
S. Asia S. Asia
4.4 4.4
-6.7 -6.7
3.3 3.3

World Trade World Trade
–8.3 –8.3
9.7 9.7
7.0 7.0
Volume Volume
India India
4.2 4.2
-9.6 -9.6
5.4 5.4

Oil prices ($) Oil prices ($)
–32.7 –32.7
56.6 56.6
–2.6 –2.6
Pakistan Pakistan
1.9 1.9
-1.5 -1.5
0.5 0.5

Bangladesh Bangladesh
8.2 8.2
2.0 2.0
1.6 1.6

Africa Africa
2.4 2.4
-3.7 -3.7
2.7 2.7

Nigeria Nigeria
2.2 2.2
-4.1 -4.1
1.1 1.1

S. Africa S. Africa
0.2 0.2
-7.8 -7.8
3.3 3.3

Angola Angola
-0.9 -0.9
-4.0 -4.0
0.9 0.9
Sources: OECD Economic Outlook: Interim Report, Organization for Economic Cooperation and Development, September 2021; , Organization for Economic Cooperation and Development, September 2021; World Economic Outlook Update,
International Monetary Fund, July, 2021; International Monetary Fund, July, 2021; Global Economic Prospects, World Bank Group, January 2021, , World Bank Group, January 2021,

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Among developing and emerging economies, the economic downturn is projected to most Among developing and emerging economies, the economic downturn is projected to most
negatively affect countries that rely on commodity exports to support annual economic growth. In negatively affect countries that rely on commodity exports to support annual economic growth. In
addition to lower prices for commodity exports and reduced global demand for exports, addition to lower prices for commodity exports and reduced global demand for exports,
developing countries are projected to be negatively affected by reduced remittances, weaker developing countries are projected to be negatively affected by reduced remittances, weaker
currencies and tighter financial conditions. currencies and tighter financial conditions.
The OECD also concluded that The OECD also concluded that
 Real per capita income in 2020 was projected to decline by 8%, with substantial  Real per capita income in 2020 was projected to decline by 8%, with substantial
declines in al economies. Even with an economic recovery in 2021, real per declines in al economies. Even with an economic recovery in 2021, real per
capita income was projected to rise to only that of 2013. capita income was projected to rise to only that of 2013.
 Unemployment was projected to rise to its highest level in more than 25 years in  Unemployment was projected to rise to its highest level in more than 25 years in
2020, while the average unemployment rate was projected to rise to 7.4% in 2020, while the average unemployment rate was projected to rise to 7.4% in
2021and 6.9% in 2022. The OECD concluded that, “scarring effects from job 2021and 6.9% in 2022. The OECD concluded that, “scarring effects from job
losses are likely to be felt particularly by younger workers and lower-skil ed losses are likely to be felt particularly by younger workers and lower-skil ed
workers, with attendant risks of many people becoming trapped in joblessness for workers, with attendant risks of many people becoming trapped in joblessness for
an extended period.” an extended period.”
 Net productive investment (business and government) was weak prior to the  Net productive investment (business and government) was weak prior to the
pandemic, fal ing behind the average rate of investment during the previous pandemic, fal ing behind the average rate of investment during the previous
decade. Investment was forecast to contract by half in 2020 as a percent of real decade. Investment was forecast to contract by half in 2020 as a percent of real
GDP, fal ing from 4.7% to 2.3% and 2.0%, respectively for the one-wave and GDP, fal ing from 4.7% to 2.3% and 2.0%, respectively for the one-wave and
two-wave scenarios and increasing the risk of entrenched weak economic two-wave scenarios and increasing the risk of entrenched weak economic
growth. Investment is also expected to be negatively affected by bankruptcies growth. Investment is also expected to be negatively affected by bankruptcies
and insolvencies among corporations and financial institutions.93 and insolvencies among corporations and financial institutions.93
Through its various forecasts, the OECD has estimated that increased direct and indirect Through its various forecasts, the OECD has estimated that increased direct and indirect
economic costs through global supply chains, reduced demand for goods and services, and economic costs through global supply chains, reduced demand for goods and services, and
declines in tourism and business travel mean that, “the adverse consequences of these declines in tourism and business travel mean that, “the adverse consequences of these
developments for other countries (non-OECD) are significant.”94 Global trade, measured by trade developments for other countries (non-OECD) are significant.”94 Global trade, measured by trade
volumes, slowed in the last quarter of 2019 and had been expected to decline further in 2020, as a volumes, slowed in the last quarter of 2019 and had been expected to decline further in 2020, as a
result of weaker global economic activity associated with the pandemic, which is negatively result of weaker global economic activity associated with the pandemic, which is negatively
affecting economic activity in various sectors, including airlines, hospitality, ports, and the affecting economic activity in various sectors, including airlines, hospitality, ports, and the
shipping industry.95 shipping industry.95
According to the OECD’s assessment According to the OECD’s assessment
 The greatest impact of the containment restrictions has been on retail and  The greatest impact of the containment restrictions has been on retail and
wholesale trade, and in professional and real estate services, although there are wholesale trade, and in professional and real estate services, although there are
notable differences between countries. notable differences between countries.
 Countries dependent on tourism have been affected more severely, while  Countries dependent on tourism have been affected more severely, while
countries with large agricultural and mining sectors experienced less severe countries with large agricultural and mining sectors experienced less severe
effects. effects.
 Economic effects likely varied across countries reflecting differences in the  Economic effects likely varied across countries reflecting differences in the
timing and degree of containment measures.96 timing and degree of containment measures.96

93 Ibid., p. 31. 93 Ibid., p. 31.
94 94 OECD Interim Economic Assessment: COVID-19: The World Economy at Risk, Organization for Economic , Organization for Economic
Cooperation and Development. March 2, 2020, p. 2. Cooperation and Development. March 2, 2020, p. 2.
95 Ibid., p. 4. 95 Ibid., p. 4.
96 96 Evaluating the Initial Impact of COVID Containment Measures on Activity, Organization for Economic Cooperation , Organization for Economic Cooperation
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In addition, the OECD argued that China’s emergence as a global economic actor marked a In addition, the OECD argued that China’s emergence as a global economic actor marked a
significant departure from previous global health episodes. China’s growth, in combination with significant departure from previous global health episodes. China’s growth, in combination with
globalization and the interconnected nature of economies through capital flows, supply chains, globalization and the interconnected nature of economies through capital flows, supply chains,
and foreign investment, magnify the cost of containing the spread of the virus through and foreign investment, magnify the cost of containing the spread of the virus through
quarantines and restrictions on labor mobility and travel.97 China’s global economic role and quarantines and restrictions on labor mobility and travel.97 China’s global economic role and
globalization mean that trade has played a role in spreading the economic effects of COVID-19. globalization mean that trade has played a role in spreading the economic effects of COVID-19.
More broadly, the economic effects of the pandemic were spread through three trade channels: More broadly, the economic effects of the pandemic were spread through three trade channels:
(1) directly through supply chains as reduced economic activity spread from intermediate goods (1) directly through supply chains as reduced economic activity spread from intermediate goods
producers to finished goods producers; (2) as a result of a drop overal in economic activity, producers to finished goods producers; (2) as a result of a drop overal in economic activity,
which reduced demand for goods in general, including imports; and (3) through reduced trade which reduced demand for goods in general, including imports; and (3) through reduced trade
with commodity exporters that supplied producers, which, in turn, reduced their imports and with commodity exporters that supplied producers, which, in turn, reduced their imports and
negatively affected trade and economic activity of exporters. negatively affected trade and economic activity of exporters.
The IMF Forecast
Having labeled the projected decline in global economic activity as the “Great Lockdown,” the Having labeled the projected decline in global economic activity as the “Great Lockdown,” the
IMF released an updated forecast in July 2021. The IMF concluded in its revised forecast that the IMF released an updated forecast in July 2021. The IMF concluded in its revised forecast that the
global economy was improving, but cautioned that renewed waves of infections and new variants global economy was improving, but cautioned that renewed waves of infections and new variants
of the virus could “pose concerns for the outlook.”98 The updated forecast estimated a slightly of the virus could “pose concerns for the outlook.”98 The updated forecast estimated a slightly
higher rate of growth in advanced economies than that forecasted in April 2021, but a slower rate higher rate of growth in advanced economies than that forecasted in April 2021, but a slower rate
of growth for emerging and developing economies. IMF concluded the pandemic had “taken a of growth for emerging and developing economies. IMF concluded the pandemic had “taken a
turn for the worse” in some parts of the world, that countries were experiencing diverging rates of turn for the worse” in some parts of the world, that countries were experiencing diverging rates of
growth reflecting differences in vaccinations, and that smooth and durable recoveries were not growth reflecting differences in vaccinations, and that smooth and durable recoveries were not
assured.99 assured.99
In its baseline forecast, the IMF estimated the global rate of economic growth declined by 3.2% In its baseline forecast, the IMF estimated the global rate of economic growth declined by 3.2%
in 2020, slightly less negative than its April forecast of -3.5%, before growing by 6.0% in 2021, in 2020, slightly less negative than its April forecast of -3.5%, before growing by 6.0% in 2021,
revised up from its previous forecast of 5.2%; global trade was projected to fal in 2020 by 8.3% revised up from its previous forecast of 5.2%; global trade was projected to fal in 2020 by 8.3%
and oil prices were projected to fal by 32.7%. For 2021, the IMF forecast indicated that global and oil prices were projected to fal by 32.7%. For 2021, the IMF forecast indicated that global
trade could grow by 9.7% and that oil prices could rebound by 56.6%. The forecast also indicated trade could grow by 9.7% and that oil prices could rebound by 56.6%. The forecast also indicated
the economic recovery wil be uneven across countries depending on, “access to medical the economic recovery wil be uneven across countries depending on, “access to medical
interventions, effectiveness of policy support, exposure to cross-country spil overs, and structural interventions, effectiveness of policy support, exposure to cross-country spil overs, and structural
characteristics entering the crisis.” India and China, in particular, were projected to outpace the characteristics entering the crisis.” India and China, in particular, were projected to outpace the
rate of global economic growth, experiencing a rate of growth in 2021 of 9.5% and 8.1%, rate of global economic growth, experiencing a rate of growth in 2021 of 9.5% and 8.1%,
respectively. respectively.
The IMF’s forecasts reflect the impact of policy measures on the U.S. economy in the first half of The IMF’s forecasts reflect the impact of policy measures on the U.S. economy in the first half of
2020 that are larger than it had assumed in its earlier forecasts, a slower recovery in the second 2020 that are larger than it had assumed in its earlier forecasts, a slower recovery in the second
half of 2020, and the impact of U.S. spending measures adopted in 2021. Also, the IMF forecast half of 2020, and the impact of U.S. spending measures adopted in 2021. Also, the IMF forecast
reflects an estimated larger decline in consumption than previously assumed as consumers reflects an estimated larger decline in consumption than previously assumed as consumers
curtailed spending to increase their savings and the effects of social distancing on economic curtailed spending to increase their savings and the effects of social distancing on economic
activity. The IMF also stated that many countries have faced a multi-layered crisis that included a activity. The IMF also stated that many countries have faced a multi-layered crisis that included a
health crisis, a domestic economic crisis, fal ing external demand, capital outflows, and a collapse health crisis, a domestic economic crisis, fal ing external demand, capital outflows, and a collapse
in commodity prices. In combination, these various effects interacted in ways that made in commodity prices. In combination, these various effects interacted in ways that made

and Development, March 27, 2020. and Development, March 27, 2020.
97 Goldin, Ian, “COVID-19 Shows How Globalization Spreads Contagion of All Kinds,” 97 Goldin, Ian, “COVID-19 Shows How Globalization Spreads Contagion of All Kinds,” Financial Times, March 2, , March 2,
2020. https://www.ft.com/content/70300682-5d33-11ea-ac5e-df00963c20e6. 2020. https://www.ft.com/content/70300682-5d33-11ea-ac5e-df00963c20e6.
98 98 World Economic Outlook, Update, International Monetary Fund, July, 2021. , International Monetary Fund, July, 2021.
99 Ibid99 Ibid, ., p. 2. p. 2.
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forecasting difficult. As a result, the IMF indicated its forecast depends on a number of factors, forecasting difficult. As a result, the IMF indicated its forecast depends on a number of factors,
including including
 The length of the pandemic and required lockdowns.  The length of the pandemic and required lockdowns.
 Voluntary social distancing, which affects consumer spending.  Voluntary social distancing, which affects consumer spending.
 The ability of displaced workers to secure employment, possibly in different  The ability of displaced workers to secure employment, possibly in different
sectors. sectors.
 The long-term impact of firm closures and unemployed workers leaving the  The long-term impact of firm closures and unemployed workers leaving the
workforce, compounding the ability of the economy to recover. workforce, compounding the ability of the economy to recover.
 The impact of changes to strengthen workplace safety—such as staggered work  The impact of changes to strengthen workplace safety—such as staggered work
shifts, enhanced hygiene and cleaning between shifts, new workplace practices shifts, enhanced hygiene and cleaning between shifts, new workplace practices
relating to proximity of personnel on production lines—which incur business relating to proximity of personnel on production lines—which incur business
costs. costs.
 Global supply chain reconfigurations that affect productivity as companies try to  Global supply chain reconfigurations that affect productivity as companies try to
enhance their resilience to supply disruptions. enhance their resilience to supply disruptions.
 The extent of cross-border spil overs from weaker external demand as wel as  The extent of cross-border spil overs from weaker external demand as wel as
funding shortfal s. funding shortfal s.
 A resolution of the current disconnect between rising asset values, as reflected in  A resolution of the current disconnect between rising asset values, as reflected in
market indices, and forecasts of a synchronized downturn in global economic market indices, and forecasts of a synchronized downturn in global economic
activity. activity.
The IMF also forecasted that advanced economies as a group could experience an economic The IMF also forecasted that advanced economies as a group could experience an economic
contraction in 2020 of 4.6% of GDP, with a rebound of 5.8% in 2021; the U.S. economic rate of contraction in 2020 of 4.6% of GDP, with a rebound of 5.8% in 2021; the U.S. economic rate of
growth was estimated to have declined in 2020 by -3.5%, greater than the rate of decline growth was estimated to have declined in 2020 by -3.5%, greater than the rate of decline
experienced in 2009 during the financial crisis, but grow by 7.0% in 2021, as indicated in experienced in 2009 during the financial crisis, but grow by 7.0% in 2021, as indicated in Figure
7. The rate of economic growth in Euro area GDP in 2020 was projected to decline by 7.2%, but . The rate of economic growth in Euro area GDP in 2020 was projected to decline by 7.2%, but
growing by 4.2% in 2021. Most developing and emerging economies were projected to growing by 4.2% in 2021. Most developing and emerging economies were projected to
experience a decline in the average rate of economic growth of -2.1% in 2020, reflecting experience a decline in the average rate of economic growth of -2.1% in 2020, reflecting
tightening global financial conditions and fal ing global trade and commodity prices, but grow at tightening global financial conditions and fal ing global trade and commodity prices, but grow at
a rate of 6.3% in 2021. In contrast, China was projected to experience smal , but positive rate of a rate of 6.3% in 2021. In contrast, China was projected to experience smal , but positive rate of
growth in 2020 of 2.3% and by 8.4% in 2021, while India’s rate of growth was projected to growth in 2020 of 2.3% and by 8.4% in 2021, while India’s rate of growth was projected to
decline by 8.0% in 2020 and grow by 12.5% in 2021. The IMF estimated that recovery of the decline by 8.0% in 2020 and grow by 12.5% in 2021. The IMF estimated that recovery of the
global economy could be weaker than projected as a result of lingering uncertainty about possible global economy could be weaker than projected as a result of lingering uncertainty about possible
contagion, lack of confidence, and permanent closure of businesses and shifts in the behavior of contagion, lack of confidence, and permanent closure of businesses and shifts in the behavior of
firms and households.100 firms and households.100
The IMF concluded that fiscal and monetary actions by developed economies provided The IMF concluded that fiscal and monetary actions by developed economies provided
developing and emerging market economies the ability to avoid tightening monetary policy to developing and emerging market economies the ability to avoid tightening monetary policy to
stem capital outflows. Instead, the countries relied on movements in their exchange rates to carry stem capital outflows. Instead, the countries relied on movements in their exchange rates to carry
the brunt of the economic adjustment, while also following developed economies in easing the brunt of the economic adjustment, while also following developed economies in easing
monetary policy, providing liquidity injections, and using unconventional monetary policy monetary policy, providing liquidity injections, and using unconventional monetary policy
measures such as purchases of government and corporate bonds. The IMF also indicated that a measures such as purchases of government and corporate bonds. The IMF also indicated that a
prolonged health crisis could push developing economies to take such measures as price controls, prolonged health crisis could push developing economies to take such measures as price controls,
export restrictions, and unorthodox measures to ease credit and financial regulation.101 export restrictions, and unorthodox measures to ease credit and financial regulation.101

100 Ibid., p. 9. 100 Ibid., p. 9.
101 Mühleisen, Martin, T ryggvi Gudmundsson, and Hélène Poirson Ward, 101 Mühleisen, Martin, T ryggvi Gudmundsson, and Hélène Poirson Ward, COVID-19 Response in Emerging Market
Econom ies: Conventional Policies and Beyond, International Monetary Fund, August 6, 2020. https://blogs.imf.org/ International Monetary Fund, August 6, 2020. https://blogs.imf.org/
2020/08/06/covid-19-response-in-emerging-market-economies-conventional-policies-and-beyond/?utm_medium=2020/08/06/covid-19-response-in-emerging-market-economies-conventional-policies-and-beyond/?utm_medium=
email&utm_source=govdelivery. email&utm_source=govdelivery.
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Figure 7. IMF Forecast, Gross Domestic Product
Percentage change Percentage change

Source: World Economic Outlook, Update, International Monetary Fund, July, 2021. Created by CRS. , International Monetary Fund, July, 2021. Created by CRS.
As a result of the various chal enges, the IMF qualified its forecast by arguing that As a result of the various chal enges, the IMF qualified its forecast by arguing that
A partial recovery is projected for 2021, with above trend growth rates, but the level of A partial recovery is projected for 2021, with above trend growth rates, but the level of
GDP will remain below the pre-virus trend, with considerable uncertainty about the GDP will remain below the pre-virus trend, with considerable uncertainty about the
strength of the rebound. Much worse growth outcomes are possible and maybe even likely. strength of the rebound. Much worse growth outcomes are possible and maybe even likely.
This would follow if the pandemic and containment measures last longer, emerging and This would follow if the pandemic and containment measures last longer, emerging and
developing economies are even more severely hit, tight financial conditions persist, or if developing economies are even more severely hit, tight financial conditions persist, or if
widespread scarring effects emerge due to firm closures and extended unemployment.102 widespread scarring effects emerge due to firm closures and extended unemployment.102
The World Bank Forecast
In January 2021, the World Bank released its updated economic forecast, which indicated that In January 2021, the World Bank released its updated economic forecast, which indicated that
global economic growth would reach 4.3% in 2020 and 4.0% in 2021, compared with June 2020 global economic growth would reach 4.3% in 2020 and 4.0% in 2021, compared with June 2020
projections of -5.2% for 2020 and 4.2% in 2021, but rise by a slower rate of 3.8% in 2022.103 The projections of -5.2% for 2020 and 4.2% in 2021, but rise by a slower rate of 3.8% in 2022.103 The
assessment also concluded that absent “substantial and effective reforms,” the global economy assessment also concluded that absent “substantial and effective reforms,” the global economy
would experience a decade of “disappointing growth.” The Bank concluded that the forecast was would experience a decade of “disappointing growth.” The Bank concluded that the forecast was
tilted toward downside risks. In particular, the Bank assessed that al regions of the world remain tilted toward downside risks. In particular, the Bank assessed that al regions of the world remain
vulnerable to renewed outbreaks of the virus, that there were logistical impediments to the vulnerable to renewed outbreaks of the virus, that there were logistical impediments to the
distribution of effective vaccines, that there are financial stresses in addition to elevated debt distribution of effective vaccines, that there are financial stresses in addition to elevated debt
levels and there is the possibility that the pandemic could have a more negative effect on incomes levels and there is the possibility that the pandemic could have a more negative effect on incomes
and growth.104 and growth.104
An earlier forecast published on June 8, 2020 indicated the economic recession in 2020 would be An earlier forecast published on June 8, 2020 indicated the economic recession in 2020 would be
the deepest since World War II. It also estimated that the global economic recession would affect the deepest since World War II. It also estimated that the global economic recession would affect
90% of the world’s economies, a percentage that is greater than what was experienced during the 90% of the world’s economies, a percentage that is greater than what was experienced during the
Great Depression.105 Similar to the OECD and the IMF forecasts, the World Bank argued that the Great Depression.105 Similar to the OECD and the IMF forecasts, the World Bank argued that the

102 102 World Economic Outlook, p. v. , p. v.
103 103 Global Economic Prospects, World Bank Group, January 2021, p. xvii. , World Bank Group, January 2021, p. xvii.
104 Ibid104 Ibid, ., p. xviii. p. xviii.
105 105 Global Economic Prospects, World Bank Group, June 8, 2020, p. 15. , World Bank Group, June 8, 2020, p. 15.
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economic impact of the global recession would fal most heavily on developing and emerging economic impact of the global recession would fal most heavily on developing and emerging
economies that rely on global trade, tourism, or remittances from abroad, and those that depend economies that rely on global trade, tourism, or remittances from abroad, and those that depend
on commodity exports. In addition, the World Bank forecasted that most emerging and on commodity exports. In addition, the World Bank forecasted that most emerging and
developing economies could experience rates of growth in 2020 that could be the lowest overal developing economies could experience rates of growth in 2020 that could be the lowest overal
since the 1960s, with 90% of such economies expected to experience contractions in per capita since the 1960s, with 90% of such economies expected to experience contractions in per capita
incomes and many mil ions of people fal ing back into poverty. incomes and many mil ions of people fal ing back into poverty.
The World Bank also estimated that economic growth in advanced economies could decline by The World Bank also estimated that economic growth in advanced economies could decline by
5.4% in 2020 and recover to 3.3% in 2021, compared with the June forecast of 7.0% and 3.8%, 5.4% in 2020 and recover to 3.3% in 2021, compared with the June forecast of 7.0% and 3.8%,
respectively. The United States, the Euro area and Japan were al estimated to experience a slower respectively. The United States, the Euro area and Japan were al estimated to experience a slower
rate of growth in 2020 and rise at a smal er rate in 2021 than the IMF forecast. rate of growth in 2020 and rise at a smal er rate in 2021 than the IMF forecast.
The global economic recession was projected to affect al regions in a type of synchronous The global economic recession was projected to affect al regions in a type of synchronous
downturn, with some regions faring worse than others. Differences in the magnitude of regional downturn, with some regions faring worse than others. Differences in the magnitude of regional
growth rates were attributed to the “scale of the domestic outbreak, vulnerability of the economy growth rates were attributed to the “scale of the domestic outbreak, vulnerability of the economy
to spil overs from global economic and financial stress the severity of preexisting chal enges such to spil overs from global economic and financial stress the severity of preexisting chal enges such
as widespread poverty, and the degree to which debt levels constrain the fiscal response.”106 as widespread poverty, and the degree to which debt levels constrain the fiscal response.”106
According to the Bank’s baseline scenario, the projected economic recovery was expected to be According to the Bank’s baseline scenario, the projected economic recovery was expected to be
slow, reflecting shifts in consumption and work patterns as consumers attempted to rebuild slow, reflecting shifts in consumption and work patterns as consumers attempted to rebuild
savings and businesses strengthen balance sheets. The World Bank also issued both a downside savings and businesses strengthen balance sheets. The World Bank also issued both a downside
and an upside scenario in which government lockdown policies were required to remain in effect and an upside scenario in which government lockdown policies were required to remain in effect
for a longer or a shorter period of time, respectively. The downside scenario projects a contraction for a longer or a shorter period of time, respectively. The downside scenario projects a contraction
in global economic growth of 8% in 2020, as lockdown procedures are assumed to last an in global economic growth of 8% in 2020, as lockdown procedures are assumed to last an
additional three months, followed by a sluggish recovery. In contrast, the upside scenario projects additional three months, followed by a sluggish recovery. In contrast, the upside scenario projects
a decline in economic activity in 2020 of 4%, based on the assumption that economic activity a decline in economic activity in 2020 of 4%, based on the assumption that economic activity
rebounds quickly in the third quarter of 2020.107 rebounds quickly in the third quarter of 2020.107
The Bank also concluded that global value chains (GVCs) had been important conduits through The Bank also concluded that global value chains (GVCs) had been important conduits through
which macroeconomic developments associated with the pandemic had been transmitted across which macroeconomic developments associated with the pandemic had been transmitted across
national borders. The economic effects of the pandemic were spread through trade linkages but national borders. The economic effects of the pandemic were spread through trade linkages but
also amplified through quarantines, production shutdowns and border closures.108 Estimates by also amplified through quarantines, production shutdowns and border closures.108 Estimates by
the World Bank indicated that national policies adopted to blunt the spread of the virus affected the World Bank indicated that national policies adopted to blunt the spread of the virus affected
the global economy through four shocks: a decline in employment due to factory closures and the global economy through four shocks: a decline in employment due to factory closures and
social distancing, a trade shock as a result of an increase in the cost of traded goods, a tourism social distancing, a trade shock as a result of an increase in the cost of traded goods, a tourism
shock through a sharp contraction in international tourism, and a services shock. The magnitude shock through a sharp contraction in international tourism, and a services shock. The magnitude
of the shocks varies by country depended on various factors, including the composition of output, of the shocks varies by country depended on various factors, including the composition of output,
reliance on trade, and the level of GVC integration. reliance on trade, and the level of GVC integration.
Global Trade
According to an August 18, 2021, forecast update, the World Trade Organization (WTO) According to an August 18, 2021, forecast update, the World Trade Organization (WTO)
estimated that global trade volumes fel by 5.3% in 2020, nearly half as much as the drop of 9.2% estimated that global trade volumes fel by 5.3% in 2020, nearly half as much as the drop of 9.2%
the WTO had forecasted in October 2020.109 The WTO indicated that in the first quarter of 2021, the WTO had forecasted in October 2020.109 The WTO indicated that in the first quarter of 2021,
global merchandise trade volumes were up 20% over the same period in the previous year and up global merchandise trade volumes were up 20% over the same period in the previous year and up

106 106 Global Economic Prospects June 8, 2020, p. 115. June 8, 2020, p. 115.
107 Ibid107 Ibid, ., p. 33. p. 33.
108 Ibid108 Ibid, ., p. 118. p. 118.
109 109 Goods Barometer Hits Record High, Confirming Strength of Trade Recovery, World T rade Organization, August , World T rade Organization, August
18, 2021. 18, 2021.
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link to page 46 link to page 46 Global Economic Effects of COVID-19

5.7% quarter over quarter, as indicated i 5.7% quarter over quarter, as indicated in Table 8. Gains were more pronounced for North Gains were more pronounced for North
America, Europe, and Asia, with other regions lagging behind. The WTO concluded the trade America, Europe, and Asia, with other regions lagging behind. The WTO concluded the trade
recovery was broad-based with al major goods categories experiencing year-over-year gains and recovery was broad-based with al major goods categories experiencing year-over-year gains and
reflected strong monetary and fiscal policy actions taken by many governments. In particular, the reflected strong monetary and fiscal policy actions taken by many governments. In particular, the
WTO attributed the improved growth performance to fiscal policies that supported personal WTO attributed the improved growth performance to fiscal policies that supported personal
incomes in advanced economies that, in turn, supported relatively higher levels of consumption incomes in advanced economies that, in turn, supported relatively higher levels of consumption
and global trade. The WTO indicated, however, that supply shortages, particularly of and global trade. The WTO indicated, however, that supply shortages, particularly of
semiconductor chips, could dampen the trade recovery in subsequent quarters.110 semiconductor chips, could dampen the trade recovery in subsequent quarters.110
The WTO’s comprehensive semi-annual forecast issued in March 2021 indicated the decline in The WTO’s comprehensive semi-annual forecast issued in March 2021 indicated the decline in
global trade in 2020 was not as severe as it had estimated in its previous forecast. The forecast global trade in 2020 was not as severe as it had estimated in its previous forecast. The forecast
reflects a marked revision from its earlier forecast that global trade volumes could decline reflects a marked revision from its earlier forecast that global trade volumes could decline
between 13% and 32% in 2020 as a result of the economic impact of COVID-19. The updated between 13% and 32% in 2020 as a result of the economic impact of COVID-19. The updated
forecast also indicates the recovery in global trade in 2021 could be slightly faster than the WTO forecast also indicates the recovery in global trade in 2021 could be slightly faster than the WTO
had projected in October 2020, primarily reflecting expectations of a faster recovery in global had projected in October 2020, primarily reflecting expectations of a faster recovery in global
GDP in 2021 (5.1% compared with 4.9%). GDP in 2021 (5.1% compared with 4.9%).
In the first quarter of 2020, global exports and imports fel by 7.8% and 6.8%, respectively, in In the first quarter of 2020, global exports and imports fel by 7.8% and 6.8%, respectively, in
volume terms and 10.6% and 8.6% in value terms, reflecting the global economic impact of the volume terms and 10.6% and 8.6% in value terms, reflecting the global economic impact of the
pandemic, as indicated in pandemic, as indicated in Figure 8. In the second quarter, global exports and imports dropped by . In the second quarter, global exports and imports dropped by
11.6% and 11.1%, respectively, in volume and by 13.4% and 14.1%, in value terms. The WTO 11.6% and 11.1%, respectively, in volume and by 13.4% and 14.1%, in value terms. The WTO
estimated that some trade sectors were affected more than others, particularly trade in fuels and estimated that some trade sectors were affected more than others, particularly trade in fuels and
mineral products fel by 38%, while trade in agricultural products fel by 5%. In the third quarter, mineral products fel by 38%, while trade in agricultural products fel by 5%. In the third quarter,
however, export and import volumes rebounded, increasing by 15.7% and 12.9%, respectively, however, export and import volumes rebounded, increasing by 15.7% and 12.9%, respectively,
while export and import values increased by 20.7% and 18.3%, respectively. In the fourth quarter, while export and import values increased by 20.7% and 18.3%, respectively. In the fourth quarter,
global exports and imports increased by 6.1% and 7.2%, respectively, in volume terms and by global exports and imports increased by 6.1% and 7.2%, respectively, in volume terms and by
9.7% and 9.6%, in value terms. Although the WTO has no comprehensive data on trade in 9.7% and 9.6%, in value terms. Although the WTO has no comprehensive data on trade in
services, it concluded that the trend in trade in services likely matched that experienced in trade in services, it concluded that the trend in trade in services likely matched that experienced in trade in
merchandise goods. The updated forecast also projected that global GDP had declined at an merchandise goods. The updated forecast also projected that global GDP had declined at an
annual rate of 3.8% in 2020, but could recover in 2021 at an annual growth rate of 5.1%. The annual rate of 3.8% in 2020, but could recover in 2021 at an annual growth rate of 5.1%. The
WTO indicated in its March forecast that renewed economic lockdowns in response to a WTO indicated in its March forecast that renewed economic lockdowns in response to a
resurgence of COVID-19 cases in the fal of 2020 potential y shaved an additional 2% to 3% resurgence of COVID-19 cases in the fal of 2020 potential y shaved an additional 2% to 3%
percentage points off the annual global GDP growth rate in 2021 and negatively affected global percentage points off the annual global GDP growth rate in 2021 and negatively affected global
trade. trade.
The WTO reported in its June 29, 2020 report on G-20 trade measures that during the mid- The WTO reported in its June 29, 2020 report on G-20 trade measures that during the mid-
October 2019 to mid-May 2020 period, countries had made “significant” progress in facilitating October 2019 to mid-May 2020 period, countries had made “significant” progress in facilitating
imports, including products related to COVID-19.111 According to the report, various imports, including products related to COVID-19.111 According to the report, various
governments initial y responded to the pandemic by introducing new trade restrictive measures, governments initial y responded to the pandemic by introducing new trade restrictive measures,
90% of which were export bans on medical products, such as surgical masks, gloves, medicine 90% of which were export bans on medical products, such as surgical masks, gloves, medicine
and disinfectant. Since then, the WTO indicated that G20 economies have repealed 36% of the and disinfectant. Since then, the WTO indicated that G20 economies have repealed 36% of the
restrictions and lowered barriers to imports of many pandemic-related products. As of mid-May restrictions and lowered barriers to imports of many pandemic-related products. As of mid-May
2020, the WTO reported that 65 of the 93 pandemic-related trade measures implemented during 2020, the WTO reported that 65 of the 93 pandemic-related trade measures implemented during
the monitoring period were of a trade-facilitating measures, rather than trade-restricting the monitoring period were of a trade-facilitating measures, rather than trade-restricting
measures.112 measures.112

110 Ibid110 Ibid, ., p. 1 p. 1
111 WT O Report on G20 Shows Moves to Facilitate Imports Even as T rade Restrictions Remain Widespread, 111 WT O Report on G20 Shows Moves to Facilitate Imports Even as T rade Restrictions Remain Widespread, World
Trade Organization, June 29, 2020. https://www.wto.org/english/news_e/news20_e/trdev_29jun20_e.htm. June 29, 2020. https://www.wto.org/english/news_e/news20_e/trdev_29jun20_e.htm.
112 112 Report on G20 Trade Measures (Mid-October 2019 to Mid-May 2020), World T rade Organization, June 29, 2020. World T rade Organization, June 29, 2020.
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Figure 8. WTO Estimates of Quarterly Global Exports and Imports, Volumes and
Values

Source: Trade Trends,, World Trade Organization, July, 2021. Created by CRS World Trade Organization, July, 2021. Created by CRS
In its April 2020 forecast, the WTO presented two estimates of global growth, reflecting the high In its April 2020 forecast, the WTO presented two estimates of global growth, reflecting the high
degree of uncertainty at that time concerning the length and economic impact of the pandemic. degree of uncertainty at that time concerning the length and economic impact of the pandemic.
According to the WTO, the more optimistic scenario assumed that trade volumes would recover According to the WTO, the more optimistic scenario assumed that trade volumes would recover
quickly in the second half of 2020 to their pre-pandemic trend, or that the global economy would quickly in the second half of 2020 to their pre-pandemic trend, or that the global economy would
experience a V-shaped recovery. In comparison, the more pessimistic scenario assumed there experience a V-shaped recovery. In comparison, the more pessimistic scenario assumed there
would be a partial recovery in global trade that lasted into 2021, or that global economic activity would be a partial recovery in global trade that lasted into 2021, or that global economic activity
would experience a U-shaped recovery. The updated forecast reflects the WTO’s estimate that would experience a U-shaped recovery. The updated forecast reflects the WTO’s estimate that
global trade volumes in 2020 did not fal by as much as it had projected under both of the global trade volumes in 2020 did not fal by as much as it had projected under both of the
scenarios in its April 2020 forecast. The WTO concluded, however, the impact on global trade scenarios in its April 2020 forecast. The WTO concluded, however, the impact on global trade
volumes could exceed the drop in global trade during the height of the 2008-2009 financial volumes could exceed the drop in global trade during the height of the 2008-2009 financial
crisis.113 crisis.113
Table 8. WTO Forecast: Merchandise Trade Volume and Real GDP 2020-2021
Annual percentage change Annual percentage change
Optimistic Optimistic
Pessimistic Pessimistic
Forecast Forecast
scenario scenario
scenario scenario
scenario scenario
Forecast scenario Forecast scenario

(April 2020) (April 2020)
(April 2020) (April 2020)
(October 2020) (October 2020)
(March 2021 (March 2021

2020 2020
2021 2021
2020 2020
2021 2021
2020 2020
2021 2021
2020 2020
2021 2021
2022 2022
Volume of world
merchandise trade
-12.9% -12.9%
21.3% 21.3%
-31.9% -31.9%
24.0% 24.0%
-9.2% -9.2%
7.2% 7.2%
-5.3% -5.3%
8.0% 8.0%
4.0% 4.0%
Exports

North America North America
-17.1 -17.1
23.7 23.7
-40.9 -40.9
19.3 19.3
-14.7 -14.7
10.7 10.7
-8.5 -8.5
7.7 7.7
5.1 5.1
South and Central America South and Central America
-12.9 -12.9
18.6 18.6
-31.3 -31.3
14.3 14.3
-7.7 -7.7
5.4 5.4
-4.5 -4.5
3.2 3.2
2.7 2.7
Europe Europe
-12.2 -12.2
20.5 20.5
-32.8 -32.8
22.7 22.7
-11.7 -11.7
8.2 8.2
-8.0 -8.0
8.3 8.3
3.9 3.9
CIS CIS

-3.9 -3.9
4.4 4.4
1.9 1.9
Africa Africa

-8.1 -8.1
8.1 8.1
3 3

113 113 Trade Set to Plunge as COVID-19 Pandemic Upends Global Economy, World T rade Organization, April 8, 2020. , World T rade Organization, April 8, 2020.
https://www.wto.org/english/news_e/pres20_e/pr855_e.htm. https://www.wto.org/english/news_e/pres20_e/pr855_e.htm.
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Optimistic Optimistic
Pessimistic Pessimistic
Forecast Forecast
scenario scenario
scenario scenario
scenario scenario
Forecast scenario Forecast scenario

(April 2020) (April 2020)
(April 2020) (April 2020)
(October 2020) (October 2020)
(March 2021 (March 2021
Middle East Middle East

-8.2 -8.2
12.4 12.4
5.0 5.0
Asia Asia
-13.5 -13.5
24.9 24.9
-36.2 -36.2
36.1 36.1
-4.5 -4.5
5.7 5.7
0.3 0.3
8.4 8.4
3.5 3.5
Other regions Other regions
-8.0 -8.0
8.6 8.6
-8.0 -8.0
9.3 9.3
-9.5 -9.5
6.1 6.1

Imports

North America North America
-14.5 -14.5
27.3 27.3
-33.8 -33.8
29.5 29.5
-8.7 -8.7
6.7 6.7
-6.1 -6.1
11.4 11.4
4.9 4.9
South and Central America South and Central America
-22.2 -22.2
23.2 23.2
-43.8 -43.8
19.5 19.5
-13.5 -13.5
6.5 6.5
-9.3 -9.3
8.1 8.1
3.7 3.7
Europe Europe
-10.3 -10.3
19.9 19.9
-28.9 -28.9
24.5 24.5
-10.3 -10.3
8.7 8.7
-7.6 -7.6
8.4 8.4
3.7 3.7
CIS CIS

-4.7 -4.7
5.7 5.7
2.7 2.7
Africa Africa

-8.8 -8.8
5.5 5.5
4 4
Middle East Middle East

-11.3 -11.3
7.2 7.2
4.5 4.5
Asia Asia
-11.8 -11.8
23.1 23.1
-31.5 -31.5
25.1 25.1
-4.4 -4.4
6.2 6.2
-1.3 -1.3
5.7 5.7
4.4 4.4
Other regions Other regions
-10 -10
13.6 13.6
-22.6 -22.6
18.0 18.0
-16.0 -16.0
5.6 5.6

World Real GDP at
market exchange rates
-2.5 -2.5
7.4 7.4
-8.8 -8.8
5.9 5.9
-4.8 -4.8
4.9 4.9
-3.8 -3.8
5.1 5.1
3.8 3.8
North America North America
-3.3 -3.3
7.2 7.2
-9.0 -9.0
5.1 5.1
-4.4 -4.4
3.9 3.9
-4.1 -4.1
5.9 5.9
3.8 3.8
South and Central America South and Central America
-4.3 -4.3
6.5 6.5
-11 -11
4.8 4.8
-7.5 -7.5
3.8 3.8
-7.8 -7.8
3.8 3.8
3.0 3.0
Europe Europe
-3.5 -3.5
6.6 6.6
-10.8 -10.8
5.4 5.4
-7.3 -7.3
5.2 5.2
-7.1 -7.1
3.7 3.7
3.6 3.6
CIS CIS

-0.5 -0.5
1.0 1.0
1.2 1.2
Africa Africa

-2.9 -2.9
2.6 2.6
3.8 3.8
Middle East Middle East

-6.0 -6.0
2.4 2.4
3.5 3.5
Asia Asia
-0.7 -0.7
8.7 8.7
-7.1 -7.1
7.4 7.4
-2.4 -2.4
5.9 5.9
-1.1 -1.1
6.1 6.1
4.1 4.1
Other regions Other regions
-1.5 -1.5
6.0 6.0
-6.7 -6.7
5.2 5.2
-5.5 -5.5
3.5 3.5

Source: World Trade Primed for Strong but Uneven Recovery After COVID-19 Pandemic Shock, World Trade , World Trade
Organization, March 31, 2021. Organization, March 31, 2021.
Notes: Data for 2021 and 2022 are projections; GDP projections are based on scenarios simulated with the Data for 2021 and 2022 are projections; GDP projections are based on scenarios simulated with the
WTO Global Trade Model. In the April and October forecasts, the CIS countries, Africa, and the Middle East WTO Global Trade Model. In the April and October forecasts, the CIS countries, Africa, and the Middle East
were grouped together as “Other Regions.” CIS is the Commonwealth of Independent States: Azerbaijan, were grouped together as “Other Regions.” CIS is the Commonwealth of Independent States: Azerbaijan,
Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan , and Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan , and
Ukraine. Ukraine.
The WTO’s various forecasts indicate that al geographic regions would experience a rise in trade The WTO’s various forecasts indicate that al geographic regions would experience a rise in trade
volumes in 2021 and 2022 compared with 2020, while North America and Europe could volumes in 2021 and 2022 compared with 2020, while North America and Europe could
experience a positive percentage increase in trade volumes in 2021, comparable to the decline in experience a positive percentage increase in trade volumes in 2021, comparable to the decline in
volumes in percentage terms experienced in 2020. The forecast also projected that sectors with volumes in percentage terms experienced in 2020. The forecast also projected that sectors with
extensive value chains, such as automobile products and electronics, could experience the extensive value chains, such as automobile products and electronics, could experience the
steepest declines in 2020. Although services were not included in the WTO forecast, this segment steepest declines in 2020. Although services were not included in the WTO forecast, this segment
of the economy could experience the largest disruption as a consequence of restrictions on travel of the economy could experience the largest disruption as a consequence of restrictions on travel
and transport and the closure of retail and hospitality establishments. Such services as information and transport and the closure of retail and hospitality establishments. Such services as information
technology, however, were growing to satisfy the demands of employees working from home. technology, however, were growing to satisfy the demands of employees working from home.
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Supply Chains
The pandemic also raised questions about the costs and benefits of the global supply chains that The pandemic also raised questions about the costs and benefits of the global supply chains that
businesses have erected over the past three decades. Evidence indicates that growth in supply businesses have erected over the past three decades. Evidence indicates that growth in supply
chains had slowed prior to the pandemic, but there is little consensus on the long-term impact of chains had slowed prior to the pandemic, but there is little consensus on the long-term impact of
the crisis. According to a December 2020 report by DHL and the New York University Stern the crisis. According to a December 2020 report by DHL and the New York University Stern
Scholl of Business, global interconnectedness comprises four distinct types of transactions: trade, Scholl of Business, global interconnectedness comprises four distinct types of transactions: trade,
capital, information, and people.114 This analysis concluded the pandemic affected cross-border capital, information, and people.114 This analysis concluded the pandemic affected cross-border
movements of people in response to travel restrictions and in trade through a sharp contraction in movements of people in response to travel restrictions and in trade through a sharp contraction in
the global economy. Capital flows also dropped during 2020 as a result of lower corporate the global economy. Capital flows also dropped during 2020 as a result of lower corporate
earnings, business travel restrictions, negative business prospects, and concerns over global earnings, business travel restrictions, negative business prospects, and concerns over global
supply chains.115 supply chains.115
In some cases, businesses reportedly were reassessing their exposure to the risks posed by In some cases, businesses reportedly were reassessing their exposure to the risks posed by
extensive supply chains that potential y are vulnerable to numerous points of disruption. Also, extensive supply chains that potential y are vulnerable to numerous points of disruption. Also,
some governments were assessing the risks supply chains pose to national supplies of items some governments were assessing the risks supply chains pose to national supplies of items
considered to be important to national security as a result of firms locating or shifting production considered to be important to national security as a result of firms locating or shifting production
offshore. For multinational businesses, changing suppliers and shifting production locations can offshore. For multinational businesses, changing suppliers and shifting production locations can
be especial y costly for some firms and can introduce additional risks.116 In addition, businesses be especial y costly for some firms and can introduce additional risks.116 In addition, businesses
may be reluctant to relocate from production locations, such as China, that serve not only as may be reluctant to relocate from production locations, such as China, that serve not only as
production platforms, but also represent important markets for their output. For instance, the production platforms, but also represent important markets for their output. For instance, the
Bureau of Economic Analysis (BEA) reports that 10% of the global sales of the majority-owned Bureau of Economic Analysis (BEA) reports that 10% of the global sales of the majority-owned
foreign affiliates of U.S. parent companies is shipped back to the U.S. parent company. In foreign affiliates of U.S. parent companies is shipped back to the U.S. parent company. In
contrast, 60% of such sales take place in the foreign country where the affiliate is located and contrast, 60% of such sales take place in the foreign country where the affiliate is located and
another 30% is shipped to other foreign countries in close proximity. For China, about 6% of the another 30% is shipped to other foreign countries in close proximity. For China, about 6% of the
sales of the majority-owned foreign affiliates of U.S. parent companies is shipped to the U.S. sales of the majority-owned foreign affiliates of U.S. parent companies is shipped to the U.S.
parent, while 82% is sold in China and another 12% is shipped to other foreign countries.117 parent, while 82% is sold in China and another 12% is shipped to other foreign countries.117
Beyond the current chal enges the pandemic poses to global supply chains, a recent report by Beyond the current chal enges the pandemic poses to global supply chains, a recent report by
McKinsey Global Institute catalogued a number of risks to supply chains.118 The report estimates McKinsey Global Institute catalogued a number of risks to supply chains.118 The report estimates
that 16% to 26% of global goods exports, worth $2.9 tril ion to $4.6 tril ion, potential y could that 16% to 26% of global goods exports, worth $2.9 tril ion to $4.6 tril ion, potential y could
move to new countries over the next five years “if companies restructure their supplier networks.” move to new countries over the next five years “if companies restructure their supplier networks.”
The report concluded, however, the pandemic had not caused firms to reshape their global The report concluded, however, the pandemic had not caused firms to reshape their global
production networks in dramatic ways, because the networks reflect, “economic logic, hundreds production networks in dramatic ways, because the networks reflect, “economic logic, hundreds
of bil ions of dollars’ worth of investment, and long-standing supplier relationships.”119 In of bil ions of dollars’ worth of investment, and long-standing supplier relationships.”119 In
addition, the report concluded that although firms can shift production locations, the addition, the report concluded that although firms can shift production locations, the
interconnected nature of these chains “limits the economic case for making large-scale changes in interconnected nature of these chains “limits the economic case for making large-scale changes in
their physical location.”120 Instead of shifting production locations, firms reportedly considered their physical location.”120 Instead of shifting production locations, firms reportedly considered
various strategies to withstand the chal enges of a global economy by increasing sources of raw various strategies to withstand the chal enges of a global economy by increasing sources of raw
materials and critical materials, expanding and diversifying supplier bases, investing in suppliers materials and critical materials, expanding and diversifying supplier bases, investing in suppliers

114 Altman, Steven A. and Phillip Bastian, 114 Altman, Steven A. and Phillip Bastian, DHL Global Connectedness Index 2020, 2020 , 2020
115 Ibid., p. 32. 115 Ibid., p. 32.
116 Beattie, Alan, Will Coronavirus Pandemic Finally Kill Off Global Supply Chains?, 116 Beattie, Alan, Will Coronavirus Pandemic Finally Kill Off Global Supply Chains?, Financial Times, May 28, 2020. , May 28, 2020.
https://www.ft.com/content/4ee0817a-809f-11ea-b0fb-13524ae1056b. https://www.ft.com/content/4ee0817a-809f-11ea-b0fb-13524ae1056b.
117 117 Activities of U.S. Multinational Enterprises: U.S. Parent Companies and ~~Their~~Th eir Foreign Affiliates, Preliminary 2017
Statistics, Bureau of Economic Analysis, August 23, 2019, T able II.E.2. https://www.bea.gov/news/2019/activities-us-, Bureau of Economic Analysis, August 23, 2019, T able II.E.2. https://www.bea.gov/news/2019/activities-us-
multinational-enterprises-2017. multinational-enterprises-2017.
118 118 Risk, Resilience, and Rebalancing in Global Value Chains, McKinsey Global Institute, August 2020, p. 1 , McKinsey Global Institute, August 2020, p. 1
119 Ibid., p. 2. 119 Ibid., p. 2.
120 Ibid120 Ibid, ., In Brief. In Brief.
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to upgrade their capabilities, and regionalizing supply chains, among a number of possible to upgrade their capabilities, and regionalizing supply chains, among a number of possible
actions.121 actions.121
Amidst the decline in global trade, 15 countries, including Brunei, Colombia, Indonesia, Laos, Amidst the decline in global trade, 15 countries, including Brunei, Colombia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam. Australia, China, Japan, New Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam. Australia, China, Japan, New
Zealand, and South Korea, signed the Regional Comprehensive Economic Partnership (RCEP) on Zealand, and South Korea, signed the Regional Comprehensive Economic Partnership (RCEP) on
November 15, 2020, to create potential y one of the largest free trade agreements.122 The November 15, 2020, to create potential y one of the largest free trade agreements.122 The
agreement needs to be ratified by at least six ASEAN countries and three non-ASEAN countries. agreement needs to be ratified by at least six ASEAN countries and three non-ASEAN countries.
This agreement followed by two years the conclusion of negotiations over the Comprehensive This agreement followed by two years the conclusion of negotiations over the Comprehensive
and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that replaced the proposed and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that replaced the proposed
Trans-Pacific Partnership agreement after the United States pulled out of the negotiations. The Trans-Pacific Partnership agreement after the United States pulled out of the negotiations. The
agreement includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, agreement includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand,
Peru, Singapore, and Vietnam. The UK reportedly applied to join the trade agreement and China Peru, Singapore, and Vietnam. The UK reportedly applied to join the trade agreement and China
announced on September 17, 2021, that it had formal y applied to join the agreement.123 announced on September 17, 2021, that it had formal y applied to join the agreement.123
Global Foreign Investment
Similar to the negative impact on global trade of policy measures that were adopted to control the Similar to the negative impact on global trade of policy measures that were adopted to control the
spread of COVID-19, the measures negatively affected global foreign investment flows. In spread of COVID-19, the measures negatively affected global foreign investment flows. In
addition, national governments implemented new or expanded foreign investment policies related addition, national governments implemented new or expanded foreign investment policies related
to national security, while attempting to navigate between legitimate national security risks and to national security, while attempting to navigate between legitimate national security risks and
policies that some policymakers argue are fundamental y protectionist. During 2020, various policies that some policymakers argue are fundamental y protectionist. During 2020, various
governments adopted measures at both the national and international level to address the health governments adopted measures at both the national and international level to address the health
and economic consequences of the COVID-19 pandemic, as indicated in and economic consequences of the COVID-19 pandemic, as indicated in Table 8.124 According to .124 According to
UNCTAD, these measure include incentives and subsidies to increase domestic production of UNCTAD, these measure include incentives and subsidies to increase domestic production of
vaccines and personal protective equipment (PPE) and direct state intervention through vaccines and personal protective equipment (PPE) and direct state intervention through
nationalization or through directives to increase output at facilities that currently produced PPE nationalization or through directives to increase output at facilities that currently produced PPE
materials or to initiate production at other facilities. EU members moved independently to amend materials or to initiate production at other facilities. EU members moved independently to amend
existing legislation or adopt new rules to expand their review of foreign investments for national existing legislation or adopt new rules to expand their review of foreign investments for national
security reasons, particularly rules related to acquisitions of firms involved in the production of security reasons, particularly rules related to acquisitions of firms involved in the production of
medical care and health. Also, Australia, Canada, and Japan expanded the range of foreign medical care and health. Also, Australia, Canada, and Japan expanded the range of foreign
investments they screen. In some cases, policy changes included enhanced foreign investment investments they screen. In some cases, policy changes included enhanced foreign investment
screening of foreign investment for “public interest” reasons that may remain after the pandemic screening of foreign investment for “public interest” reasons that may remain after the pandemic
crisis.125 crisis.125
Table 9. Foreign Investment Screening Legislation Adopted During COVID-19
Country Country
Investment Measure Investment Measure
Spain Spain
Adopted a Royal Decree to suspend its liberalization regime regarding listed and Adopted a Royal Decree to suspend its liberalization regime regarding listed and
unlisted Spanish companies and require authorization to acquire 10% or more of stock unlisted Spanish companies and require authorization to acquire 10% or more of stock
in certain sectors, including critical infrastructure, critical technologies, media and food in certain sectors, including critical infrastructure, critical technologies, media and food
security. security.

121 121 Risk, Resilience, and Rebalancing in Global Value Chains, p. 16. , p. 16.
122 Shih, Gerry, and Simon Denyer, As T rump Era Ends, Massive New Asian T rade Deal Leaves U.S. on the Sidelines, 122 Shih, Gerry, and Simon Denyer, As T rump Era Ends, Massive New Asian T rade Deal Leaves U.S. on the Sidelines,
Washington Post, November 16, 2020. https://www.washingtonpost.com/world/asia_pacific/trade-china-trump-obama- November 16, 2020. https://www.washingtonpost.com/world/asia_pacific/trade-china-trump-obama-
asia/2020/11/16/f02f43e4-27b7-11eb-9c21-3cc501d0981f_story.html. asia/2020/11/16/f02f43e4-27b7-11eb-9c21-3cc501d0981f_story.html.
123 Qian, Colin, T winnie Siu, T om Daly, Gabriel Crossley, Daniel Leussink, Sakura Murakami, Ben Blanchard, Jeanny 123 Qian, Colin, T winnie Siu, T om Daly, Gabriel Crossley, Daniel Leussink, Sakura Murakami, Ben Blanchard, Jeanny
Kao, and David Brunnstrom, China Applies to Join Pacific T rade Pact to Boost Economic Clout, Kao, and David Brunnstrom, China Applies to Join Pacific T rade Pact to Boost Economic Clout, Reuters, September September
17, 2021. https://www.reuters.com/world/china/china-officially-applies-join-cptpp-trade-pact-2021-09-16/. 17, 2021. https://www.reuters.com/world/china/china-officially-applies-join-cptpp-trade-pact-2021-09-16/.
124 124 World Investment Report 2020, United Nations Conference on T rade and Development, 2020, p. 93. United Nations Conference on T rade and Development, 2020, p. 93.
125 Ibid., p. 96. 125 Ibid., p. 96.
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Country Country
Investment Measure Investment Measure
European Union European Union
The EU Commission issued a Guidance to Member States concerning efforts by non -EU The EU Commission issued a Guidance to Member States concerning efforts by non -EU
investors to attempt to acquire health care capacities or related industries through investors to attempt to acquire health care capacities or related industries through
foreign investment during the pandemic and recommended that EU members make ful foreign investment during the pandemic and recommended that EU members make ful
use of FDI screening regimes or establish such regimes where they are not ful y use of FDI screening regimes or establish such regimes where they are not ful y
developed. developed.
Australia Australia
Temporarily lowered the monetary screening threshold to zero for al foreign Temporarily lowered the monetary screening threshold to zero for al foreign
investments, requiring prior approval for al foreign investments and extended the investments, requiring prior approval for al foreign investments and extended the
timeframe for screening procedures from 30 days to six months. timeframe for screening procedures from 30 days to six months.
Italy Italy
Expanded the scope of its FDI screening regime, including acquisitions from within the Expanded the scope of its FDI screening regime, including acquisitions from within the
EU, by adding finance, credit and insurance to its list of strategic sectors. EU, by adding finance, credit and insurance to its list of strategic sectors.
India India
Introduced a requirement for prior governmental approval for al investment originating Introduced a requirement for prior governmental approval for al investment originating
from countries that share land borders with India. from countries that share land borders with India.
Canada Canada
Announced “enhanced security” reviews of foreign investments in Canadian firms to Announced “enhanced security” reviews of foreign investments in Canadian firms to
prevent foreign firms from taking advantage of low stock valuations during the pandemic prevent foreign firms from taking advantage of low stock valuations during the pandemic
to acquire any Canadian firm, but particularly those related to public health or involved to acquire any Canadian firm, but particularly those related to public health or involved
in the supply of critical goods and services to Canadians to protect Canadian’s health in the supply of critical goods and services to Canadians to protect Canadian’s health
and safety. and safety.
France France
Added biotechnology to its list of critical sectors requiring prior governmental approval Added biotechnology to its list of critical sectors requiring prior governmental approval
for foreign acquisitions and temporarily lowered the voting rights threshold for listed for foreign acquisitions and temporarily lowered the voting rights threshold for listed
companies for FDI screening from 25% to 10%. companies for FDI screening from 25% to 10%.
Germany Germany
Amended its Foreign Trade and Payments Ordinance to emphasize critical public health Amended its Foreign Trade and Payments Ordinance to emphasize critical public health
sectors and require prior governmental approval for foreign acquisitions of 10% or sectors and require prior governmental approval for foreign acquisitions of 10% or
more of the stock of German companies involved in developing, manufacturing or more of the stock of German companies involved in developing, manufacturing or
producing vaccines, medicines, protective medical equipment and other medical goods producing vaccines, medicines, protective medical equipment and other medical goods
for the treatment of highly infectious diseases. Also adopted measures to align German for the treatment of highly infectious diseases. Also adopted measures to align German
reviews with EU rules. reviews with EU rules.
Hungary Hungary
Adopted a foreign investment screening mechanism that requires approval for Adopted a foreign investment screening mechanism that requires approval for
investments in 21 industries, including health care, pharmaceuticals and medical device investments in 21 industries, including health care, pharmaceuticals and medical device
manufacturing, and non-medical industries. An investment can be denied that violates or manufacturing, and non-medical industries. An investment can be denied that violates or
threatens public security or order, particularly the security of supply of basic social threatens public security or order, particularly the security of supply of basic social
needs. needs.
Japan Japan
Amended its list of sectors considered critical to national security by adding the Amended its list of sectors considered critical to national security by adding the
production of vaccines, medicines and advanced medical equipment, including production of vaccines, medicines and advanced medical equipment, including
ventilators. ventilators.
Poland Poland
Adopted a FDI screening regime for foreign acquisitions of 20 % or more in publicly Adopted a FDI screening regime for foreign acquisitions of 20 % or more in publicly
listed companies, companies control ing strategic infrastructure or developing critical IT listed companies, companies control ing strategic infrastructure or developing critical IT
software, or companies active in 21 industries, including pharmaceuticals, manufacturing software, or companies active in 21 industries, including pharmaceuticals, manufacturing
of medical devices, food processing and utilities. of medical devices, food processing and utilities.
Source: World Investment Report 2020, United Nations Conference on Trade and Development, 2020, p. 92-93. United Nations Conference on Trade and Development, 2020, p. 92-93.
The UN also reported that governments adopted new regulations across a spectrum of areas and The UN also reported that governments adopted new regulations across a spectrum of areas and
also supported joint international efforts to address public aspects of the pandemic, as indicated in also supported joint international efforts to address public aspects of the pandemic, as indicated in
Table 9. State intervention spanned policy approaches from investment incentives to promote the State intervention spanned policy approaches from investment incentives to promote the
production of medicines and medical equipment, assistance to affected firms and industries, production of medicines and medical equipment, assistance to affected firms and industries,
measures to circumvent intel ectual property rights restrictions, and international efforts to speed measures to circumvent intel ectual property rights restrictions, and international efforts to speed
up vaccine production and cross-border sharing. up vaccine production and cross-border sharing.
The shift in approach toward the national security dimensions of foreign investment, especial y The shift in approach toward the national security dimensions of foreign investment, especial y
by developed economies, has tended to blur the distinction between foreign investment, trade, and by developed economies, has tended to blur the distinction between foreign investment, trade, and
national security and reflects the evolving nature of the concept of national security relative to national security and reflects the evolving nature of the concept of national security relative to
foreign investment. Conceivably, changes in technology and the global economy have made it foreign investment. Conceivably, changes in technology and the global economy have made it
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more difficult to assess the economic costs and benefits of changes in foreign investment policies more difficult to assess the economic costs and benefits of changes in foreign investment policies
taken on national security grounds. taken on national security grounds.
Table 10. Investment Policy Instruments Adopted at the National and International
Levels to Address the COVID-19 Pandemic
Investment policy areas
Policy measures
Policy actions at the national level
Investment facilitation Investment facilitation
Al eviate administrative burdens and bureaucratic Al eviate administrative burdens and bureaucratic
obstacles for firms. obstacles for firms.

Use of online tools and e-platforms. Use of online tools and e-platforms.
Investment retention and aftercare by investment Investment retention and aftercare by investment
COVID-19-related information services. COVID-19-related information services.
promotion agencies (IPAs) promotion agencies (IPAs)

Administrative and operational support during the Administrative and operational support during the
crisis. crisis.

Move to online services. Move to online services.
Investment incentives Investment incentives
Financial or fiscal incentives to produce COVID-19- Financial or fiscal incentives to produce COVID-19-
related medical equipment. related medical equipment.

Incentives for conversion of production lines. Incentives for conversion of production lines.

Incentives for enhancement of contracted economic Incentives for enhancement of contracted economic
activities. activities.
State participation in crisis-affected industries State participation in crisis-affected industries
Acquisition of equity in companies, including Acquisition of equity in companies, including
nationalization. nationalization.
Local smal and medium enterprises (SMEs) and supply Local smal and medium enterprises (SMEs) and supply
Financial or fiscal support for domestic suppliers (such Financial or fiscal support for domestic suppliers (such
chains chains
as SMEs). as SMEs).
National security and public health National security and public health
Application and potential reinforcement of FDI Application and potential reinforcement of FDI
screening in pandemic-relevant industries. screening in pandemic-relevant industries.
Other State intervention in the health industry Other State intervention in the health industry
Mandatory production. Mandatory production.

Export bans. Export bans.

Import facilitation. Import facilitation.
Intel ectual property (IP) Intel ectual property (IP)
General authorization of non-voluntary licensing, to General authorization of non-voluntary licensing, to
speed up research and development (R&D). speed up research and development (R&D).

IP holder-specific non-voluntary licensing, to enable IP holder-specific non-voluntary licensing, to enable
imports of medication. imports of medication.
Policy actions at the international level
International support measures for investment International support measures for investment
International pledges in support of cross-border International pledges in support of cross-border
investment. investment.
IIAs IIAs
Reform International Investment Agreements (IIAs) to Reform International Investment Agreements (IIAs) to
support public health policies and to minimize investor–support public health policies and to minimize investor–
State dispute risks. State dispute risks.
Intel ectual property (IP) Intel ectual property (IP)
General authorization of non-voluntary licensing, to General authorization of non-voluntary licensing, to
speed up research and development (R&D). speed up research and development (R&D).
Source: World Investment Report 2020, United Nations Conference on Trade and Development, 2020, p. 89. , United Nations Conference on Trade and Development, 2020, p. 89.
According to the United Nations Conference on Trade and Development (UNCTAD), global According to the United Nations Conference on Trade and Development (UNCTAD), global
foreign direct investment inflows fel by 42% in 2020 compared with the same period in 2019, foreign direct investment inflows fel by 42% in 2020 compared with the same period in 2019,
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with continued weakness expected in 2021, as indicated in with continued weakness expected in 2021, as indicated in Figure 9.126 Global inflow totals were .126 Global inflow totals were
driven in large part by the decline in foreign investment inflows to developed economies, which driven in large part by the decline in foreign investment inflows to developed economies, which
fel by 69%. Inflows to Europe fel to -$4 bil ion, compared with inflows in 2019 of $344 bil ion. fel by 69%. Inflows to Europe fel to -$4 bil ion, compared with inflows in 2019 of $344 bil ion.
In contrast, inflows to developing economies fel by 12% over the period, aided in large part by In contrast, inflows to developing economies fel by 12% over the period, aided in large part by
positive inflows to China. Investment flows to developing Asia, at $476 bil ion, dropped by 4% positive inflows to China. Investment flows to developing Asia, at $476 bil ion, dropped by 4%
compared with 2019 and accounted for about half the total $859 bil ion global direct investment compared with 2019 and accounted for about half the total $859 bil ion global direct investment
inflows in 2020. inflows in 2020.
Figure 9. Annual Foreign Direct Investment Inflows by Major Country Groups
Inflows in bil ions of dol ars Inflows in bil ions of dol ars

Source: United Nations Conference on Trade and Development. Created by CRS. United Nations Conference on Trade and Development. Created by CRS.
As indicated in As indicated in Figure 10, al major geographic areas except Asia experienced a drop in foreign , al major geographic areas except Asia experienced a drop in foreign
direct investment inflows in 2020 compared with 2019.127 This drop in foreign investment was direct investment inflows in 2020 compared with 2019.127 This drop in foreign investment was
apparent in the three major types of foreign investment: cross-border investments; greenfield apparent in the three major types of foreign investment: cross-border investments; greenfield
investment, or investment in new business activity; and international project finance. In the three investment, or investment in new business activity; and international project finance. In the three
types of investment activity, global activity fel by 10%, 35%, and 2%, respectively in 2020 types of investment activity, global activity fel by 10%, 35%, and 2%, respectively in 2020
compared with 2019. Cross-border merger and acquisition (M&A) activity increased by 31% and compared with 2019. Cross-border merger and acquisition (M&A) activity increased by 31% and
147%, respectively, in Asia and Transition economies, but declined by 11% in developed 147%, respectively, in Asia and Transition economies, but declined by 11% in developed
economies and 67% in Latin America. International project finance, reportedly an important economies and 67% in Latin America. International project finance, reportedly an important
source of infrastructure finance, fel global y by 2%, but rose by 7% in developed economies, source of infrastructure finance, fel global y by 2%, but rose by 7% in developed economies,
primarily in Europe, and by 17% in Asia. primarily in Europe, and by 17% in Asia.

126 126 Investment Trends Monitor, United Nations Conference on T rade and Development, January, 2021. Investment , United Nations Conference on T rade and Development, January, 2021. Investment
Policy Instruments Adopted at the National and International level to Address the COVIDPolicy Instruments Adopted at the National and International level to Address the COVID -19 Pandemic -19 Pandemic
127 127 Investment Trends Monitor, United Nations Conference on T rade and Development, January 24, 2021. , United Nations Conference on T rade and Development, January 24, 2021.
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Figure 10. Global Foreign Direct Investment Inflows
In bil ions of dol ars and percentage change In bil ions of dol ars and percentage change

Source: United Nations Conference on Trade and Development. Created by CRS. United Nations Conference on Trade and Development. Created by CRS.
For the United States, BEA reported that U.S. direct investment abroad (outflows) and foreign For the United States, BEA reported that U.S. direct investment abroad (outflows) and foreign
direct investment in the United States (inflows) rose by 37% and fel by half, respectively, in the direct investment in the United States (inflows) rose by 37% and fel by half, respectively, in the
first half of 2020 compared with the first half of 2019, as indicated in first half of 2020 compared with the first half of 2019, as indicated in Figure 11.128 The drop in .128 The drop in
inbound foreign direct investment values partly reflect the lower values for equity, mirroring the inbound foreign direct investment values partly reflect the lower values for equity, mirroring the
declines in major equity markets in the first half of 2020. For 2020 as a whole, U.S. direct declines in major equity markets in the first half of 2020. For 2020 as a whole, U.S. direct
investment outflows rose by 155%, while foreign direct investment inflows fel by 30% compared investment outflows rose by 155%, while foreign direct investment inflows fel by 30% compared
with 2019. In the first quarter of 2021, U.S. direct investment abroad fel by 20% compared with with 2019. In the first quarter of 2021, U.S. direct investment abroad fel by 20% compared with
the previous quarter; foreign direct investment in the United States fel by 31%, reflecting the the previous quarter; foreign direct investment in the United States fel by 31%, reflecting the
continuing chal enges facing the global economy that are affecting a sustained recovery. In the continuing chal enges facing the global economy that are affecting a sustained recovery. In the
second quarter, U.S. direct investment outflows increased by 81% over the previous quarter to second quarter, U.S. direct investment outflows increased by 81% over the previous quarter to
reach $139 bil ion, the largest outflows preceding the pandemic, while foreign direct investment reach $139 bil ion, the largest outflows preceding the pandemic, while foreign direct investment
in the United States rose increased by 35% to reach $95 bil ion. in the United States rose increased by 35% to reach $95 bil ion.

128 128 U.S. International Transactions, Second Quarter 2021, Bureau of Economic Analysis, September 21, 2021. , Bureau of Economic Analysis, September 21, 2021.
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Figure 11. U.S. Direct Investment; Inflows and Outflows

Source: Bureau of Economic Analysis, Created by CRS. Bureau of Economic Analysis, Created by CRS.
Notes: In the balance of payments, direct investment outflows are represented as a negative value, indicating an In the balance of payments, direct investment outflows are represented as a negative value, indicating an
outflow and direct investment inflows are represented as positive values. For presentation purposes, the signs outflow and direct investment inflows are represented as positive values. For presentation purposes, the signs
for direct investment abroad, or outflows, have been reversed. for direct investment abroad, or outflows, have been reversed.
Major Economic Developments
Between late February 2020 and spring 2021, financial markets from the United States to Asia Between late February 2020 and spring 2021, financial markets from the United States to Asia
and Europe were whipsawed as investors alternated between optimism and pessimism amid and Europe were whipsawed as investors alternated between optimism and pessimism amid
concerns that COVID-19 would create a global economic and financial crisis with few metrics to concerns that COVID-19 would create a global economic and financial crisis with few metrics to
indicate how prolonged and extensive the economic effects could be.129 February 24, in particular, indicate how prolonged and extensive the economic effects could be.129 February 24, in particular,
stands as a red-letter date as financial market indexes from Asia, Europe, and the United States stands as a red-letter date as financial market indexes from Asia, Europe, and the United States
dropped by large amounts. Investors searched for safe-haven investments, such as the benchmark dropped by large amounts. Investors searched for safe-haven investments, such as the benchmark
U.S. Treasury 10-year security, which experienced a historic drop in yield to below 1% on March U.S. Treasury 10-year security, which experienced a historic drop in yield to below 1% on March
3, 2020.130 In response to concerns that the global economy was in a freefal , the Federal Reserve 3, 2020.130 In response to concerns that the global economy was in a freefal , the Federal Reserve
lowered key interest rates on March 3, 2020, to shore up economic activity, while the Bank of lowered key interest rates on March 3, 2020, to shore up economic activity, while the Bank of
Japan engaged in asset purchases to provide short-term liquidity to Japanese banks; Japan’s Japan engaged in asset purchases to provide short-term liquidity to Japanese banks; Japan’s
government indicated it would also assist workers with wage subsidies. The Bank of Canada also government indicated it would also assist workers with wage subsidies. The Bank of Canada also
lowered its key interest rate. The International Monetary Fund (IMF) announced that it was lowered its key interest rate. The International Monetary Fund (IMF) announced that it was
making about $50 bil ion available through emergency financing facilities for low-income and making about $50 bil ion available through emergency financing facilities for low-income and
emerging market countries and through funds available in its Catastrophe Containment and Relief emerging market countries and through funds available in its Catastrophe Containment and Relief
Trust (CCRT).131 As assessments of risk by financial market participants lessened, pressure on the Trust (CCRT).131 As assessments of risk by financial market participants lessened, pressure on the
dollar and on U.S. treasury securities lessened as wel . dollar and on U.S. treasury securities lessened as wel .

129 Samson, Adam and Hudson Lockett , “Stocks Fall Again in Worst Week Since 2008 Crisis,” 129 Samson, Adam and Hudson Lockett , “Stocks Fall Again in Worst Week Since 2008 Crisis,” Financial Times, ,
February 28. https://www.ft.com/content/4b23a140-59d3-11ea-a528-dd0f971febbc. February 28. https://www.ft.com/content/4b23a140-59d3-11ea-a528-dd0f971febbc.
130 T he price and yield of a bond are inversely related; increased demand for T reasury securities raises their price, 130 T he price and yield of a bond are inversely related; increased demand for T reasury securities raises their price,
which lowers their yield. Levisohn, Ben, “ T he 10-Year T reasury Yield Fell Below 1% for the First T ime Ever. What which lowers their yield. Levisohn, Ben, “ T he 10-Year T reasury Yield Fell Below 1% for the First T ime Ever. What
T hat Means,” T hat Means,” Barrons, March 3, 2020. https://www.barrons.com/articles/the-10-year-treasury-yield-fell-below-1-for-, March 3, 2020. https://www.barrons.com/articles/the-10-year-treasury-yield-fell-below-1-for-
the-first-time-ever-what -that-means-51583267310. the-first-time-ever-what -that-means-51583267310.
131 Georgieva, Kristalina, “Potential Impact of the COVID-19 Epidemic: What We Know and What We Can Do,” 131 Georgieva, Kristalina, “Potential Impact of the COVID-19 Epidemic: What We Know and What We Can Do,”
International Monetary Fund, March 4, 2020. https://blogs.imf.org/2020/03/04/potential-impact-of-the-COVID-19-, March 4, 2020. https://blogs.imf.org/2020/03/04/potential-impact-of-the-COVID-19-
epidemic-what-we-know-and-what -we-can-do/. epidemic-what-we-know-and-what -we-can-do/.
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link to page 55 link to page 55 Global Economic Effects of COVID-19

Financial Markets
Reflecting investors’ uncertainties, the DJIA lost about one-third of its value between February Reflecting investors’ uncertainties, the DJIA lost about one-third of its value between February
14, 2020, and March 23, 2020, as indicated in 14, 2020, and March 23, 2020, as indicated in Figure 12. Expectations that the U.S. Congress . Expectations that the U.S. Congress
would adopt a $2.0 tril ion spending package moved the DJIA up by more than 11% on March 24, would adopt a $2.0 tril ion spending package moved the DJIA up by more than 11% on March 24,
2020. From March 23 to April 15, the DJIA moved higher by 18%, paring its initial losses by 2020. From March 23 to April 15, the DJIA moved higher by 18%, paring its initial losses by
half. Since then, the DJIA trended upward, but moved erratical y at times as investors weighed half. Since then, the DJIA trended upward, but moved erratical y at times as investors weighed
news about the human cost and economic impact of the pandemic and the prospects of various news about the human cost and economic impact of the pandemic and the prospects of various
medical treatments. Between March 23 and July 1, the DJIA regained 70% of the value lost medical treatments. Between March 23 and July 1, the DJIA regained 70% of the value lost
during the February to March decline. On Monday, November 9, 2020, the DJIA gained over 800 during the February to March decline. On Monday, November 9, 2020, the DJIA gained over 800
points, or nearly three percentage points, as markets responded positively to press reports that an points, or nearly three percentage points, as markets responded positively to press reports that an
effective COVID-19 vaccine had been developed. On November 10, the DJIA rose above 29,400 effective COVID-19 vaccine had been developed. On November 10, the DJIA rose above 29,400
for the first time since the index fel in February 2020. Between January 1, 2021, and February 4, for the first time since the index fel in February 2020. Between January 1, 2021, and February 4,
2021, the DJIA increased by about 3.0%, continuing a rise in the index of 17% since the end of 2021, the DJIA increased by about 3.0%, continuing a rise in the index of 17% since the end of
October 2020. Through April, 2021, the DJIA had gained more than 12% in value and was 16% October 2020. Through April, 2021, the DJIA had gained more than 12% in value and was 16%
higher than the value on February 14, 2020. On July 23, 2021, the DJIA crossed the 35,000 mark, higher than the value on February 14, 2020. On July 23, 2021, the DJIA crossed the 35,000 mark,
nearly doubling the value of the index since March 23, 2020. nearly doubling the value of the index since March 23, 2020.
As indicated i As indicated in Table 11, the DJIA lost the largest part of its market valuation in trading during the DJIA lost the largest part of its market valuation in trading during
February and March when the index lost nearly one-fourth of its value as more trading sessions February and March when the index lost nearly one-fourth of its value as more trading sessions
ended with overal market values lower than higher. Since March, the index has posted more ended with overal market values lower than higher. Since March, the index has posted more
trading sessions that closed with positive gains than losses. By October 23, 2020, the DJIA had trading sessions that closed with positive gains than losses. By October 23, 2020, the DJIA had
recovered most of the value lost in February and March. During the final week of October, the recovered most of the value lost in February and March. During the final week of October, the
DJIA lost more than 1,800 points, the largest weekly loss since March 2020 as Germany, France DJIA lost more than 1,800 points, the largest weekly loss since March 2020 as Germany, France
and other European countries reinstituted lockdowns in response to a resurgence of COVID-19 and other European countries reinstituted lockdowns in response to a resurgence of COVID-19
cases. In the first three days of November, however, the Index regained three-fourths of the value cases. In the first three days of November, however, the Index regained three-fourths of the value
it lost the previous week.it lost the previous week. Announcements of vaccines portending a resurgence of economic Announcements of vaccines portending a resurgence of economic
activity boosted market sentiment in November and December with the DJIA rising by over a activity boosted market sentiment in November and December with the DJIA rising by over a
combined 3,700 points or by nearly 14%. In January 2021, the DJIA dropped by about 1% with combined 3,700 points or by nearly 14%. In January 2021, the DJIA dropped by about 1% with
more trading days ending more trading days ending with the index down than days with the index up from the previous day. with the index down than days with the index up from the previous day.
During the first six months of 2021, the DJIA gained 15% in market value. During June 2021, the During the first six months of 2021, the DJIA gained 15% in market value. During June 2021, the
DJIA had one more day of the index closing down than up as the index lost one-quarter of a point DJIA had one more day of the index closing down than up as the index lost one-quarter of a point
overal , the first such decline since January 2021. Through August, however, more trading session overal , the first such decline since January 2021. Through August, however, more trading session
closed higher than lower, the Index gained 1.24%, and closed above 35,000 for the first time on closed higher than lower, the Index gained 1.24%, and closed above 35,000 for the first time on
~~July 23, 2021.~~
July 23, 2021. In September, trading sessions closing lower outnumbered sessions closing higher 13 to 8, with the index as a whole fal ing by 4.4% in value, the largest decline since October 2020. Table 11. Dow Jones Industrial Average Market Changes by Month
Sessions up Sessions down
Open
Close
Change in index valuation

January January
2020 13 13
8 8
28,638.97 28,638.97
28,256.03 28,256.03
-382.94 -382.94
-1.34% -1.34%
February February
8 8
11 11
28,319.65 28,319.65
25,409.36 25,409.36
-2,910.29 -2,910.29
-10.28% -10.28%
March March
10 10
12 12
25,590.51 25,590.51
21,917.16 21,917.16
-3,673.35 -3,673.35
-14.35% -14.35%
April April
12 12
9 9
21,227.38 21,227.38
24,345.72 24,345.72
3,118.34 3,118.34
14.69% 14.69%
May May
10 10
10 10
24,120.78 24,120.78
25,383.11 25,383.11
1,262.33 1,262.33
5.23% 5.23%
June June
14 14
8 8
25,342.99 25,342.99
25,812.88 25,812.88
469.89 469.89
1.85% 1.85%
July July
13 13
9 9
25,879.38 25,879.38
26,428.32 26,428.32
548.94 548.94
2.12% 2.12%
Congressional Research Service 50 Global Economic Effects of COVID-19 Sessions up Sessions down Open Close Change in index valuation August August
14 14
7 7
26,542.32 26,542.32
28,430.05 28,430.05
1,887.73 1,887.73
7.11% 7.11%
September September
12 12
9 9
28,439.61 28,439.61
27,781.70 27,781.70
-657.91 -657.91
-2.31% -2.31%
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~~Global Economic Effects of COVID-19~~

~~Sessions up Sessions down~~
~~Open~~
~~Close~~
~~Change in index valuation~~

October October
10 10
12 12
27,816.90 27,816.90
26,501.60 26,501.60
-1,315.30 -1,315.30
-4.73% -4.73%
November November
12 12
8 8
26,691.28 26,691.28
29,638.64 29,638.64
2,947.36 2,947.36
11.04% 11.04%
December December
14 14
8 8
29,707.50 29,707.50
30,606.48 30,606.48
808.98 808.98
2.71% 2.71%
January 2021 January 2021
8 8
11 11
30,223.89 30,223.89
29,981.10 29,981.10
-242.79 -242.79
-0.80% -0.80%
February February
15 15
5 5
30,054.73 30,054.73
30,932.37 30,932.37
877.64 877.64
2.92% 2.92%
March March
13 13
10 10
31,065.90 31,065.90
32,981.55 32,981.55
1,915.65 1,915.65
6.17% 6.17%
April April
12 12
8 8
33,054.58 33,054.58
33,874.85 33,874.85
820.27 820.27
2.48% 2.48%
May May
13 13
7 7
33,904.89 33,904.89
34,529.45 34,529.45
624.56 624.56
1.84% 1.84%
June June
10 10
11 11
34,584.19 34,584.19
34, 502.51 34, 502.51
-81.68 -81.68
-0.24% -0.24%
July July
13 13
7 7
34,507.32 34,507.32
34,935.47 34,935.47
428.15 428.15
1,24% 1,24%
August August
13 13
9 9
34,968.56 34,968.56
35,360.73 35,360.73
392.17 392.17
1.12 1.12% September 8 13 35,387.55 33,843.92 -1,543.63 -4.36% %
Source: Financial Times, calculations by CRS. , calculations by CRS.
Similar to the 2008-2009 global financial crisis, central banks implemented a series of monetary Similar to the 2008-2009 global financial crisis, central banks implemented a series of monetary
operations to provide liquidity to their economies. These actions, however, initial y were not operations to provide liquidity to their economies. These actions, however, initial y were not
viewed entirely positively by al financial market participants who questioned the use of policy viewed entirely positively by al financial market participants who questioned the use of policy
tools by central banks that were similar to those employed during the 2008-2009 financial crisis, tools by central banks that were similar to those employed during the 2008-2009 financial crisis,
despite the fact that the COVID-19 and the previous crises were fundamental y different in origin. despite the fact that the COVID-19 and the previous crises were fundamental y different in origin.
During the previous financial crisis, central banks intervened to restart credit and spending by During the previous financial crisis, central banks intervened to restart credit and spending by
banks that had engaged in risky assets. In the 2020 environment, central banks attempted to banks that had engaged in risky assets. In the 2020 environment, central banks attempted to
address financial market volatility and prevent large-scale corporate insolvencies that reflected address financial market volatility and prevent large-scale corporate insolvencies that reflected
the underlying economic uncertainty caused by the pandemic. the underlying economic uncertainty caused by the pandemic.
Congressional Research Service 51 Global Economic Effects of COVID-19 Figure 12. Dow Jones Industrial Average
February 14, 2020, through September 27, 2021 February 14, 2020, through September 27, 2021

Source: Financial Times. Created by CRS. . Created by CRS.

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The yield on U.S. Treasury securities dropped to historic levels on March 6, 2020, and March 9, The yield on U.S. Treasury securities dropped to historic levels on March 6, 2020, and March 9,
2020, as investors moved out of stocks and into Treasury securities and other sovereign bonds, 2020, as investors moved out of stocks and into Treasury securities and other sovereign bonds,
including UK and German bonds, due in part to concerns over the impact the pandemic would including UK and German bonds, due in part to concerns over the impact the pandemic would
have on economic growth and expectations the Federal Reserve and other central banks would have on economic growth and expectations the Federal Reserve and other central banks would
lower short-term interest rates.132 On March 5, the U.S. Congress passed an $8 bil ion spending lower short-term interest rates.132 On March 5, the U.S. Congress passed an $8 bil ion spending
bil to provide assistance for health care, sick leave, smal business loans, and international bil to provide assistance for health care, sick leave, smal business loans, and international
assistance. At the same time, commodity prices dropped sharply as a result of reduced economic assistance. At the same time, commodity prices dropped sharply as a result of reduced economic
activity and disagreements among oil producers over production cuts in crude oil and lower activity and disagreements among oil producers over production cuts in crude oil and lower
global demand for commodities, including crude oil. global demand for commodities, including crude oil.
The drop in some commodity prices raised concerns about corporate profits and led some The drop in some commodity prices raised concerns about corporate profits and led some
investors to sel equities and buy sovereign bonds. In overnight trading in various sessions investors to sel equities and buy sovereign bonds. In overnight trading in various sessions
between March 8, and March 24, U.S. stock market indexes moved sharply (both higher and between March 8, and March 24, U.S. stock market indexes moved sharply (both higher and
lower), triggering automatic circuit breakers designed to halt trading if the indexes rise or fal by lower), triggering automatic circuit breakers designed to halt trading if the indexes rise or fal by
more than 5% when markets are closed and 7% when markets are open.133 By early April, the more than 5% when markets are closed and 7% when markets are open.133 By early April, the
global mining industry had reduced production by an estimated 20% in response to fal ing global mining industry had reduced production by an estimated 20% in response to fal ing
demand and labor quarantines and as a strategy for raising prices.134 demand and labor quarantines and as a strategy for raising prices.134
On March 11, as the WHO designated COVID-19 a pandemic, governments and central banks On March 11, as the WHO designated COVID-19 a pandemic, governments and central banks
adopted additional monetary and fiscal policies to address the growing economic impact. The adopted additional monetary and fiscal policies to address the growing economic impact. The
Bank of England lowered its key interest rate, reduced capital buffers for UK banks, and provided Bank of England lowered its key interest rate, reduced capital buffers for UK banks, and provided
a funding program for smal and medium businesses. The UK Chancel or of the Exchequer a funding program for smal and medium businesses. The UK Chancel or of the Exchequer
proposed a budget that appropriated £30 bil ion (about $35 bil ion) for fiscal stimulus spending, proposed a budget that appropriated £30 bil ion (about $35 bil ion) for fiscal stimulus spending,
132 Smith, Colby, Richard Henderson, Philip Georgiadis, and Hudson Lockett, “ Stocks T umble and Government Bonds Hit Highs on Virus Fears,” Financial Tim es, March 6, 2020. https://www.ft.com/content/9f94d6f8-5f51-11ea-b0ab-339c2307bcd4. 133 Georgiadis, Philip, Adam Samson, and Hudson Lockett, “Stocks Plummet as Oil Crash Shakes Financial Markets,” Financial Tim es, March 9, 2020. https://www.ft.com/content/8273a32a-61e4-11ea-a6cd-df28cc3c6a68. 134 Hume, Neil, “Mine Closures Bolster Metals Prices as Demand Collapses,” Financial Times, April 7, 2020. https://www.ft.com/content/06ef38c9-18d8-427e-8675-a567227397c0. Congressional Research Service 52 Global Economic Effects of COVID-19 including funds for sick pay for workers, guarantees for loans to smal businesses, and cuts in including funds for sick pay for workers, guarantees for loans to smal businesses, and cuts in
business taxes. The European Commission announced a €25 bil ion (about $28 bil ion) business taxes. The European Commission announced a €25 bil ion (about $28 bil ion)
investment fund to assist EU countries and the Federal Reserve announced that it would expand investment fund to assist EU countries and the Federal Reserve announced that it would expand
its repo market purchases to provide larger and longer-term funding to provide added liquidity to its repo market purchases to provide larger and longer-term funding to provide added liquidity to
financial markets. financial markets.
International Role of the Dollar
Similar to conditions during the 2008-2009 financial crisis, the dollar emerged as the preferred Similar to conditions during the 2008-2009 financial crisis, the dollar emerged as the preferred
currency by investors, reinforcing its role as the dominant global reserve currency. As indicated in currency by investors, reinforcing its role as the dominant global reserve currency. As indicated in
Figure 13, the dollar appreciated more than 3.0% during the period between March 3 and March , the dollar appreciated more than 3.0% during the period between March 3 and March
13, 2020, reflecting increased international demand for the dollar and dollar-denominated assets. 13, 2020, reflecting increased international demand for the dollar and dollar-denominated assets.
Since the highs reached on March 23, the exchange value of the dollar has dropped between 1% Since the highs reached on March 23, the exchange value of the dollar has dropped between 1%
and 2% per month in a slow decline through December 2020 as financial strains eased and and 2% per month in a slow decline through December 2020 as financial strains eased and
demand for the dollar in international financial markets lessened. demand for the dollar in international financial markets lessened.
By the end of January 2021, the dollar had depreciated by more than 11% from the highest value By the end of January 2021, the dollar had depreciated by more than 11% from the highest value
it reached in March 2020. The development of COVID-19 vaccines likely affected the value of it reached in March 2020. The development of COVID-19 vaccines likely affected the value of
the dollar in various ways, including factors that tend to appreciate the dollar as a result of the dollar in various ways, including factors that tend to appreciate the dollar as a result of
renewed economic growth in the United States and opposing forces that tend to depreciate the renewed economic growth in the United States and opposing forces that tend to depreciate the

~~132 Smith, Colby, Richard Henderson, Philip Georgiadis, and Hudson Lockett, “ Stocks T umble and Government Bonds~~
~~Hit Highs on Virus Fears,” Financial Tim es, March 6, 2020. https://www.ft.com/content/9f94d6f8-5f51-11ea-b0ab-~~
~~339c2307bcd4.~~
~~133 Georgiadis, Philip, Adam Samson, and Hudson Lockett, “Stocks Plummet as Oil Crash Shakes Financial Markets,”~~
Financial Tim es, March 9, 2020. https://www.ft.com/content/8273a32a-61e4-11ea-a6cd-df28cc3c6a68.
~~134 Hume, Neil, “Mine Closures Bolster Metals Prices as Demand Collapses,” Financial Times, April 7, 2020.~~
~~https://www.ft.com/content/06ef38c9-18d8-427e-8675-a567227397c0.~~
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dollar if demand declines for the dollar as a safe-haven currency. As previously noted, common dollar if demand declines for the dollar as a safe-haven currency. As previously noted, common
central banks policies of keeping key interest rates low also affected movements in the foreign central banks policies of keeping key interest rates low also affected movements in the foreign
exchange value of the dollar in 2021 by reducing arbitrage opportunities and curtailing volatility. exchange value of the dollar in 2021 by reducing arbitrage opportunities and curtailing volatility.
Despite periods of appreciation and depreciation of the dollar through 2020 and 2021, by the end Despite periods of appreciation and depreciation of the dollar through 2020 and 2021, by the end
of April, 2021, the dollar was down 2% compared with the value on January 2, 2020. In part, the of April, 2021, the dollar was down 2% compared with the value on January 2, 2020. In part, the
resolution of the UK’s withdrawal from the EU has strengthened both the Euro and the pound, resolution of the UK’s withdrawal from the EU has strengthened both the Euro and the pound,
which tended to depreciate the value of the dollar. The decline in the value of the dollar which tended to depreciate the value of the dollar. The decline in the value of the dollar
reportedly pushed some countries to consider intervening to weaken their currencies.135 Between reportedly pushed some countries to consider intervening to weaken their currencies.135 Between
June 10, 2021, and August 20, 2021, the dollar appreciated about 3.6%, nearly reaching the value June 10, 2021, and August 20, 2021, the dollar appreciated about 3.6%, nearly reaching the value
recorded on January 2, 2020. The strengthening in the value of the dollar is attributed to a number recorded on January 2, 2020. The strengthening in the value of the dollar is attributed to a number
of factors, including an anticipated change in Fed monetary policies.136 of factors, including an anticipated change in Fed monetary policies.136 135 Szalay, Eva, Central Banks T ake Rare Step of Flagging Currency Sales in Advance, Financial Times, February 3, 2021. https://www.ft.com/content/0383f3a4-41a0-464a-b831-fd1a09a6b1b0. 136 Stubbington, T ommy, Federal Reserve’s T ilt T owards T ighter Policy Unleashes Dollar Bulls, Financial Times, July 19, 2021. Congressional Research Service 53 Global Economic Effects of COVID-19
Figure 13. U.S. Dollar Trade-Weighted Broad Index, Goods and Services
January 2, 2020, through September 17, 2021 January 2, 2020, through September 17, 2021

Source: St. Louis Federal Reserve Bank. Created by CRS. St. Louis Federal Reserve Bank. Created by CRS.
The Bank for International Settlements (BIS) emphasized the role of the dollar as a dominant The Bank for International Settlements (BIS) emphasized the role of the dollar as a dominant
global currency in its 2019 triennial survey of currency markets.137 According to the survey, the global currency in its 2019 triennial survey of currency markets.137 According to the survey, the
dollar accounts for 88% of global foreign exchange market turnover and is key in funding an dollar accounts for 88% of global foreign exchange market turnover and is key in funding an
array of financial transactions, including serving as an invoicing currency to facilitate array of financial transactions, including serving as an invoicing currency to facilitate
international trade, as indicated ininternational trade, as indicated in ~~Error! Reference source not found.14~~. Figure 14 It also accounts for It also accounts for a
~~bout~~about 60% of central bank foreign exchange holdings, half of non-U.S. banks foreign currency 60% of central bank foreign exchange holdings, half of non-U.S. banks foreign currency
deposits, and two-thirds of non-U.S. corporate borrowings from banks and the corporate bond deposits, and two-thirds of non-U.S. corporate borrowings from banks and the corporate bond
market.138 In comparison, the market.138 In comparison, the United States accounts for about one-fourth of global GDP and United States accounts for about one-fourth of global GDP and
about one-fifth of global trade about one-fifth of global trade (exports plus imports). (exports plus imports).

~~135 Szalay, Eva, Central Banks T ake Rare Step of Flagging Currency Sales in Advance, Financial Times, February 3,~~
~~2021. https://www.ft.com/content/0383f3a4-41a0-464a-b831-fd1a09a6b1b0.~~
~~136 Stubbington, T ommy, Federal Reserve’s T ilt T owards T ighter Policy Unleashes Dollar Bulls, Financial Times, July~~
~~19, 2021.~~
137 137 Foreign Exchange Turnover in April 2019, Bank for International Settlements, September 16, 2019. , Bank for International Settlements, September 16, 2019.
https://www.bis.org/statistics/rpfx19_fx.htm. https://www.bis.org/statistics/rpfx19_fx.htm.
138 See CRS In Focus IF10112, 138 See CRS In Focus IF10112, Introduction to Financial Services: The International Foreign Exchange Market. .
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Figure 14. International Role of the Dollar

Source: U.S. Dol ar Funding: An International Perspective, CGFS Papers No. 65, Bank for International Settlements, , CGFS Papers No. 65, Bank for International Settlements,
June 2020. Created by CRS. June 2020. Created by CRS.
Notes: (1) Data refer to 2019. (2) Data refer to 2019. (3) U.S. dol ar-denominated cross-border loans by banks (1) Data refer to 2019. (2) Data refer to 2019. (3) U.S. dol ar-denominated cross-border loans by banks
to counterparties in al countries; data refer to Q4 2019 (excluding interoffice claims but including interbank to counterparties in al countries; data refer to Q4 2019 (excluding interoffice claims but including interbank
claims on account of loans and deposits); loans comprise nonnegotiable debt instruments that are loaned by claims on account of loans and deposits); loans comprise nonnegotiable debt instruments that are loaned by
creditors directly to a debtor or represented by evidence of a deposit. (4) US dol ar denominated international creditors directly to a debtor or represented by evidence of a deposit. (4) US dol ar denominated international
debt securities by al issuers; data refer to Q4 2019; these securities are issued outside the local market of the debt securities by al issuers; data refer to Q4 2019; these securities are issued outside the local market of the
country where the borrower resides, and capture issues conventional y known as eurobonds and foreign bonds country where the borrower resides, and capture issues conventional y known as eurobonds and foreign bonds
and exclude negotiable loans; instruments such as bonds, medium-term notes and money market instruments are and exclude negotiable loans; instruments such as bonds, medium-term notes and money market instruments are
included. (5) Data refer to 2019. (6) Data refer to Q4 2019. (7) As estimated in Gopinath (2015). (8) Data refer included. (5) Data refer to 2019. (6) Data refer to Q4 2019. (7) As estimated in Gopinath (2015). (8) Data refer
to February 2020. Sources: Gopinath (2015); Federal Reserve; IMF; CPB World Trade Monitor; Bloomberg; to February 2020. Sources: Gopinath (2015); Federal Reserve; IMF; CPB World Trade Monitor; Bloomberg;
SWIFT; BIS Triennial Central Bank Survey of Foreign Exchange and Over-the-counter (OTC) Derivatives SWIFT; BIS Triennial Central Bank Survey of Foreign Exchange and Over-the-counter (OTC) Derivatives
Markets; BIS locational banking statistics (LBS). Markets; BIS locational banking statistics (LBS).
As a result of the dominant role of the dollar as a global reserve currency, disruptions in the As a result of the dominant role of the dollar as a global reserve currency, disruptions in the
smooth functioning of the global dollar market can have far-reaching repercussions on smooth functioning of the global dollar market can have far-reaching repercussions on
international trade and financial transactions. A June 2020 report by BIS stressed the central role international trade and financial transactions. A June 2020 report by BIS stressed the central role
of the dollar in the global economy by concluding that dollar funding activities are highly of the dollar in the global economy by concluding that dollar funding activities are highly
complex, geographical y dispersed, and interconnected in ways that provide benefits to the complex, geographical y dispersed, and interconnected in ways that provide benefits to the
stability of the global financial system. This also means, however, that strains in the system can stability of the global financial system. This also means, however, that strains in the system can
easily be transmitted across different financial markets and across regions.139 easily be transmitted across different financial markets and across regions.139
In addition, the dominant role of the dollar in international trade pricing and trade financing In addition, the dominant role of the dollar in international trade pricing and trade financing
means the dollar plays a key role in the global economic recovery and that it could amplify the means the dollar plays a key role in the global economic recovery and that it could amplify the
impact of the pandemic, according to the IMF.140 Traditional y, most economic models are based impact of the pandemic, according to the IMF.140 Traditional y, most economic models are based
on the assumption that countries set their prices in their home currencies. As a result, on the assumption that countries set their prices in their home currencies. As a result,
domestical y produced goods and services become cheaper for trading partners when the domestical y produced goods and services become cheaper for trading partners when the
domestic currency weakens, leading to increased demand by trading partners and increased domestic currency weakens, leading to increased demand by trading partners and increased
exports. However, much international trade, including many commodities, is priced in dollars, exports. However, much international trade, including many commodities, is priced in dollars,
which means that trade volumes respond less than they would if goods were priced in exporters’ which means that trade volumes respond less than they would if goods were priced in exporters’
home currencies. Limited evidence indicates that a significant share of bilateral trade between home currencies. Limited evidence indicates that a significant share of bilateral trade between

139 Bank for International Settlements, 139 Bank for International Settlements, U.S, Dollar Funding: An International Perspective, CGFS Papers, No. 65, June , CGFS Papers, No. 65, June
2020, p. 52. https://www.bis.org/publ/cgfs65.htm. 2020, p. 52. https://www.bis.org/publ/cgfs65.htm.
140 140 Dominant Currencies and External Adjustment, IMF Staff Discussion Note 20/05, International Monetary Fund, , IMF Staff Discussion Note 20/05, International Monetary Fund,
July 2020. July 2020.
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countries other than the United States is invoiced in U.S. dollars.141 As a result, an appreciation of countries other than the United States is invoiced in U.S. dollars.141 As a result, an appreciation of
the dollar against other currencies, or a weakening in other currencies, has a muted effect on the dollar against other currencies, or a weakening in other currencies, has a muted effect on
export volumes by other countries, at least in the short run, as has been evident in movements in export volumes by other countries, at least in the short run, as has been evident in movements in
exchange rates and trade volumes of emerging market and developing economies. The IMF also exchange rates and trade volumes of emerging market and developing economies. The IMF also
concluded that because countries other than the United States price much of their trade in dollars, concluded that because countries other than the United States price much of their trade in dollars,
an appreciation in the value of the dollar, or a depreciation in the value of other currencies an appreciation in the value of the dollar, or a depreciation in the value of other currencies
relative to the dollar, reduces both exports and imports. As a result, a depreciation in other relative to the dollar, reduces both exports and imports. As a result, a depreciation in other
currencies relative to the dollar provides less of a boost in their exports and, therefore, less of a currencies relative to the dollar provides less of a boost in their exports and, therefore, less of a
countercyclical support. countercyclical support.
Together, these effects translate into movements in the exchange value of the dollar that at times Together, these effects translate into movements in the exchange value of the dollar that at times
contrast with traditional theory, since such movements do not affect trade volumes as much as contrast with traditional theory, since such movements do not affect trade volumes as much as
might be expected. For instance, after appreciating in March 2020, the trade-weighted value of might be expected. For instance, after appreciating in March 2020, the trade-weighted value of
the dollar steadily depreciated through December 2020 and then has roller-coasted through 2021. the dollar steadily depreciated through December 2020 and then has roller-coasted through 2021.
In standard models, the depreciation in the dollar would be expected to lower export prices and, In standard models, the depreciation in the dollar would be expected to lower export prices and,
in turn, increase demand for U.S. exports, or increase the volume of exports, while import in turn, increase demand for U.S. exports, or increase the volume of exports, while import
volumes would be expected to decline along with the rising price of foreign currencies relative to volumes would be expected to decline along with the rising price of foreign currencies relative to
the dollar. GDP data through the second quarter of 2021 indicate, however, that U.S. trade prices the dollar. GDP data through the second quarter of 2021 indicate, however, that U.S. trade prices
for exports and imports and trade volumes for exports and imports general y moved in tandem, as for exports and imports and trade volumes for exports and imports general y moved in tandem, as
indicated in indicated in Figure 15.
The international role of the dollar and the wel -developed U.S. capital markets also provide the The international role of the dollar and the wel -developed U.S. capital markets also provide the
United States with greater latitude in financing its trade deficit. For some trade specialists, the United States with greater latitude in financing its trade deficit. For some trade specialists, the
widely accepted characterization of the current account as a product of a domestic saving- widely accepted characterization of the current account as a product of a domestic saving-
investment relationship fails to distinguish between a country’s domestic saving-investment investment relationship fails to distinguish between a country’s domestic saving-investment
balance, its ability to finance its trade deficit, and the role of cross-border capital flows. These balance, its ability to finance its trade deficit, and the role of cross-border capital flows. These
flows suggest that the ability of the United States to finance its trade imbalances through capital flows suggest that the ability of the United States to finance its trade imbalances through capital
inflows eases the constraint imposed by the domestic saving-investment balance. inflows eases the constraint imposed by the domestic saving-investment balance.
The international role of the dollar also increases pressure on the Federal Reserve essential y to The international role of the dollar also increases pressure on the Federal Reserve essential y to
assume the lead role as the global lender of last resort during crises. Reminiscent of the financial assume the lead role as the global lender of last resort during crises. Reminiscent of the financial
crisis, the global economy experienced a period of dollar shortage, requiring the Federal Reserve crisis, the global economy experienced a period of dollar shortage, requiring the Federal Reserve
to take numerous steps to ensure the supply of dollars to the U.S. and global economies, including to take numerous steps to ensure the supply of dollars to the U.S. and global economies, including
activating existing currency swap arrangements, establishing such arrangements with additional activating existing currency swap arrangements, establishing such arrangements with additional
central banks, and creating new financial facilities to provide liquidity to central banks and central banks, and creating new financial facilities to provide liquidity to central banks and
monetary authorities.142 Typical y, banks lend long-term and borrow short-term and can only monetary authorities.142 Typical y, banks lend long-term and borrow short-term and can only
borrow from their home central bank. In turn, central banks can only provide liquidity in their borrow from their home central bank. In turn, central banks can only provide liquidity in their
own currency. Consequently, a bank can become il iquid in a panic, meaning it cannot borrow in own currency. Consequently, a bank can become il iquid in a panic, meaning it cannot borrow in
private markets to meet short-term cash flow needs. Swap lines are designed to al ow foreign private markets to meet short-term cash flow needs. Swap lines are designed to al ow foreign
central banks the funds necessary to provide needed liquidity to their country’s banks in dollars. central banks the funds necessary to provide needed liquidity to their country’s banks in dollars.

141 Ibid., p. 8. 141 Ibid., p. 8.
142 Politi, James, Brendan Greeley, and Colby Smith, “Fed Sets Up Scheme to Meet Booming Foreign Demand for 142 Politi, James, Brendan Greeley, and Colby Smith, “Fed Sets Up Scheme to Meet Booming Foreign Demand for
Dollars,” Dollars,” Financial Tim es, March 31, 2020. https://www.ft.com/content/6c976586-a6ea-42ec-a369-9353186c05bb. , March 31, 2020. https://www.ft.com/content/6c976586-a6ea-42ec-a369-9353186c05bb.
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Figure 15. Quarterly Price and Quantity Indexes, U.S. Goods Imports and Exports

Source: Bureau of Economic Analysis. Created by CRS. Bureau of Economic Analysis. Created by CRS.
Notes: 2012 = 100. 2012 = 100.
U.S. Monthly Trade
BEA data il ustrate the sharp drop in U.S. trade volumes for both exports and imports of goods BEA data il ustrate the sharp drop in U.S. trade volumes for both exports and imports of goods
and services in 2020 compared with 2019. Trade in services was especial y hard hit as a result of and services in 2020 compared with 2019. Trade in services was especial y hard hit as a result of
lockdowns that restricted tourism travel and lower transport revenues as a result of the overal lockdowns that restricted tourism travel and lower transport revenues as a result of the overal
decline in economic activity. Trade in services fel sharply with the volume of services exports decline in economic activity. Trade in services fel sharply with the volume of services exports
and imports declining by multiples of the percentage decline in goods trade, as indicated in and imports declining by multiples of the percentage decline in goods trade, as indicated in Table
12. Prices for services exports and imports, however, fel slightly compared with the decline in . Prices for services exports and imports, however, fel slightly compared with the decline in
prices of goods imports and exports. The largest changes in prices and quantities for goods and prices of goods imports and exports. The largest changes in prices and quantities for goods and
services occurred in the second quarter of 2020 following the same pattern as the second quarter services occurred in the second quarter of 2020 following the same pattern as the second quarter
change in GDP. The quantity of U.S. exports and imports fel by 23% and 16%, respectively, in change in GDP. The quantity of U.S. exports and imports fel by 23% and 16%, respectively, in
second quarter 2020, compared with the preceding quarter.143 second quarter 2020, compared with the preceding quarter.143
In value terms, the prices of U.S. goods exports in second quarter 2020 fel by 6.0%, while the In value terms, the prices of U.S. goods exports in second quarter 2020 fel by 6.0%, while the
price of imports fel by 3.5%, compared with the first quarter. In the third quarter, both export and price of imports fel by 3.5%, compared with the first quarter. In the third quarter, both export and
import volumes increased by about 20%, while export and import prices rose by 3.8% and 2.1%, import volumes increased by about 20%, while export and import prices rose by 3.8% and 2.1%,
respectively. In fourth quarter 2020, U.S. export and import prices increased slightly, while export respectively. In fourth quarter 2020, U.S. export and import prices increased slightly, while export
and import volumes increased by 6.0% and 7.0%, respectively. As a result, the overal value of and import volumes increased by 6.0% and 7.0%, respectively. As a result, the overal value of
exports and imports rose slightly less than 5% in the fourth quarter of 2020. According to U.S. exports and imports rose slightly less than 5% in the fourth quarter of 2020. According to U.S.
balance of payments data, the overal annual value of U.S, goods exports and imports (the balance of payments data, the overal annual value of U.S, goods exports and imports (the
combined changes in prices and volumes) dropped by 35% and 16%, respectively year-over-year combined changes in prices and volumes) dropped by 35% and 16%, respectively year-over-year
(2020 compared to 2019).144 (2020 compared to 2019).144
In the first quarter of 2021, U.S. goods export volumes fel slightly, while import volumes rose by In the first quarter of 2021, U.S. goods export volumes fel slightly, while import volumes rose by
2.6%. Export and import price indexes both rose, reflecting an increase of 30% in petroleum 2.6%. Export and import price indexes both rose, reflecting an increase of 30% in petroleum
export prices and a rise in petroleum import prices of 38%. Compared to the decline in goods export prices and a rise in petroleum import prices of 38%. Compared to the decline in goods
export and import volumes in the second quarter of 2020, first quarter 2021 export and import export and import volumes in the second quarter of 2020, first quarter 2021 export and import
volumes were up 28% and 31%, respectively, reflecting an increase in the global rate of economic volumes were up 28% and 31%, respectively, reflecting an increase in the global rate of economic
growth. Relative to first quarter 2021, price indexes for exports and imports in the second quarter growth. Relative to first quarter 2021, price indexes for exports and imports in the second quarter

143 143 Gross Domestic Product, Second Quarter, 2021 (Advance Estimate) and Annual Update, Bureau of Economic Bureau of Economic
Analysis, July 29, 2021. Analysis, July 29, 2021.
144 144 U.S. International Trade in Goods and Services June 2021 , Bureau of Economic Analysis, August 5, 2021. , Bureau of Economic Analysis, August 5, 2021.
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of 2021 rose by 5.8% and 3.4%, respectively. In contrast, goods export and import volumes of 2021 rose by 5.8% and 3.4%, respectively. In contrast, goods export and import volumes
increased by 1.4% and 1.6$, respectively. The combined price and quantity affects indicate that increased by 1.4% and 1.6$, respectively. The combined price and quantity affects indicate that
goods exports grew by 6.8% in the second quarter of 2021 compared with first quarter 2021, goods exports grew by 6.8% in the second quarter of 2021 compared with first quarter 2021,
while goods imports increased by 4.2%. while goods imports increased by 4.2%.
In the first half of 2020, trade in services experienced a sharp drop in quantity and price terms as In the first half of 2020, trade in services experienced a sharp drop in quantity and price terms as
travel exports fel by 61% and travel imports dropped by 90%. Overal , exports of services travel exports fel by 61% and travel imports dropped by 90%. Overal , exports of services
declined by 10.3% and 15.3% in the first and second quarters of 2020, but demonstrated mixed declined by 10.3% and 15.3% in the first and second quarters of 2020, but demonstrated mixed
changes in the subsequent four quarters. Similarly, total import services fel by 9.7% and 24.6% changes in the subsequent four quarters. Similarly, total import services fel by 9.7% and 24.6%
in the first two quarters of 2020, but experienced positive changes in volumes since. Travel- in the first two quarters of 2020, but experienced positive changes in volumes since. Travel-
related imports, in particular, rose by 97.9% in fourth quarter 2020 compared with the preceding related imports, in particular, rose by 97.9% in fourth quarter 2020 compared with the preceding
quarter. The quarterly prices of both services exports and imports increased over each of the quarter. The quarterly prices of both services exports and imports increased over each of the
subsequent four quarters. U.S. imports of services in the second quarter, however, grew twice as subsequent four quarters. U.S. imports of services in the second quarter, however, grew twice as
fast as exports of services; the overal goods and services deficit in the second quarter increased fast as exports of services; the overal goods and services deficit in the second quarter increased
by 1.4% over the first quarter.145 by 1.4% over the first quarter.145
Table 12. U.S. Goods and Services Exports and Imports, Change in Quarterly Price
and Quantity Indexes
Percentage change Percentage change

Year over Year % Year over Year %
Quarter over Quarter % Change Quarter over Quarter % Change
Change Change

2019 2019
2020 2020
2020 2020
2021 2021

1q 1q
2q 2q
3q 3q
4q 4q
1q 1q
2q 2q
Goods

Exports Exports

Quantity Quantity
-0.1% -0.1%
-10.2% -10.2%
-1.2% -1.2%
-23.1% -23.1%
18.8% 18.8%
5.9% 5.9%
-0.4% -0.4%
1.4% 1.4%
Price Price
-1.6 -1.6
-4.0 -4.0
-1.1 -1.1
-6.0 -6.0
3.8 3.8
1.7 1.7
6.1 6.1
5.8 5.8
Imports Imports

Quantity Quantity
0.5 0.5
-5.6 -5.6
-1.9 -1.9
-15.6 -15.6
19.5 19.5
6.8 6.8
2.6 2.6
1.4 1.4
Price Price
-2.1 -2.1
-2.8 -2.8
-0.5 -0.5
-3.5 -3.5
2.1 2.1
0.4 0.4
3.5 3.5
3.4 3.4
Services

Exports Exports

Quantity Quantity
-0.1 -0.1
-19.7 -19.7
-10.3 -10.3
-15.3 -15.3
-1.3 -1.3
3.8 3.8
-1.5 -1.5
1.6 1.6
Price Price
1.7 1.7
0.4 0.4
0.4 0.4
-2.1 -2.1
2.1 2.1
1.2 1.2
2.2 2.2
1.7 1.7
Imports Imports

Quantity Quantity
3.9 3.9
-22.6 -22.6
-9.7 -9.7
-24.6 -24.6
6.7 6.7
8.3 8.3
0.5 0.5
4.6 4.6
Price Price
0.9 0.9
0.5 0.5
0.7 0.7
-1.0 -1.0
1.1 1.1
1.2 1.2
1.1 1.1
2.1 2.1
Source: Bureau of Economic Analysis. Quarterly GDP estimates, export and imports price and quantity indices. Bureau of Economic Analysis. Quarterly GDP estimates, export and imports price and quantity indices.
Created by CRS. Created by CRS.
Notes: Annual changes represent percentage change in 4th quarter index values over the 4th quarter of the Annual changes represent percentage change in 4th quarter index values over the 4th quarter of the
preceding year; quarterly changes represent the change in quarterly index values over the previous quarter. preceding year; quarterly changes represent the change in quarterly index values over the previous quarter.
On September 3, 2021, the U.S. Census Bureau reported a decrease in the overal U.S. goods and On September 3, 2021, the U.S. Census Bureau reported a decrease in the overal U.S. goods and
services trade deficit in July 2021of over $3 bil ion to reach a monthly total of $70.1bil ion, services trade deficit in July 2021of over $3 bil ion to reach a monthly total of $70.1bil ion,

145 Ibid. 145 Ibid.
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compared to the June total of $73.2 bil ion. The decrease in the monthly goods and services compared to the June total of $73.2 bil ion. The decrease in the monthly goods and services
deficit primarily reflected a 1.3% increase in goods and services exports, compared to a 0.15% deficit primarily reflected a 1.3% increase in goods and services exports, compared to a 0.15%
decrease in goods and services imports, as indicated in decrease in goods and services imports, as indicated in Figure 16.146 According to BEA data, .146 According to BEA data,
goods exports increased from $145.9 bil ion in June 2021 to $148.6 bil ion in July 2021; goods goods exports increased from $145.9 bil ion in June 2021 to $148.6 bil ion in July 2021; goods
imports fel from $239.2 bil ion to $236.3 bil ion. On a year-over-basis, the overal goods and imports fel from $239.2 bil ion to $236.3 bil ion. On a year-over-basis, the overal goods and
services trade deficit in 2020 increased by $105 bil ion, or 18.2%, compared with 2019 and services trade deficit in 2020 increased by $105 bil ion, or 18.2%, compared with 2019 and
demonstrates the impact that business lockdowns had on U.S. and global trade in the first quarter demonstrates the impact that business lockdowns had on U.S. and global trade in the first quarter
of 2020. Relative to 2019, U.S. goods exports in 2020 fel by 13.2%, while goods imports fel by of 2020. Relative to 2019, U.S. goods exports in 2020 fel by 13.2%, while goods imports fel by
6.6%, accounting for the largest part of the increase in the annual U.S. trade balance. Services 6.6%, accounting for the largest part of the increase in the annual U.S. trade balance. Services
exports declined by 21% in 2020 relative to 2019, while services imports fel by 22%, reflecting exports declined by 21% in 2020 relative to 2019, while services imports fel by 22%, reflecting
the drop overal in services activities as a result of quarantines and business lockdowns. the drop overal in services activities as a result of quarantines and business lockdowns.
Figure 16. Monthly U.S. Exports and Imports of Goods and Services 2020-2021

Source: Census Bureau,Census Bureau, Bureau of Economic Analysis. Created by CRS. Bureau of Economic Analysis. Created by CRS.
Global Energy Markets
The price of oil has served as an additional indicator of the impact of the pandemic on the global The price of oil has served as an additional indicator of the impact of the pandemic on the global
economy. As global economic activity fel in March and April 2020, demand for oil also fel , economy. As global economic activity fel in March and April 2020, demand for oil also fel ,
resulting in rising inventories and fal ing prices. In response, oil producers reduced oil resulting in rising inventories and fal ing prices. In response, oil producers reduced oil
production, only slowly restoring output as the global economic activity recovered. As financial production, only slowly restoring output as the global economic activity recovered. As financial
market indexes declined in 2020 and the dollar appreciated, the price of Brent crude oil dropped market indexes declined in 2020 and the dollar appreciated, the price of Brent crude oil dropped
close to $20 per barrel on March 20, as indicated in close to $20 per barrel on March 20, as indicated in Figure 17.
As a result of the steep drop in oil prices, oil producers agreed in April, 2020 to reduce global As a result of the steep drop in oil prices, oil producers agreed in April, 2020 to reduce global
supply by 10%, or 9.6 mil ion barrels per day. Since the low prices recorded in April, the price of supply by 10%, or 9.6 mil ion barrels per day. Since the low prices recorded in April, the price of
Brent crude oil general y moved within a range of $40 to $44 per barrel through late November Brent crude oil general y moved within a range of $40 to $44 per barrel through late November
2020, when it began edging above $50 per barrel. In trading December 10, 2020, the price of 2020, when it began edging above $50 per barrel. In trading December 10, 2020, the price of
Brent crude oil breached the $50 per barrel mark for the first time since March 2020. As energy Brent crude oil breached the $50 per barrel mark for the first time since March 2020. As energy
demand showed signs of recovering in 2021, the cuts in oil production that began in April were demand showed signs of recovering in 2021, the cuts in oil production that began in April were
trimmed to 7.7 mil ion barrels per day and were trimmed by an additional 2 mil ion barrels per trimmed to 7.7 mil ion barrels per day and were trimmed by an additional 2 mil ion barrels per
day starting in January 2021. day starting in January 2021.

146 146 Monthly U.S. International Trade in Goods and Services, July 2021, Census Bureau, September 3, 2021. , Census Bureau, September 3, 2021.
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On February 23, 2021, the price of Brent crude oil rose above $67 per barrel, the highest price On February 23, 2021, the price of Brent crude oil rose above $67 per barrel, the highest price
since January 9, 2020, but dropped to $64 per barrel by March 3, 2021. On March 5, 2021, the since January 9, 2020, but dropped to $64 per barrel by March 3, 2021. On March 5, 2021, the
Brent crude price of a barrel of oil rose to $69 per barrel, the highest since January 2020, as Brent crude price of a barrel of oil rose to $69 per barrel, the highest since January 2020, as
OPEC and Russia decided against increasing petroleum output.147 By the end of June 2021 the OPEC and Russia decided against increasing petroleum output.147 By the end of June 2021 the
price of Brent crude oil pushed above $75 per barrel. In meetings in early July 2021, OPEC price of Brent crude oil pushed above $75 per barrel. In meetings in early July 2021, OPEC
members agreed to increase production as the international price of crude oil reached nearly $78 members agreed to increase production as the international price of crude oil reached nearly $78
per barrel, but objections by the United Arab Emirates (UAE) over the calculation used to per barrel, but objections by the United Arab Emirates (UAE) over the calculation used to
increase production targets held up the agreement.148 On July18, 2021, OPEC and Russia agreed increase production targets held up the agreement.148 On July18, 2021, OPEC and Russia agreed
to increase crude oil production by an additional 400,000 barrels a day into 2022.149 On August to increase crude oil production by an additional 400,000 barrels a day into 2022.149 On August
11, 2021, the Biden Administration, citing concerns over the negative impact rising energy prices 11, 2021, the Biden Administration, citing concerns over the negative impact rising energy prices
could have on an economic recovery, cal ed on OPEC to increase oil production beyond levels could have on an economic recovery, cal ed on OPEC to increase oil production beyond levels
previously announced.150 According to the Bureau of Labor Statistics, U.S. energy prices in June previously announced.150 According to the Bureau of Labor Statistics, U.S. energy prices in June
had increased by 35% over the previous year.151 had increased by 35% over the previous year.151
Figure 17. Brent Crude Oil Price Per Barrel in Dollars
January 9, 2020, through September 24, 2021 January 9, 2020, through September 24, 2021

Source: Markets Insider. Created by CRS. Markets Insider. Created by CRS.
Country Policy Responses
As previously indicated, after a delayed response, most central banks followed the actions of As previously indicated, after a delayed response, most central banks followed the actions of
Federal Reserve. In addition, national governments adopted various fiscal measures to sustain Federal Reserve. In addition, national governments adopted various fiscal measures to sustain
economic activity. In response to growing concerns over the global economic impact of the economic activity. In response to growing concerns over the global economic impact of the
pandemic, G-7 finance ministers and central bankers released a statement on March 3, 2020, pandemic, G-7 finance ministers and central bankers released a statement on March 3, 2020,

147 Raval, Anjli, Oil Jumps as OPEC and Allies Decide Against Big Rise in 147 Raval, Anjli, Oil Jumps as OPEC and Allies Decide Against Big Rise in ~~Outp ut~~Output, Financial T imes, March 5, 2021. , Financial T imes, March 5, 2021.
https://www.ft.com/content/771ebf3a-cff0-4ff3-ab9a-0bbd01a33f55. https://www.ft.com/content/771ebf3a-cff0-4ff3-ab9a-0bbd01a33f55.
148 Sheppard, David, Why is OPEC+ in T urmoil When Oil Prices Are Elevated?, 148 Sheppard, David, Why is OPEC+ in T urmoil When Oil Prices Are Elevated?, Financial Times, July 5, 2021. , July 5, 2021.
149 Rovnick, Naomi, T ommy Stubbington, Hudson Lockett, and Joe Rennison, Global Markets Shaken by Fears Over 149 Rovnick, Naomi, T ommy Stubbington, Hudson Lockett, and Joe Rennison, Global Markets Shaken by Fears Over
Delta Variant , Delta Variant , Financial Tim es, July 19, 2021. https://www.ft.com/content/5b2248be-8f0e-4235-ba2e-2187c96f16a6. July 19, 2021. https://www.ft.com/content/5b2248be-8f0e-4235-ba2e-2187c96f16a6.
150 Fedor, Lauren and Derek Brower, White House Calls on OPEC to Boost Production to Contain Fuel Prices, 150 Fedor, Lauren and Derek Brower, White House Calls on OPEC to Boost Production to Contain Fuel Prices,
Financial Tim es, August 11, 2021. https://www.ft.com/content/a8a631cf-de43-47e8-8cc4-99732c39c4da. , August 11, 2021. https://www.ft.com/content/a8a631cf-de43-47e8-8cc4-99732c39c4da.
151 151 Producer Price Indexes-June 2021, Bureau of Labor Statistics, July 14, 2021. , Bureau of Labor Statistics, July 14, 2021.
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indicating they would “use al appropriate policy tools” to sustain economic growth.152 The indicating they would “use al appropriate policy tools” to sustain economic growth.152 The
Finance Ministers also pledged fiscal support to ensure health systems can sustain efforts to fight Finance Ministers also pledged fiscal support to ensure health systems can sustain efforts to fight
the outbreak.153 In most cases, however, countries pursued their own divergent strategies, in some the outbreak.153 In most cases, however, countries pursued their own divergent strategies, in some
cases including banning exports of medical equipment. Following the G-7 statement, the U.S. cases including banning exports of medical equipment. Following the G-7 statement, the U.S.
Federal Reserve (Fed) lowered its federal funds rate by 50 basis points, or 0.5%, to a range of Federal Reserve (Fed) lowered its federal funds rate by 50 basis points, or 0.5%, to a range of
1.0% to 1.25% due to concerns about the “evolving risks to economic activity of the COVID- 1.0% to 1.25% due to concerns about the “evolving risks to economic activity of the COVID-
19.”154 At the time, the cut was the largest one-time reduction in the interest rate by the Fed since 19.”154 At the time, the cut was the largest one-time reduction in the interest rate by the Fed since
the 2008-2009 global financial crisis. the 2008-2009 global financial crisis.
On April 15, 2021, the Director-General of the WTO cal ed on WTO members and vaccine On April 15, 2021, the Director-General of the WTO cal ed on WTO members and vaccine
manufacturers to increase production, reduce export restrictions, and suspend intel ectual property manufacturers to increase production, reduce export restrictions, and suspend intel ectual property
rights on COVID-19 vaccines to increase immunizations.155 The WHO also reported that new rights on COVID-19 vaccines to increase immunizations.155 The WHO also reported that new
COVID-19 cases had nearly doubled around the world over the preceding two months, COVID-19 cases had nearly doubled around the world over the preceding two months,
approaching the highest rates of infection since the start of the pandemic. Reportedly, new case approaching the highest rates of infection since the start of the pandemic. Reportedly, new case
numbers had spiked in every region of the world, with the largest outbreaks occurring in India, numbers had spiked in every region of the world, with the largest outbreaks occurring in India,
Brazil, Poland, Turkey and some other countries.156 Also on April 15, 2021, a group of 175 former Brazil, Poland, Turkey and some other countries.156 Also on April 15, 2021, a group of 175 former
world leaders and Nobel laureates cal ed on the United States to suspend intel ectual property world leaders and Nobel laureates cal ed on the United States to suspend intel ectual property
rights for COVID-19 vaccines to facilitate the international production and distribution of rights for COVID-19 vaccines to facilitate the international production and distribution of
vaccines by al owing developing countries the ability to manufacture their own vaccines. The vaccines by al owing developing countries the ability to manufacture their own vaccines. The
group warned that, “… inequitable vaccine access would impact the global economy and prevent group warned that, “… inequitable vaccine access would impact the global economy and prevent
it from recovering.”157 it from recovering.”157
On April 16, the WHO announced that it would develop one or more COVID-19 technology hubs On April 16, the WHO announced that it would develop one or more COVID-19 technology hubs
to transfer a “comprehensive technology package and provide appropriate technology to to transfer a “comprehensive technology package and provide appropriate technology to
interested manufacturers” in developing economies.158 Reportedly, the initiative’s goal is to make interested manufacturers” in developing economies.158 Reportedly, the initiative’s goal is to make
the technology either free of intel ectual property constraints in developing economies, or that the technology either free of intel ectual property constraints in developing economies, or that
such rights are made available through nonexclusive licenses. such rights are made available through nonexclusive licenses.
China, which experienced positive quarterly rates of economic growth throughout the pandemic- China, which experienced positive quarterly rates of economic growth throughout the pandemic-
related recession, reportedly considered a series of actions to support its economic growth rate related recession, reportedly considered a series of actions to support its economic growth rate
due to concerns over a slowing economy. On July 7, 2021, the Chinese Cabinet stated it would due to concerns over a slowing economy. On July 7, 2021, the Chinese Cabinet stated it would
scale back pandemic-related spending to address concerns over accumulated government debt scale back pandemic-related spending to address concerns over accumulated government debt
and potential y to maintain low borrowing costs for smal businesses. The statement also and potential y to maintain low borrowing costs for smal businesses. The statement also
indicated the cabinet supported cuts by the People’s Bank of China (PBOC) in its required indicated the cabinet supported cuts by the People’s Bank of China (PBOC) in its required

152 152 Statement of G-7 Finance Ministers and Central Bank Governors, March 3, 2020. https://home.treasury.gov/news/, March 3, 2020. https://home.treasury.gov/news/
press-releases/sm927. Long, Heather, “ G-7 Leaders Promise to Help Economy as COVID-19 Spreads, But T hey Don’t press-releases/sm927. Long, Heather, “ G-7 Leaders Promise to Help Economy as COVID-19 Spreads, But T hey Don’t
Announce Any New Action,” Announce Any New Action,” Washington Post, March 3, 2020. https://www.washingtonpost.com/business/2020/03/, March 3, 2020. https://www.washingtonpost.com/business/2020/03/
03/economy-COVID-19-rate-cuts/. 03/economy-COVID-19-rate-cuts/.
153 Giles et al., “Finance Ministers Ready to T ake Action.” 153 Giles et al., “Finance Ministers Ready to T ake Action.”
154 154 Federal Reserve Releases FOMC Statement, March 3, 2020, https://www.federalreserve.gov/newsevents/, March 3, 2020, https://www.federalreserve.gov/newsevents/
pressreleases/monetary20200303a.htm. pressreleases/monetary20200303a.htm.
155 Cunnigham, Erin, New African WT O Head Urges Members to T ake Action on Vaccine Inequity, 155 Cunnigham, Erin, New African WT O Head Urges Members to T ake Action on Vaccine Inequity, The Washington
Post, April 15, 2021. , April 15, 2021.
156 Cunningham, Erin and Siobhan O’Grady, New Global Coronavirus Cases Nearly Double in T wo Months, 156 Cunningham, Erin and Siobhan O’Grady, New Global Coronavirus Cases Nearly Double in T wo Months, The
Washington Post, April 16, 2021. https://www.washingtonpost.com/world/2021/04/16/global-coronavirus-cases-surge-, April 16, 2021. https://www.washingtonpost.com/world/2021/04/16/global-coronavirus-cases-surge-
who/. who/.
157 Williams, Aime, Former World Leaders Call on Biden to Suspend Covid-19 Vaccine Patents, 157 Williams, Aime, Former World Leaders Call on Biden to Suspend Covid-19 Vaccine Patents, Financial Times, ,
April 15, 2021. https://www.ft.com/content/43fd53f5-2b82-4e41-981c-8544a6ce996b. April 15, 2021. https://www.ft.com/content/43fd53f5-2b82-4e41-981c-8544a6ce996b.
158 World Health Organization, Establishment of a COVID-19 mRNA Vaccine T echnology T ransfer Hub to Scale Up 158 World Health Organization, Establishment of a COVID-19 mRNA Vaccine T echnology T ransfer Hub to Scale Up
Global Manufacturing, April 16, 2021. Global Manufacturing, April 16, 2021.
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reserve ratio (RRR) – general y considered to be among the strongest actions central banks can reserve ratio (RRR) – general y considered to be among the strongest actions central banks can
take – to support the economy.159 take – to support the economy.159
According to the WHO, sixteen African countries experienced their worst period during the According to the WHO, sixteen African countries experienced their worst period during the
pandemic in early July 2021, as a result of rising rates of infections and deaths, with even larger pandemic in early July 2021, as a result of rising rates of infections and deaths, with even larger
numbers expected.160 Some of the most severely affected countries were Namibia, Uganda, numbers expected.160 Some of the most severely affected countries were Namibia, Uganda,
Zambia, and South Africa, The WHO indicated the continent was experiencing a third wave of Zambia, and South Africa, The WHO indicated the continent was experiencing a third wave of
infections as a result of the rapidly spreading Delta variant. Reportedly, less than one percent of infections as a result of the rapidly spreading Delta variant. Reportedly, less than one percent of
the continent’s population has been vaccinated. the continent’s population has been vaccinated.
In the early stages of the pandemic, foreign investors pulled an estimated $26 bil ion out of In the early stages of the pandemic, foreign investors pulled an estimated $26 bil ion out of
developing Asian economies not including more than $16 bil ion out of India, increasing concerns developing Asian economies not including more than $16 bil ion out of India, increasing concerns
about a major economic recession in Asia. Some estimates indicate that 29 mil ion people in Latin about a major economic recession in Asia. Some estimates indicate that 29 mil ion people in Latin
America could fal into poverty, reversing a decade of efforts to narrow income inequality. Some America could fal into poverty, reversing a decade of efforts to narrow income inequality. Some
analysts also expressed concern that Africa, after escaping the initial spread of infections, could analysts also expressed concern that Africa, after escaping the initial spread of infections, could
face a sharp increase in rates of infection outside South Africa, Egypt, Nigeria, Algeria, and face a sharp increase in rates of infection outside South Africa, Egypt, Nigeria, Algeria, and
Ghana, where most of the initial infections had occurred.161 Ghana, where most of the initial infections had occurred.161
In October 2020, the Bank of Canada indicated that Canada’s quarterly rate of growth declined by In October 2020, the Bank of Canada indicated that Canada’s quarterly rate of growth declined by
13.0% in the second quarter of 2020, but by 4.4% in the third quarter as business and other 13.0% in the second quarter of 2020, but by 4.4% in the third quarter as business and other
restrictions were relaxed and by a rebound in home sales. The Bank also estimated that growth restrictions were relaxed and by a rebound in home sales. The Bank also estimated that growth
for 2020 declined at an annual rate of 5.3% in 2020, but could increase by an estimated 6.0% in for 2020 declined at an annual rate of 5.3% in 2020, but could increase by an estimated 6.0% in
2021 and 4.6%in 2022.162 On December 1, the Canadian government adopted a C$1 tril ion 2021 and 4.6%in 2022.162 On December 1, the Canadian government adopted a C$1 tril ion
spending package to support economic growth, reportedly the largest such fiscal stimulus spending package to support economic growth, reportedly the largest such fiscal stimulus
package adopted in the post-World War II period.163 The package provided relief to provinces and package adopted in the post-World War II period.163 The package provided relief to provinces and
territories to improve infection in long-term care facilities, industries hard hit by the pandemic, territories to improve infection in long-term care facilities, industries hard hit by the pandemic,
such as tourism, travel and arts, and provide loans to eligible businesses and to lower and middle such as tourism, travel and arts, and provide loans to eligible businesses and to lower and middle
income families. income families.
India announced on March 25, 2021, that it was temporarily halting exports of COVID-19 India announced on March 25, 2021, that it was temporarily halting exports of COVID-19
vaccines and prioritizing local vaccinations in response to a resurgence in viral cases.164 In early vaccines and prioritizing local vaccinations in response to a resurgence in viral cases.164 In early
April 2021, India and Brazil were designated global viral infection hot spots due to a resurgence April 2021, India and Brazil were designated global viral infection hot spots due to a resurgence
in cases. On May 6, India reported a single-day total of 412,000 new cases.165 By July 2, India’s in cases. On May 6, India reported a single-day total of 412,000 new cases.165 By July 2, India’s
death toll from the pandemic surpassed 400,000.166 Brazil reportedly has had over 350,000 viral-death toll from the pandemic surpassed 400,000.166 Brazil reportedly has had over 350,000 viral-

159 Qian, Colin, Judy Hua, Kevin Yao, Giles Elgood and Mark Heinrich, China's Cabinet Says It Will Use RRR Cuts to 159 Qian, Colin, Judy Hua, Kevin Yao, Giles Elgood and Mark Heinrich, China's Cabinet Says It Will Use RRR Cuts to
Support Real Economy, Reuters, July 7, 2021. Support Real Economy, Reuters, July 7, 2021.
160 Cunningham, Erin, Africa Suffers ‘Worst Pandemic Week Ever’ as Cases Surge, Vaccinations Lag, 160 Cunningham, Erin, Africa Suffers ‘Worst Pandemic Week Ever’ as Cases Surge, Vaccinations Lag, The Washington
Post, July 9, 2021. July 9, 2021.
161 Pilling, David, T he Pandemic is Getting Worse: Africa Prepares for Surge in Infections, 161 Pilling, David, T he Pandemic is Getting Worse: Africa Prepares for Surge in Infections, Financial Times, July 20, , July 20,
2020. https://www.ft.com/content/1b3274ce-de3b-411d-8544-a024e64c3542. 2020. https://www.ft.com/content/1b3274ce-de3b-411d-8544-a024e64c3542.
162 162 Monetary Policy Report July 2021, Bank of Canada, July 2021. , Bank of Canada, July 2021.
163 Canada Unveils Largest Economic Relief Package Since WW2, BBC News, December 1, 2020. 163 Canada Unveils Largest Economic Relief Package Since WW2, BBC News, December 1, 2020.
https://www.bbc.com/news/world-us-canada-55139229. https://www.bbc.com/news/world-us-canada-55139229.
164 Findlay, Stephanie, Michael Peel, Donato Paolo Mancini, Andres Schipani and Jasmine Cameron-Chileshe, India 164 Findlay, Stephanie, Michael Peel, Donato Paolo Mancini, Andres Schipani and Jasmine Cameron-Chileshe, India
Blocks Vaccine Exports in Blow to Dozens of Nations Blocks Vaccine Exports in Blow to Dozens of Nations Financial Tim es, March 25, 2021. , March 25, 2021.
https://www.ft.com/content/5349389c-8313-41e0-9a67-58274e24a019. https://www.ft.com/content/5349389c-8313-41e0-9a67-58274e24a019.
165 Slater, Joanna, India Announces Record Number of Deaths and New Cases as Outbreak Rages on, 165 Slater, Joanna, India Announces Record Number of Deaths and New Cases as Outbreak Rages on, The Washington
Post, May 6, 2021; Parker, Claire, Paul Schemm, Sean Sullivan, India Sets Another Daily Coronavirus Case Record: , May 6, 2021; Parker, Claire, Paul Schemm, Sean Sullivan, India Sets Another Daily Coronavirus Case Record:
U.S. Pledges Help, U.S. Pledges Help, The Washington Post, April 26, 2021. https://www.washingtonpost.com/world/asia_pacific/india- April 26, 2021. https://www.washingtonpost.com/world/asia_pacific/india-
coronavirus-deaths-pandemic/2021/04/25/ec0f208a-a51c-11eb-b314-2e993bd83e31_story.html. coronavirus-deaths-pandemic/2021/04/25/ec0f208a-a51c-11eb-b314-2e993bd83e31_story.html.
166 Cunningham, Erin, Covid-19 Global Updates: India’s Death T oll T ops 400,000 as Delta Variant Gains Ground 166 Cunningham, Erin, Covid-19 Global Updates: India’s Death T oll T ops 400,000 as Delta Variant Gains Ground
Worldwide, Worldwide, The Washington Post, July 2, 2021. , July 2, 2021.
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related deaths: in some cities in Brazil, COVID-related daily deaths have outnumbered daily related deaths: in some cities in Brazil, COVID-related daily deaths have outnumbered daily
births.167 births.167
In April 2021, India reported that in the second quarter its GDP growth rate fel by 25.8% In April 2021, India reported that in the second quarter its GDP growth rate fel by 25.8%
compared with the first quarter, raising concerns that the country could experience its most severe compared with the first quarter, raising concerns that the country could experience its most severe
economic contraction on record.168 Subsequent forecasts indicate that India’s economy grew by economic contraction on record.168 Subsequent forecasts indicate that India’s economy grew by
23.7% in the third quarter of 2020, reportedly reflecting higher levels of consumer activity, and 23.7% in the third quarter of 2020, reportedly reflecting higher levels of consumer activity, and
by 7.9% in the fourth quarter.169 On an annual basis, India’s economy reportedly grew at a rate by 7.9% in the fourth quarter.169 On an annual basis, India’s economy reportedly grew at a rate
of -3.5%. On November 12, India’s finance minister announced a new package of fiscal measures of -3.5%. On November 12, India’s finance minister announced a new package of fiscal measures
totaling $35 bil ion to increase consumer spending and to assist manufacturing, agriculture, and totaling $35 bil ion to increase consumer spending and to assist manufacturing, agriculture, and
exports. The move followed an announcement by India’s cabinet that it had approved a spending exports. The move followed an announcement by India’s cabinet that it had approved a spending
package of $27 bil ion to provide incentives over five years to manufacturing firms, including package of $27 bil ion to provide incentives over five years to manufacturing firms, including
automobiles, auto parts, pharmaceuticals, textiles, and food products.170 automobiles, auto parts, pharmaceuticals, textiles, and food products.170
As a consequence of the resurgence in cases and renewed lockdowns in economies, the IMF As a consequence of the resurgence in cases and renewed lockdowns in economies, the IMF
argued that advanced economies needed to sustain fiscal support for consumers and businesses as argued that advanced economies needed to sustain fiscal support for consumers and businesses as
the most effective means of stimulating their economies. The IMF argued this support was the most effective means of stimulating their economies. The IMF argued this support was
necessary because the global economy was experiencing what economists term a Keynesian necessary because the global economy was experiencing what economists term a Keynesian
liquidity trap, named after economist John Maynard Keynes. In theoretical terms, a liquidity trap liquidity trap, named after economist John Maynard Keynes. In theoretical terms, a liquidity trap
exists when central banks’ key interest rates are so low they have little impact through traditional exists when central banks’ key interest rates are so low they have little impact through traditional
means to affect business and consumer activity. According to the IMF, in 60% of the global means to affect business and consumer activity. According to the IMF, in 60% of the global
economy, central banks had pushed key interest rates below 1% and in one-fifth of the global economy, central banks had pushed key interest rates below 1% and in one-fifth of the global
economy, interest rates were below zero. In these circumstances, economists general y argue that economy, interest rates were below zero. In these circumstances, economists general y argue that
adjusting fiscal policy, or government taxing and spending, is the more effective policy tool for adjusting fiscal policy, or government taxing and spending, is the more effective policy tool for
raising the rate of economic growth.171 The IMF concluded that, “Fiscal policy must play a raising the rate of economic growth.171 The IMF concluded that, “Fiscal policy must play a
leading role in the recovery.” leading role in the recovery.”
The United States
Recognizing the growing impact the pandemic was having on financial markets and economic Recognizing the growing impact the pandemic was having on financial markets and economic
growth, the Federal Reserve (Fed) took a number of steps to promote economic and financial growth, the Federal Reserve (Fed) took a number of steps to promote economic and financial
stability involving the Fed’s monetary policy and “lender of last resort” roles. Some of these stability involving the Fed’s monetary policy and “lender of last resort” roles. Some of these
actions were intended to stimulate economic activity by reducing interest rates; other actions were actions were intended to stimulate economic activity by reducing interest rates; other actions were
intended to provide liquidity to financial markets so firms would have access to needed funding. intended to provide liquidity to financial markets so firms would have access to needed funding.
In announcing its decisions, the Fed indicated that “[t]he COVID-19 outbreak has harmed In announcing its decisions, the Fed indicated that “[t]he COVID-19 outbreak has harmed
communities and disrupted economic activity in many countries, including the United States. communities and disrupted economic activity in many countries, including the United States.
Global financial conditions have also been significantly affected.172” On March 31, 2020, the Global financial conditions have also been significantly affected.172” On March 31, 2020, the

167 Caverni, Alexandre, Brazil Sees 1,803 COVID-19 Deaths; Chinese Vaccine Found 50.7% Effective Against 167 Caverni, Alexandre, Brazil Sees 1,803 COVID-19 Deaths; Chinese Vaccine Found 50.7% Effective Against
Variant, Reuters, April 11, 2021; Hassan, Jennifer, In Many Brazilian Cities, Deaths Have Overtaken Births, Variant, Reuters, April 11, 2021; Hassan, Jennifer, In Many Brazilian Cities, Deaths Have Overtaken Births, The
Washington Post, April 15, 2021. April 15, 2021.
168 Slater, Joanna, India’s Economy Contracts by Nearly 24%, Its Sharpest Drop On Record, 168 Slater, Joanna, India’s Economy Contracts by Nearly 24%, Its Sharpest Drop On Record, Washington Post, August , August
31, 2020. https://www.washingtonpost.com/world/asia_pacific/indias-economy-contracts-by-nearly-24-percent-amid-31, 2020. https://www.washingtonpost.com/world/asia_pacific/indias-economy-contracts-by-nearly-24-percent-amid-
pandemic/2020/08/31/92318fbe-eb70-11ea-bd08-1b10132b458f_story.html?hpid=hp_world-right -4-0_world-latest-pandemic/2020/08/31/92318fbe-eb70-11ea-bd08-1b10132b458f_story.html?hpid=hp_world-right -4-0_world-latest-
feed%3Ahomepage%2Fstory-ans. feed%3Ahomepage%2Fstory-ans.
169 169 RBI Bulletin – November 2020, Reserve Bank of India, November 2020. , Reserve Bank of India, November 2020.
170 Sharma, Ashok, India Announces $35 Billion Economic Stimulus Package, 170 Sharma, Ashok, India Announces $35 Billion Economic Stimulus Package, ABCNews, November 12, 2020. , November 12, 2020.
https://abcnews.go.com/International/wireStory/india-announces-35-billion-economic-stimulus-package-74165709. https://abcnews.go.com/International/wireStory/india-announces-35-billion-economic-stimulus-package-74165709.
171 Gopinath, Gita, Global Liquidity T rap Requires a Big Fiscal Response, 171 Gopinath, Gita, Global Liquidity T rap Requires a Big Fiscal Response, Financial Times, November 3, 2020, , November 3, 2020,
https://www.ft.com/content/2e1c0555-d65b-48d1-9af3-825d187eec58. https://www.ft.com/content/2e1c0555-d65b-48d1-9af3-825d187eec58.
172 172 Federal Reserve Issues FOMC Statement, March 15, 2020. https://www.federalreserve.gov/newsevents/, March 15, 2020. https://www.federalreserve.gov/newsevents/
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Trump Administration announced that it was suspending for 90 days tariffs it had placed on Trump Administration announced that it was suspending for 90 days tariffs it had placed on
imports of apparel and light trucks from China, but not on other consumer goods and metals.173 In imports of apparel and light trucks from China, but not on other consumer goods and metals.173 In
October, Congress and the Trump Administration negotiated over the substance of an additional October, Congress and the Trump Administration negotiated over the substance of an additional
spending package to support the U.S. economy. The U.S. Congress passed a $1.9 tril ion spending package to support the U.S. economy. The U.S. Congress passed a $1.9 tril ion
economic stimulus bil , designated the American Rescue Plan Act (P.L. 117-2), that was signed by economic stimulus bil , designated the American Rescue Plan Act (P.L. 117-2), that was signed by
President Biden on March 11, 2021. President Biden on March 11, 2021.
On May 5, 2021, the Biden administration announced it would support international discussions On May 5, 2021, the Biden administration announced it would support international discussions
to waive intel ectual property restrictions on COVID-19 vaccine production for developing to waive intel ectual property restrictions on COVID-19 vaccine production for developing
economies.174 Prior to this announcement, developed economies, including Britain, Switzerland, economies.174 Prior to this announcement, developed economies, including Britain, Switzerland,
the EU, and the United States, had blocked a proposal by over 80 developing countries at the the EU, and the United States, had blocked a proposal by over 80 developing countries at the
World Trade Organization to suspend intel ectual property rights restrictions on production of World Trade Organization to suspend intel ectual property rights restrictions on production of
COVID-19 vaccines.175 The EU announced on June 4, 2021, that it would reject the U.S. proposal COVID-19 vaccines.175 The EU announced on June 4, 2021, that it would reject the U.S. proposal
to drop IP protections and offered a three-point plan of its own that included (1) maintaining to drop IP protections and offered a three-point plan of its own that included (1) maintaining
export restrictions; (2) encouraging vaccine manufacturers to negotiate agreements with export restrictions; (2) encouraging vaccine manufacturers to negotiate agreements with
producers in developing economies and increasing vaccine supplies to vulnerable countries; and producers in developing economies and increasing vaccine supplies to vulnerable countries; and
(3) using existing WTO rules to grant licenses to producers without the consent of the patent-(3) using existing WTO rules to grant licenses to producers without the consent of the patent-
holder.176 During the G-7 summit in England on June 11, 2021, the United States and the other G-holder.176 During the G-7 summit in England on June 11, 2021, the United States and the other G-
7 leaders announced they would provide a combined total of 1 bil ion doses of the COVID-19 7 leaders announced they would provide a combined total of 1 bil ion doses of the COVID-19
vaccine in addition to lifesaving medical supplies, oxygen, diagnostics, therapeutics, and personal vaccine in addition to lifesaving medical supplies, oxygen, diagnostics, therapeutics, and personal
protective equipment (PPE) to low and middle income developing countries.177 protective equipment (PPE) to low and middle income developing countries.177
On On ~~July 29~~September 30, 2021, the Bureau of Economic Analysis (BEA) released updated data on U.S. , 2021, the Bureau of Economic Analysis (BEA) released updated data on U.S. ~~GDP~~
GDP growth for the first and second quarters of 2021 and updated data for 2020 that indicates the growth for the first and second quarters of 2021 and updated data for 2020 that indicates the
economy grew by 6.3% in the first quarter and 6.economy grew by 6.3% in the first quarter and 6.57% in the second quarter of 2021, outpacing the % in the second quarter of 2021, outpacing the
4th quarter 2020 rate of 4.5%. In contrast, U.S. GDP fel at an annual rate of 31.4% in the second 4th quarter 2020 rate of 4.5%. In contrast, U.S. GDP fel at an annual rate of 31.4% in the second
quarter of 2020, after fal ing by 5.0% at an annual rate in the first quarter, as indicated in quarter of 2020, after fal ing by 5.0% at an annual rate in the first quarter, as indicated in Figure
18.178 On an annual basis, the 2020 rate of growth fel by 3.4%, compared with a 2019 rate of .178 On an annual basis, the 2020 rate of growth fel by 3.4%, compared with a 2019 rate of
2.3%. In the second quarter2.3%. In the second quarter of 2020, amidst a large decline overal in U.S. economic activity in , amidst a large decline overal in U.S. economic activity in ~~response~~
response to business lockdowns, some sectors experienced a decline in activity of 80% or more, including to business lockdowns, some sectors experienced a decline in activity of 80% or more, including
recreation, food services and accommodation and transportation sectors. In the third quarter, recreation, food services and accommodation and transportation sectors. In the third quarter,
however, al sectors except mining experienced positive rate of growth. Personal consumption however, al sectors except mining experienced positive rate of growth. Personal consumption
increased by 41% in the third quarter, after fal ing by 31.4% in the second quarter, increased by 41% in the third quarter, after fal ing by 31.4% in the second quarter, ~~sustaining~~
sustaining economic growth. economic growth.

pressreleases/monetary20200315a.htm. pressreleases/monetary20200315a.htm.
173 Politi, James and Aime Williams, “T rump to Suspend Some T ariffs for 90 Days,” 173 Politi, James and Aime Williams, “T rump to Suspend Some T ariffs for 90 Days,” Financial Times, March 31, 2020. , March 31, 2020.
https://www.ft.com/content/46add447-2048-4348-bd34-2088ad0e3bc8. https://www.ft.com/content/46add447-2048-4348-bd34-2088ad0e3bc8.
174 Diamond, Dan, T yler Pager, and Jeff Stein, Biden Commits to Waiving Vaccine Patents, Driving Wedge With 174 Diamond, Dan, T yler Pager, and Jeff Stein, Biden Commits to Waiving Vaccine Patents, Driving Wedge With
Pharmaceutical Companies, Pharmaceutical Companies, The Washington Post, May 5, 2021. May 5, 2021.
175 175 Rich, Developing Economies Wrangle Over COVID Patents, Reuters, March 10, 2021. , Reuters, March 10, 2021.
https://www.reuters.com/article/us-health-coronavirus-wto/rich-developing-nations-wrangle-over-covid-vaccine-https://www.reuters.com/article/us-health-coronavirus-wto/rich-developing-nations-wrangle-over-covid-vaccine-
patents-idUSKBN2B21V9. patents-idUSKBN2B21V9.
176 Blenkinsop, Phillip, Resisting Patent Waiver, EU Submits Vaccine Plan to WT O, 176 Blenkinsop, Phillip, Resisting Patent Waiver, EU Submits Vaccine Plan to WT O, Reuters, June 4, 2021. , June 4, 2021.
https://www.reuters.com/world/europe/eu-executive-submits-vaccine-access-proposal-wto-2021-06-04/. https://www.reuters.com/world/europe/eu-executive-submits-vaccine-access-proposal-wto-2021-06-04/.
177 Scott, Eugene, G-7 Leaders Commit to Making 1 Billion Coronavirus Vaccines Available Starting T his Summer, 177 Scott, Eugene, G-7 Leaders Commit to Making 1 Billion Coronavirus Vaccines Available Starting T his Summer,
The Washington Post, June 11, 2021. , June 11, 2021.
178 Gross Domestic Product, 178 Gross Domestic Product, ~~First Quarter 2021 (Advance Estimate)~~(Third Estimate), Corporate Profits (Revised Estimates), and GDP by Industry, Second Quarter 2021, Bureau of Economic Analysis, , Bureau of Economic Analysis, ~~April 29~~September 30, 2021. , 2021.
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Figure 18. U.S. GDP, Percentage Change From Preceding Quarter
Seasonal y adjusted at annual rate Seasonal y adjusted at annual rate

Source: Bureau of Economic Analysis. Created by CRS. Bureau of Economic Analysis. Created by CRS.
Notes: Exports and imports represent the combination of goods and services. Exports and imports represent the combination of goods and services.
On September 3, 2021, the BLS released data on the employment situation in August, which On September 3, 2021, the BLS released data on the employment situation in August, which
indicated that nonfarm payrolls rose by 235,000, down from 1,053,000 jobs gained in July and indicated that nonfarm payrolls rose by 235,000, down from 1,053,000 jobs gained in July and
represents the lowest number of job gains since January 2021; the rate of unemployment was represents the lowest number of job gains since January 2021; the rate of unemployment was
5.2%.179 The data also indicate that 5.6 mil ion persons reported in August they did not work at al 5.2%.179 The data also indicate that 5.6 mil ion persons reported in August they did not work at al

179 179 The Employment Situation-August 2021, Bureau of Labor Statistics, September 3, 2021. https://www.bls.gov/. T he , Bureau of Labor Statistics, September 3, 2021. https://www.bls.gov/. T he
unemployment number does not include 4.5 million workers who were working part time not by choice and 5.7 million unemployment number does not include 4.5 million workers who were working part time not by choice and 5.7 million
individuals seeking employment. In addition, BLS indicated that some individuals seeking employment. In addition, BLS indicated that some ~~workers~~worker s had been misclassified as employed, had been misclassified as employed,
but should have been classified as unemployed, which would have raised the rate of unemployment by 0.3 percentage but should have been classified as unemployed, which would have raised the rate of unemployment by 0.3 percentage
points. points.
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or worked fewer hours at some point in the previous 4 weeks because their employer closed or or worked fewer hours at some point in the previous 4 weeks because their employer closed or
lost business due to the pandemic. lost business due to the pandemic.
As indicated in As indicated in Figure 19, with the exception of December, the U.S. economy experienced , with the exception of December, the U.S. economy experienced
monthly gains in jobs since the loss of more than 20 mil ion jobs in April 2020. In general, the monthly gains in jobs since the loss of more than 20 mil ion jobs in April 2020. In general, the
monthly gains in jobs has varied and by August 2021 had not equaled the number of jobs lost in monthly gains in jobs has varied and by August 2021 had not equaled the number of jobs lost in
April 2020. The number of unemployed workers was 9.5 mil ion in June 2021, up from the April 2020. The number of unemployed workers was 9.5 mil ion in June 2021, up from the
previous month’s total of 8.4 mil ion. Over the period from May 2020 through August 2021, job previous month’s total of 8.4 mil ion. Over the period from May 2020 through August 2021, job
gains were notable in the leisure and hospitality industry (particularly in food services and gains were notable in the leisure and hospitality industry (particularly in food services and
drinking establishments), retail trade, public-sector education and health services, health care and drinking establishments), retail trade, public-sector education and health services, health care and
social assistance, professional and business services, and other services, while employment in social assistance, professional and business services, and other services, while employment in
utilities fel . utilities fel .
Figure 19. Change in Total Monthly U.S. Nonfarm Employment

Source: Bureau of Labor Statistics. Created by CRS. Bureau of Labor Statistics. Created by CRS.
In the first stages of the pandemic, the Department of Labor reported on May 8, 2020, that the In the first stages of the pandemic, the Department of Labor reported on May 8, 2020, that the
U.S. nonfarm unemployment rate in April, 2020, increased by 20 mil ion workers, which raised U.S. nonfarm unemployment rate in April, 2020, increased by 20 mil ion workers, which raised
the total number of unemployed Americans to 23 mil ion, or an unemployment rate of 14% of the the total number of unemployed Americans to 23 mil ion, or an unemployment rate of 14% of the
total civilian labor force of about 160 mil ion. The unemployment rate did not include total civilian labor force of about 160 mil ion. The unemployment rate did not include
approximately 10 mil ion workers who were involuntarily working part-time and another 9 approximately 10 mil ion workers who were involuntarily working part-time and another 9
mil ion individuals who were seeking employment. As indicated in mil ion individuals who were seeking employment. As indicated in Figure 20, the number of , the number of
unemployed individuals increased the most in the leisure and hospitality sector, reflecting unemployed individuals increased the most in the leisure and hospitality sector, reflecting
national quarantining policies to reduce the spread of COVID-19 through social contact. The national quarantining policies to reduce the spread of COVID-19 through social contact. The
employment losses were widely spread across the economy, affecting every nonfarm sector and employment losses were widely spread across the economy, affecting every nonfarm sector and
al labor groups. Between March and Aril 2020, the number of U.S. non-farm civilian workers al labor groups. Between March and Aril 2020, the number of U.S. non-farm civilian workers
dropped from 150 mil ion to 130 mil ion. Between June 2020 and July 2021, the non-farm dropped from 150 mil ion to 130 mil ion. Between June 2020 and July 2021, the non-farm
civilian labor force increased from 137.8 mil ion to 146.5 mil ion. civilian labor force increased from 137.8 mil ion to 146.5 mil ion.
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Figure 20. Change in U.S. Employment by Major Industrial Sector

Source: The Employment Situation, Bureau of Labor Statistics, various months 2020 and 2021. Created by CRS. , Bureau of Labor Statistics, various months 2020 and 2021. Created by CRS.
In a speech on May 13, 2020, Federal Reserve Chairman Jerome Powel reported that Federal In a speech on May 13, 2020, Federal Reserve Chairman Jerome Powel reported that Federal
Reserve analyses indicated that of individuals working in February, 2020, “almost 40 percent of Reserve analyses indicated that of individuals working in February, 2020, “almost 40 percent of
those in households making less than $40,000 a year had lost a job in March.”180 Chairman those in households making less than $40,000 a year had lost a job in March.”180 Chairman
Powel also indicated that given the extraordinary nature of the current economic downturn the Powel also indicated that given the extraordinary nature of the current economic downturn the
Fed would, “continue to use our tools to their fullest until the crisis has passed and the economic Fed would, “continue to use our tools to their fullest until the crisis has passed and the economic
recovery is wel under way.” recovery is wel under way.”
In characterizing the monetary and fiscal response to the economic downturn, Chairman Powel In characterizing the monetary and fiscal response to the economic downturn, Chairman Powel
said in a speech on October 6, the monetary response included, “the full range of tools at our said in a speech on October 6, the monetary response included, “the full range of tools at our
disposal,” including cutting key interest rates, “unprecedented” asset purchases, establishing disposal,” including cutting key interest rates, “unprecedented” asset purchases, establishing
emergency lending facilities to support households, businesses and state and local governments, emergency lending facilities to support households, businesses and state and local governments,
and implementing targeted and temporary measures for banks to support their customers.181 In and implementing targeted and temporary measures for banks to support their customers.181 In
addition, the fiscal response accomplished three objectives, it provided support to households, addition, the fiscal response accomplished three objectives, it provided support to households,
businesses through the Paycheck Protection Program, and financial markets. Chairman Powel businesses through the Paycheck Protection Program, and financial markets. Chairman Powel
concluded his remarks by arguing for the necessity of continued fiscal support for the economy: concluded his remarks by arguing for the necessity of continued fiscal support for the economy:
The expansion is still far from complete. At this early stage, I would argue that the risks of The expansion is still far from complete. At this early stage, I would argue that the risks of
policy intervention are still asymmetric. Too little support would lead to a weak recovery, policy intervention are still asymmetric. Too little support would lead to a weak recovery,
creating unnecessary hardship for households and businesses. Over time, household creating unnecessary hardship for households and businesses. Over time, household
insolvencies and business bankruptcies would rise, harming the productive capacity of the insolvencies and business bankruptcies would rise, harming the productive capacity of the
economy, and holding back wage growth. By contrast, the risks of overdoing it seem, for economy, and holding back wage growth. By contrast, the risks of overdoing it seem, for
now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they
will not go to waste.182 will not go to waste.182

180 180 Current Economic Issues; Speech at the Peterson Institute for International Economics, Jerome H. Powell, May 13, ; Speech at the Peterson Institute for International Economics, Jerome H. Powell, May 13,
2020. 2020.
181 181 Recent Economic Developments and the Challenges Ahead , Jerome H Powell, Remarks at the National Association Jerome H Powell, Remarks at the National Association
for Business Economists, October 6, 2020. for Business Economists, October 6, 2020.
182 Ibid., p. 7. 182 Ibid., p. 7.
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Monetary Policy183
Forward Guidance
Forward guidance refers to Fed public communications on its future plans for short-term interest refers to Fed public communications on its future plans for short-term interest
rates, and it took many forms following the 2008 financial crisis. As monetary policy returned to rates, and it took many forms following the 2008 financial crisis. As monetary policy returned to
normal in recent years, forward guidance was phased out. It is being used again today. For normal in recent years, forward guidance was phased out. It is being used again today. For
example, when the Fed reduced short-term rates to zero on March 15, it announced that it example, when the Fed reduced short-term rates to zero on March 15, it announced that it
“expects to maintain this target range until it is confident that the economy has weathered recent “expects to maintain this target range until it is confident that the economy has weathered recent
events and is on track to achieve its maximum employment and price stability goals.” events and is on track to achieve its maximum employment and price stability goals.”
Quantitative Easing
Large-scale asset purchases, popularly referred to as Large-scale asset purchases, popularly referred to as quantitative easing or or QE, were also used , were also used
during the financial crisis. Under QE, the Fed expanded its balance sheet by purchasing during the financial crisis. Under QE, the Fed expanded its balance sheet by purchasing
securities. Three rounds of QE from 2009 to 2014 increased the Fed’s securities holdings by $3.7 securities. Three rounds of QE from 2009 to 2014 increased the Fed’s securities holdings by $3.7
tril ion. tril ion.
On March 23, the Fed announced that it would increase its purchases of Treasury securities and On March 23, the Fed announced that it would increase its purchases of Treasury securities and
mortgage-backed securities (MBS)—including commercial MBS—issued by government mortgage-backed securities (MBS)—including commercial MBS—issued by government
agencies or government-sponsored enterprises to “the amounts needed to support smooth market agencies or government-sponsored enterprises to “the amounts needed to support smooth market
functioning and effective transmission of monetary policy... ” These would be undertaken at the functioning and effective transmission of monetary policy... ” These would be undertaken at the
unprecedented rate of up to $125 bil ion daily during the week of March 23. As a result, the value unprecedented rate of up to $125 bil ion daily during the week of March 23. As a result, the value
of the Fed’s balance sheet is projected to exceed its post-financial crisis peak of $4.5 tril ion. One of the Fed’s balance sheet is projected to exceed its post-financial crisis peak of $4.5 tril ion. One
notable difference from previous rounds of QE is that the Fed is purchasing securities of different notable difference from previous rounds of QE is that the Fed is purchasing securities of different
maturities, so the effect likely wil not be concentrated on long-term rates. maturities, so the effect likely wil not be concentrated on long-term rates.
Actions to Provide Liquidity
Reserve Requirements
On March 15, the Fed announced that it was reducing reserve requirements—the amount of vault On March 15, the Fed announced that it was reducing reserve requirements—the amount of vault
cash or deposits at the Fed that banks must hold against deposits—to zero for the first time ever. cash or deposits at the Fed that banks must hold against deposits—to zero for the first time ever.
As the Fed noted in its announcement, because bank reserves are currently so abundant, reserve As the Fed noted in its announcement, because bank reserves are currently so abundant, reserve
requirements “do not play a significant role” in monetary policy. requirements “do not play a significant role” in monetary policy.
Term Repos
The Fed can temporarily provide liquidity to financial markets by lending cash through The Fed can temporarily provide liquidity to financial markets by lending cash through
repurchase agreements (repos) with primary dealers (i.e., large government securities dealers who repurchase agreements (repos) with primary dealers (i.e., large government securities dealers who
are market makers). Before the financial crisis, this was the Fed’s routine method for targeting the are market makers). Before the financial crisis, this was the Fed’s routine method for targeting the
federal funds rate. Following the financial crisis, the Fed’s large balance sheet meant that repos federal funds rate. Following the financial crisis, the Fed’s large balance sheet meant that repos
were no longer needed, until they were revived in September 2019. On March 12, the Fed were no longer needed, until they were revived in September 2019. On March 12, the Fed
announced it would offer a three-month repo of $500 bil ion and a one-month repo of $500 announced it would offer a three-month repo of $500 bil ion and a one-month repo of $500
bil ion on a weekly basis through the end of the month in addition to the shorter-term repos it had bil ion on a weekly basis through the end of the month in addition to the shorter-term repos it had
already been offering. These repos would be larger and longer than those offered since already been offering. These repos would be larger and longer than those offered since
September. On March 31, the Fed announced the Foreign and International Monetary Authorities September. On March 31, the Fed announced the Foreign and International Monetary Authorities
(FIMA) Repo Facility, which works like the foreign repo pool in reverse. This facility al ows (FIMA) Repo Facility, which works like the foreign repo pool in reverse. This facility al ows
foreign central banks to convert their U.S. Treasury holdings into U.S. dollars on an overnight foreign central banks to convert their U.S. Treasury holdings into U.S. dollars on an overnight

183 T his section was prepared by Marc Labonte, Specialist in Macroeconomic Policy, Government and Finance 183 T his section was prepared by Marc Labonte, Specialist in Macroeconomic Policy, Government and Finance
Division, CRS. CRS Insight IN11259, Division, CRS. CRS Insight IN11259, Federal Reserve: Recent Actions in Response to COVID-19, by Marc Labonte. , by Marc Labonte.
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basis. The Fed wil charge a (typical y) above market interest rate of 0.25 percentage points above basis. The Fed wil charge a (typical y) above market interest rate of 0.25 percentage points above
the interest rate paid on bank reserves. The facility is intended to work in tandem with currency the interest rate paid on bank reserves. The facility is intended to work in tandem with currency
swap lines to provide additional dollars to meet global demand and is available to a broader group swap lines to provide additional dollars to meet global demand and is available to a broader group
of central banks than the swap lines. of central banks than the swap lines.
Discount Window
In its March 15 announcement, the Fed encouraged banks (insured depository institutions) to In its March 15 announcement, the Fed encouraged banks (insured depository institutions) to
borrow from the Fed’s discount window to meet their liquidity needs. This is the Fed’s traditional borrow from the Fed’s discount window to meet their liquidity needs. This is the Fed’s traditional
tool in its “lender of last resort” function. The Fed also encouraged banks to use intraday credit tool in its “lender of last resort” function. The Fed also encouraged banks to use intraday credit
available through the Fed’s payment systems as a source of liquidity. available through the Fed’s payment systems as a source of liquidity.
Foreign Central Bank Swap Lines
Both domestic and foreign commercial banks rely on short-term borrowing markets to access Both domestic and foreign commercial banks rely on short-term borrowing markets to access
U.S. dollars needed to fund their operations and meet their cash flow needs. But in an U.S. dollars needed to fund their operations and meet their cash flow needs. But in an
environment of strained liquidity, only banks operating in the United States can access the environment of strained liquidity, only banks operating in the United States can access the
discount window. Therefore, the Fed has standing “swap lines” with major foreign central banks discount window. Therefore, the Fed has standing “swap lines” with major foreign central banks
to provide central banks with U.S. dollar funding that they can in turn lend to private banks in to provide central banks with U.S. dollar funding that they can in turn lend to private banks in
their jurisdictions. On March 15, the Fed reduced the cost of using those swap lines and on March their jurisdictions. On March 15, the Fed reduced the cost of using those swap lines and on March
19 it extended swap lines to nine more central banks. On March 31, 2020, the Fed set up a new 19 it extended swap lines to nine more central banks. On March 31, 2020, the Fed set up a new
temporary facility to work in tandem with the swap lines to provide additional dollars to meet temporary facility to work in tandem with the swap lines to provide additional dollars to meet
global demand. The new facility al ows central banks and international monetary authorities to global demand. The new facility al ows central banks and international monetary authorities to
exchange their U.S. Treasury securities held with the Federal Reserve for U.S. dollars, which can exchange their U.S. Treasury securities held with the Federal Reserve for U.S. dollars, which can
then be made available to institutions in their jurisdictions.184 then be made available to institutions in their jurisdictions.184
Emergency Credit Facilities for the Nonbank Financial System
In 2008, the Fed created a series of emergency credit facilities to support liquidity in the nonbank In 2008, the Fed created a series of emergency credit facilities to support liquidity in the nonbank
financial system. This extended the Fed’s traditional role as lender of last resort from the banking financial system. This extended the Fed’s traditional role as lender of last resort from the banking
system to the overal financial system for the first time since the Great Depression. To create system to the overal financial system for the first time since the Great Depression. To create
these facilities, the Fed relied on its emergency lending authority (Section 13(3) of the Federal these facilities, the Fed relied on its emergency lending authority (Section 13(3) of the Federal
Reserve Act). To date, the Fed has created six facilities—some new, and some reviving 2008 Reserve Act). To date, the Fed has created six facilities—some new, and some reviving 2008
facilities—in response to COVID-19. facilities—in response to COVID-19.
 On March 17, the Fed revived the commercial paper funding facility to purchase  On March 17, the Fed revived the commercial paper funding facility to purchase
commercial paper, which is an important source of short-term funding for commercial paper, which is an important source of short-term funding for
financial firms, nonfinancial firms, and asset-backed securities (ABS). financial firms, nonfinancial firms, and asset-backed securities (ABS).
 Like banks, primary dealers are heavily reliant on short-term lending markets in  Like banks, primary dealers are heavily reliant on short-term lending markets in
their role as securities market makers. Unlike banks, they cannot access the their role as securities market makers. Unlike banks, they cannot access the
discount window. On March 17, the Fed revived the primary dealer credit facility, discount window. On March 17, the Fed revived the primary dealer credit facility,
which is akin to a discount window for primary dealers. Like the discount which is akin to a discount window for primary dealers. Like the discount
window, it provides short-term, fully collateralized loans to primary dealers. window, it provides short-term, fully collateralized loans to primary dealers.
 On March 19, the Fed created the Money Market Mutual Fund Liquidity Facility  On March 19, the Fed created the Money Market Mutual Fund Liquidity Facility
(MMLF), similar to a facility created during the 2008 financial crisis. The (MMLF), similar to a facility created during the 2008 financial crisis. The
MMLF makes loans to financial institutions to purchase assets that money MMLF makes loans to financial institutions to purchase assets that money
market funds are sel ing to meet redemptions. market funds are sel ing to meet redemptions.

184 For additional information about swap lines, see CRS In Focus IF11489, 184 For additional information about swap lines, see CRS In Focus IF11489, Federal Executive Agencies: Selected Pay
Flexibilities for COVID-19 Response, by Barbara L. Schwemle. , by Barbara L. Schwemle.
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 On March 23, the Fed created two facilities to support corporate bond markets—  On March 23, the Fed created two facilities to support corporate bond markets—
the Primary Market Corporate Credit Facility to purchase newly issued corporate the Primary Market Corporate Credit Facility to purchase newly issued corporate
debt and the Secondary Market Corporate Credit Facility to purchase existing debt and the Secondary Market Corporate Credit Facility to purchase existing
corporate debt on secondary markets. corporate debt on secondary markets.
 On March 23, the Fed revived the Term Asset-Backed Securities Loan Facility to  On March 23, the Fed revived the Term Asset-Backed Securities Loan Facility to
make nonrecourse loans to private investors to purchase ABS backed by various make nonrecourse loans to private investors to purchase ABS backed by various
nonmortgage consumer loans. nonmortgage consumer loans.
 On April 6, the Fed announced the Payroll Protection Program Lending Facility  On April 6, the Fed announced the Payroll Protection Program Lending Facility
(PPPLF) to provide credit to depository institutions (e.g., banks) making loans (PPPLF) to provide credit to depository institutions (e.g., banks) making loans
under the CARES Act (H.R. 748/P.L. 116-136) Payroll Protection Program. under the CARES Act (H.R. 748/P.L. 116-136) Payroll Protection Program.
Because banks are not required to hold capital against these loans, this facility Because banks are not required to hold capital against these loans, this facility
increases lending capacity for banks facing high demand to originate these loans. increases lending capacity for banks facing high demand to originate these loans.
The PPP provides low-cost loans to smal businesses to pay employees. These The PPP provides low-cost loans to smal businesses to pay employees. These
loans do not pose credit risk to the Fed because they are guaranteed by the Smal loans do not pose credit risk to the Fed because they are guaranteed by the Smal
Business Administration. Business Administration.
 On April 9, the Fed announced the Main Street Lending Program (MSLP), which  On April 9, the Fed announced the Main Street Lending Program (MSLP), which
purchases loans from depository institutions to businesses with up to 10,000 purchases loans from depository institutions to businesses with up to 10,000
employees or up to $2.5 bil ion in revenues. The loans to businesses would defer employees or up to $2.5 bil ion in revenues. The loans to businesses would defer
principal and interest repayment for one year, and the businesses would have to principal and interest repayment for one year, and the businesses would have to
make a “reasonable effort” to retain employees. make a “reasonable effort” to retain employees.
 On April 9, the Fed announced the Municipal Liquidity Facility (MLF) to  On April 9, the Fed announced the Municipal Liquidity Facility (MLF) to
purchase state and municipal debt in response to higher yields and reduced purchase state and municipal debt in response to higher yields and reduced
liquidity in that market. The facility wil only purchase debt of larger counties liquidity in that market. The facility wil only purchase debt of larger counties
and cities. and cities.
Many of these facilities are structured as special purpose vehicles controlled by the Fed because Many of these facilities are structured as special purpose vehicles controlled by the Fed because
of restrictions on the types of securities that the Fed can purchase. Although there were no losses of restrictions on the types of securities that the Fed can purchase. Although there were no losses
from these facilities during the financial crisis, assets of the Treasury’s Exchange Stabilization from these facilities during the financial crisis, assets of the Treasury’s Exchange Stabilization
Fund have been pledged to backstop any losses on several of the facilities today. Fund have been pledged to backstop any losses on several of the facilities today.
Fiscal Policy
In terms of a fiscal stimulus, Congress adopted H.R. 6074 on March 5, 2020 (P.L. 116-123), to In terms of a fiscal stimulus, Congress adopted H.R. 6074 on March 5, 2020 (P.L. 116-123), to
appropriate $8.3 bil ion in emergency funding to support efforts to fight COVID-19; President appropriate $8.3 bil ion in emergency funding to support efforts to fight COVID-19; President
Trump signed the measure on March 6, 2020. President Trump also signed on March 18, H.R. Trump signed the measure on March 6, 2020. President Trump also signed on March 18, H.R.
6201 (P.L. 116-127), the Families First COVID-19 Response Act, that provided paid sick leave 6201 (P.L. 116-127), the Families First COVID-19 Response Act, that provided paid sick leave
and free COVID-19 testing, expanded food assistance and unemployment benefits, and required and free COVID-19 testing, expanded food assistance and unemployment benefits, and required
employers to provide additional protections for health care workers. Other countries indicated at employers to provide additional protections for health care workers. Other countries indicated at
that time that they would also provide assistance to workers and to some businesses. Congress that time that they would also provide assistance to workers and to some businesses. Congress
also considered other possible measures, including contingency plans for agencies to implement also considered other possible measures, including contingency plans for agencies to implement
offsite telework for employees, financial assistance to the shale oil industry, a reduction in the offsite telework for employees, financial assistance to the shale oil industry, a reduction in the
payroll tax,185 and extended of the tax filing deadline.186 President Trump took additional actions, payroll tax,185 and extended of the tax filing deadline.186 President Trump took additional actions,
including including

185 Armus, T heo, “Federal, State Officials Attempt to Fight Virus T hrough Social Distancing, Stimulus Package,” 185 Armus, T heo, “Federal, State Officials Attempt to Fight Virus T hrough Social Distancing, Stimulus Package,”
Washington Post, March 11, 2020. https://www.washingtonpost.com/world/2020/03/11/Covid-19-live-updates/. , March 11, 2020. https://www.washingtonpost.com/world/2020/03/11/Covid-19-live-updates/.
186 Sevastopulo, Demetri, “US T reasury Considers T ax Filing Extension to Ease Virus Impact,” 186 Sevastopulo, Demetri, “US T reasury Considers T ax Filing Extension to Ease Virus Impact,” Financial Times, ,
March 11, 2020. https://www.ft.com/content/c65a6e40-639f-11ea-b3f3-fe4680ea68b5. March 11, 2020. https://www.ft.com/content/c65a6e40-639f-11ea-b3f3-fe4680ea68b5.
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 Announcing on March 11, 2020, restrictions on al travel from Europe to the  Announcing on March 11, 2020, restrictions on al travel from Europe to the
United States for 30 days, directing the Smal Business Administration (SBA) to United States for 30 days, directing the Smal Business Administration (SBA) to
offer low-interest loans to smal businesses, and directing the Treasury offer low-interest loans to smal businesses, and directing the Treasury
Department to defer tax payments penalty-free for affected businesses.187 Department to defer tax payments penalty-free for affected businesses.187
 Declaring on March 13, a state of emergency that freed up disaster relief funding  Declaring on March 13, a state of emergency that freed up disaster relief funding
to assist state and local governments to address the effects of the pandemic. The to assist state and local governments to address the effects of the pandemic. The
President also announced additional testing for the virus, a website to help President also announced additional testing for the virus, a website to help
individuals identify symptoms, increased oil purchases for the Strategic Oil individuals identify symptoms, increased oil purchases for the Strategic Oil
Reserve, and a waiver on interest payments on student loans.188 Reserve, and a waiver on interest payments on student loans.188
 Invoking on March 18, 2020, the Defense Production Act (DPA) that gave him  Invoking on March 18, 2020, the Defense Production Act (DPA) that gave him
the authority to require some U.S. businesses to increase production of medical the authority to require some U.S. businesses to increase production of medical
equipment and supplies that were in short supply.189 equipment and supplies that were in short supply.189
On March 25, 2020, the Senate adopted the COVID-19 Aid, Relief, and Economic Security Act On March 25, 2020, the Senate adopted the COVID-19 Aid, Relief, and Economic Security Act
(S. 3548) to formal y implement President Trump’s proposal by providing direct payments to (S. 3548) to formal y implement President Trump’s proposal by providing direct payments to
taxpayers, loans and guarantees to airlines and other industries, and assistance for smal taxpayers, loans and guarantees to airlines and other industries, and assistance for smal
businesses, actions similar to those of various foreign governments. The House adopted the businesses, actions similar to those of various foreign governments. The House adopted the
measure as H.R. 748 on March 27, and President Trump signed the measure (P.L. 116-136) on measure as H.R. 748 on March 27, and President Trump signed the measure (P.L. 116-136) on
March 27. The law March 27. The law
 Provided funding for $1,200 tax rebates to individuals, with additional $500  Provided funding for $1,200 tax rebates to individuals, with additional $500
payments per qualifying child. The rebate begins phasing out when incomes payments per qualifying child. The rebate begins phasing out when incomes
exceed $75,000 (or $150,000 for joint filers). exceed $75,000 (or $150,000 for joint filers).
 Assisted smal businesses by providing funding forgivable bridge loans; and  Assisted smal businesses by providing funding forgivable bridge loans; and
additional funding for grants and technical assistance; authorized emergency additional funding for grants and technical assistance; authorized emergency
loans to distressed businesses, including air carriers; and suspended certain loans to distressed businesses, including air carriers; and suspended certain
aviation excise taxes. aviation excise taxes.
 Created a $367 bil ion loan program for smal businesses, established a $500  Created a $367 bil ion loan program for smal businesses, established a $500
bil ion lending fund for industries, cities and states, $150 bil ion for state and bil ion lending fund for industries, cities and states, $150 bil ion for state and
local stimulus funds, and $130 bil ion for hospitals. local stimulus funds, and $130 bil ion for hospitals.
 Increased unemployment insurance benefits, expanded eligibility and offered  Increased unemployment insurance benefits, expanded eligibility and offered
workers an additional $600 a week for four month, in addition to state workers an additional $600 a week for four month, in addition to state
unemployment programs.190 unemployment programs.190
 Established special rules for certain tax-favored withdrawals from retirement  Established special rules for certain tax-favored withdrawals from retirement
plans; delayed due dates for employer payroll taxes and estimated tax payments plans; delayed due dates for employer payroll taxes and estimated tax payments
for corporations; and revised other provisions, including those related to losses, for corporations; and revised other provisions, including those related to losses,
charitable deductions, and business interest. charitable deductions, and business interest.

187 McAuley, James, and Michael Birnbaum, “Europe Blindsided by T rump’s T ravel Restrictions, with Many Seeing 187 McAuley, James, and Michael Birnbaum, “Europe Blindsided by T rump’s T ravel Restrictions, with Many Seeing
Political Motive,” Political Motive,” Washington Post, March 12, 2020. https://www.washingtonpost.com/world/europe/europe-, March 12, 2020. https://www.washingtonpost.com/world/europe/europe-
blindsided-by-trumps-travel-restrictions-with-many-seeing-political-motive/2020/03/12/42a279d0-6412-11ea-8a8e-blindsided-by-trumps-travel-restrictions-with-many-seeing-political-motive/2020/03/12/42a279d0-6412-11ea-8a8e-
5c5336b32760_story.html. 5c5336b32760_story.html.
188 Fritz, Angela and Meryl Kornfield, “President T rump Declares a National Emergency, Freeing $50 Billion in 188 Fritz, Angela and Meryl Kornfield, “President T rump Declares a National Emergency, Freeing $50 Billion in
Funding,”Funding,” Washington Post, March 13, 2020. https://www.washingtonpost.com/world/2020/03/13/Covid-19-latest-, March 13, 2020. https://www.washingtonpost.com/world/2020/03/13/Covid-19-latest-
news/. news/.
189 Hellmann, Jessie, “T rump Invokes Defense Production Act as Covid-19 Response,” 189 Hellmann, Jessie, “T rump Invokes Defense Production Act as Covid-19 Response,” The Hill, March 18, 2020. , March 18, 2020.
https://thehill.com/policy/healthcare/488226-trump-invokes-defense-production-act-as-Covid-19-response. https://thehill.com/policy/healthcare/488226-trump-invokes-defense-production-act-as-Covid-19-response.
190 For additional information about unemployment and sick leave provisions, see CRS Insight IN11249, 190 For additional information about unemployment and sick leave provisions, see CRS Insight IN11249, H.R. 6201:
Paid Leave and Unem ploym ent Insurance Responses to COVID-19, by Sarah A. Donovan, Katelin P. Isaacs, and Julie , by Sarah A. Donovan, Katelin P. Isaacs, and Julie
M. Whittaker, and CRS In Focus IF11487, M. Whittaker, and CRS In Focus IF11487, The Fam ilies First Coronavirus Response Act Leave Provisions, by Sarah , by Sarah
A. Donovan and Jon O. ShimabukuroA. Donovan and Jon O. Shimabukuro.
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 Provided additional funding for the prevention, diagnosis, and treatment of  Provided additional funding for the prevention, diagnosis, and treatment of
COVID-19; limited liability for volunteer health care professionals; prioritized COVID-19; limited liability for volunteer health care professionals; prioritized
Food and Drug Administration (FDA) review of certain drugs; al ow ed Food and Drug Administration (FDA) review of certain drugs; al ow ed
emergency use of certain diagnostic tests that had not been approved by the FDA; emergency use of certain diagnostic tests that had not been approved by the FDA;
expanded health-insurance coverage for diagnostic testing and required coverage expanded health-insurance coverage for diagnostic testing and required coverage
for preventative services and vaccines; and revised other provisions, including for preventative services and vaccines; and revised other provisions, including
those regarding the medical supply chain, the national stockpile, the health care those regarding the medical supply chain, the national stockpile, the health care
workforce, the Healthy Start program, telehealth services, nutrition services, workforce, the Healthy Start program, telehealth services, nutrition services,
Medicare, and Medicaid. Medicare, and Medicaid.
 Temporarily suspended payments for federal student loans and revised provisions  Temporarily suspended payments for federal student loans and revised provisions
related to campus-based aid, supplemental educational-opportunity grants, related to campus-based aid, supplemental educational-opportunity grants,
federal work-study, subsidized loans, Pel grants, and foreign institutions. federal work-study, subsidized loans, Pel grants, and foreign institutions.
 Authorized the Department of the Treasury temporarily to guarantee money-  Authorized the Department of the Treasury temporarily to guarantee money-
market funds. market funds.
On April 23, 2020, the House of Representatives passed H.R. 266 (P.L. 116-139), the Paycheck On April 23, 2020, the House of Representatives passed H.R. 266 (P.L. 116-139), the Paycheck
Protection Program and Health Care Enhancement Act, following similar actions by the Senate Protection Program and Health Care Enhancement Act, following similar actions by the Senate
the previous day. The measure provided $484 bil ion for smal business loans, health care the previous day. The measure provided $484 bil ion for smal business loans, health care
providers, and COVID-19 testing. In particular, the law providers, and COVID-19 testing. In particular, the law
 Provided additional lending authority for certain Smal Business Administration  Provided additional lending authority for certain Smal Business Administration
(SBA) programs in response to COVID-19, increased the authority for (1) the (SBA) programs in response to COVID-19, increased the authority for (1) the
Paycheck Protection Program, under which the SBA may guarantee certain loans Paycheck Protection Program, under which the SBA may guarantee certain loans
to smal businesses during the COVID-19 pandemic; and (2) advanced on to smal businesses during the COVID-19 pandemic; and (2) advanced on
emergency economic injury disaster loans made in response to COVID-19. The emergency economic injury disaster loans made in response to COVID-19. The
provision also expanded eligibility for disaster loans and advances to include provision also expanded eligibility for disaster loans and advances to include
agricultural enterprises. agricultural enterprises.
 Provided $100 bil ion in FY2020 supplemental appropriations to HHS for the  Provided $100 bil ion in FY2020 supplemental appropriations to HHS for the
Public Health and Social Services Emergency Fund, including $75 bil ion to Public Health and Social Services Emergency Fund, including $75 bil ion to
reimburse health care providers for health care related expenses or lost revenues reimburse health care providers for health care related expenses or lost revenues
that were attributable to the coronavirus outbreak; and $25 bil ion for expenses to that were attributable to the coronavirus outbreak; and $25 bil ion for expenses to
research, develop, validate, manufacture, purchase, administer, and expand research, develop, validate, manufacture, purchase, administer, and expand
capacity for COVID-19 tests to effectively monitor and suppress COVID-19. capacity for COVID-19 tests to effectively monitor and suppress COVID-19.
 Al ocated specified portions of the $25 bil ion for COVID-19 testing to states,  Al ocated specified portions of the $25 bil ion for COVID-19 testing to states,
localities, territories, and tribes; the Centers for Diseases Control and Prevention; localities, territories, and tribes; the Centers for Diseases Control and Prevention;
the National Institutes of Health; the Biomedical Advanced Research and the National Institutes of Health; the Biomedical Advanced Research and
Development Authority; the Food and Drug Administration; community health Development Authority; the Food and Drug Administration; community health
centers; rural health clinics; and testing for the uninsured. centers; rural health clinics; and testing for the uninsured.
On May 12, House Democrats introduced H.R. 6800, the Heroes Act, to provide a $3 tril ion On May 12, House Democrats introduced H.R. 6800, the Heroes Act, to provide a $3 tril ion
supplemental spending bil for additional financial resources to state and local governments. The supplemental spending bil for additional financial resources to state and local governments. The
measure passed the House on May 15 and was sent to the Senate for consideration. Among other measure passed the House on May 15 and was sent to the Senate for consideration. Among other
provisions, the bil would have provisions, the bil would have
 Appropriated $200 bil ion in hazard pay to essential workers.  Appropriated $200 bil ion in hazard pay to essential workers.
 Extended additional payments to individuals, for nutrition and housing  Extended additional payments to individuals, for nutrition and housing
assistance, and provide funding for additional testing and contact tracing. assistance, and provide funding for additional testing and contact tracing.
 Restored the tax deduction for state and local taxes.  Restored the tax deduction for state and local taxes.
 Provided FY2020 emergency supplemental appropriations to federal agencies.  Provided FY2020 emergency supplemental appropriations to federal agencies.
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 Provided payments and other assistance to state, local, tribal, and territorial  Provided payments and other assistance to state, local, tribal, and territorial
governments. governments.
 Provided additional direct payments of up to $1,200 per individual.  Provided additional direct payments of up to $1,200 per individual.
 Expanded paid sick days, family and medical leave, unemployment  Expanded paid sick days, family and medical leave, unemployment
compensation, nutrition and food assistance programs, housing assistance, and compensation, nutrition and food assistance programs, housing assistance, and
payments to farmers. payments to farmers.
 Modified and expanded the Paycheck Protection Program, which provides loans  Modified and expanded the Paycheck Protection Program, which provides loans
and grants to smal businesses and nonprofit organizations. and grants to smal businesses and nonprofit organizations.
 Expanded several tax credits and deductions.  Expanded several tax credits and deductions.
 Provided funding and establish requirements for COVID-19 testing and contact  Provided funding and establish requirements for COVID-19 testing and contact
tracing. tracing.
 Eliminated cost-sharing for COVID-19 treatments;  Eliminated cost-sharing for COVID-19 treatments;
 Extended and expanded the moratorium on certain evictions and foreclosures;  Extended and expanded the moratorium on certain evictions and foreclosures;
and and
 Required employers to develop and implement infectious disease exposure  Required employers to develop and implement infectious disease exposure
control plans. control plans.
On December 2, the Federal Reserve released its “Beige Book”—a mostly qualitative assessment On December 2, the Federal Reserve released its “Beige Book”—a mostly qualitative assessment
of the U.S. economy produced 8 times a year by the 12 regional Federal Reserve banks—that of the U.S. economy produced 8 times a year by the 12 regional Federal Reserve banks—that
provides an assessment of economic activity across the various regions of the country. The provides an assessment of economic activity across the various regions of the country. The
assessment indicated that economic activity in November had improved modestly, although was assessment indicated that economic activity in November had improved modestly, although was
negligible in some Districts.191 negligible in some Districts.191
On December 27, 2020, President Trump signed the Consolidated Appropriations Act of 2021 On December 27, 2020, President Trump signed the Consolidated Appropriations Act of 2021
(P.L. 116-260) that provided funding for government operations and $900 bil ion in additional (P.L. 116-260) that provided funding for government operations and $900 bil ion in additional
funding for COVID-19 related programs and a $1.4 tril ion budget that comprised 12 funding for COVID-19 related programs and a $1.4 tril ion budget that comprised 12
appropriations bil s. In general, the measure provided appropriations bil s. In general, the measure provided
 $600 in stimulus checks to qualifying individuals, including adults and children.  $600 in stimulus checks to qualifying individuals, including adults and children.
 Extended unemployment benefits of up to $300 per week through at least March  Extended unemployment benefits of up to $300 per week through at least March
14, 2021, and Pandemic Unemployment Assistance for qualifying individuals up 14, 2021, and Pandemic Unemployment Assistance for qualifying individuals up
to 11 weeks. to 11 weeks.
 Financial assistance to businesses, including forgivable Paycheck Protection  Financial assistance to businesses, including forgivable Paycheck Protection
Program loans, extensions of the PPP program to churches and the entertainment Program loans, extensions of the PPP program to churches and the entertainment
industry, and grants through the Economic Injury Disaster Loans program. industry, and grants through the Economic Injury Disaster Loans program.
 A moratorium on rental evictions through January 31, 2021, and emergency  A moratorium on rental evictions through January 31, 2021, and emergency
funding for renters. funding for renters.
 Funds to support vaccine production, distribution, and testing.  Funds to support vaccine production, distribution, and testing.
 Funds for schools, colleges, and child-care assistance.  Funds for schools, colleges, and child-care assistance.
 Assistance to the transportation industry through funds for busses, roads, airports,  Assistance to the transportation industry through funds for busses, roads, airports,
and Amtrak and assistance to the airline workers through the Payroll Support and Amtrak and assistance to the airline workers through the Payroll Support
Program. Program.
On March 11, 2021, President Biden signed the American Rescue Plan Act (P.L. 117-2) that On March 11, 2021, President Biden signed the American Rescue Plan Act (P.L. 117-2) that
appropriated $1.9 tril ion to stimulating the U.S. economy. The major features of the act included appropriated $1.9 tril ion to stimulating the U.S. economy. The major features of the act included

191 191 The Beige Book: Summary of Commentary on Current Economic Conditions by Federal Reserve District, December , December
2, 2020, the Federal Reserve System. 2, 2020, the Federal Reserve System.
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 Expanded unemployment benefits with a $300 weekly supplement through  Expanded unemployment benefits with a $300 weekly supplement through
September 6, 2021. September 6, 2021.
 $1,400 in direct payments to individuals making up to $75,000, $112,500 for  $1,400 in direct payments to individuals making up to $75,000, $112,500 for
single parents, and $150,000 for couples. single parents, and $150,000 for couples.
 Emergency paid leave, expanded child tax credit up to $3,600 per child,  Emergency paid leave, expanded child tax credit up to $3,600 per child,
expanded child and dependent care credit, and earned income tax credit. expanded child and dependent care credit, and earned income tax credit.
 Over $50 bil ion in grants and other payments to smal businesses.  Over $50 bil ion in grants and other payments to smal businesses.
 $350 bil ion in assistance to state, local, and tribal governments.  $350 bil ion in assistance to state, local, and tribal governments.
 Education funding: $130 bil ion for schools; $40 bil ion to colleges and  Education funding: $130 bil ion for schools; $40 bil ion to colleges and
universities. universities.
 Nearly $50 bil ion in housing assistance, emergency rental assistance,  Nearly $50 bil ion in housing assistance, emergency rental assistance,
homeowner assistance, and other housing programs. homeowner assistance, and other housing programs.
 Over $160 bil ion in health care-related programs, including COVID-19  Over $160 bil ion in health care-related programs, including COVID-19
vaccines, testing, contact tracing and other health-care related funding. vaccines, testing, contact tracing and other health-care related funding.
 $50 bil ion for transportation provisions, including funding for airports, airlines,  $50 bil ion for transportation provisions, including funding for airports, airlines,
Amtrak and other commuter rail services. Amtrak and other commuter rail services.
 $10.4 bil ion for agriculture, including debt relief for farmers.  $10.4 bil ion for agriculture, including debt relief for farmers.
 $1.9 bil ion to improve cybersecurity.  $1.9 bil ion to improve cybersecurity.
 Changes to other health care provisions.  Changes to other health care provisions.
Personal Income and Outlays
Another metric for assessing the impact of the pandemic on the U.S. economy is provided Another metric for assessing the impact of the pandemic on the U.S. economy is provided
through changes in personal income, consumption, and saving. The economic lockdown pushed through changes in personal income, consumption, and saving. The economic lockdown pushed
mil ions of Americans out of their jobs and left them without an income. During the pandemic-mil ions of Americans out of their jobs and left them without an income. During the pandemic-
related recession, transfer payments from the federal government to individuals, primarily related recession, transfer payments from the federal government to individuals, primarily
through unemployment insurance, offset some of their lost income and played an important role through unemployment insurance, offset some of their lost income and played an important role
in supporting household consumption. On August 27, 2020, the Bureau of Economic Analysis in supporting household consumption. On August 27, 2020, the Bureau of Economic Analysis
(BEA) reported that U.S. personal income fel by 13.6% in April and 2.1% in May, primarily (BEA) reported that U.S. personal income fel by 13.6% in April and 2.1% in May, primarily
reflecting a decrease in government transfer payments to individuals from federal economic reflecting a decrease in government transfer payments to individuals from federal economic
recovery programs of 41.8% in April and 11.6% in May, as indicated in recovery programs of 41.8% in April and 11.6% in May, as indicated in Figure 21.192 In contrast, .192 In contrast,
personal income rose in June and July by 0.2% and 1.1%, respectively, reflecting an increase in personal income rose in June and July by 0.2% and 1.1%, respectively, reflecting an increase in
transfer payments by 1.8% in June and an increase of 2.9% in July. During the same period, transfer payments by 1.8% in June and an increase of 2.9% in July. During the same period,
personal consumption rose by 1.1% and 0.3%, respectively as consumers increased spending. The personal consumption rose by 1.1% and 0.3%, respectively as consumers increased spending. The
lower level of spending and income transfers were also associated with a lower level of personal lower level of spending and income transfers were also associated with a lower level of personal
savings rate of 8.8% in June and 8.6% in July as consumers attempted to sustain their level of savings rate of 8.8% in June and 8.6% in July as consumers attempted to sustain their level of
consumption by reducing their level of saving. consumption by reducing their level of saving.
In September 2021 the Census Bureau released its annual Income and Poverty193 report and its In September 2021 the Census Bureau released its annual Income and Poverty193 report and its
Supplemental Poverty Measure (SPM)194 report. According to the SPM report, which measures Supplemental Poverty Measure (SPM)194 report. According to the SPM report, which measures

192 192 Personal Income and Outlays, April 2020, Bureau of Economic Analysis, May 29, 2020. , Bureau of Economic Analysis, May 29, 2020.
193 Shrider, Emily A., Mellissa Kollar, Frances Chen, and Jessica Semega, 193 Shrider, Emily A., Mellissa Kollar, Frances Chen, and Jessica Semega, Income and Poverty in the United States:
2020, U.S. Census Bureau, September 2021. , U.S. Census Bureau, September 2021.
194 Fox, Liana E. and Kalee Burns, 194 Fox, Liana E. and Kalee Burns, The Supplemental Poverty Measure: 2020, U.S. Census Bureau, September 2021. , U.S. Census Bureau, September 2021.
According to the Census Bureau: T he SPM does not replace According to the Census Bureau: T he SPM does not replace ~~the~~t he official poverty measure and is not designed to be used official poverty measure and is not designed to be used
for program eligibility or funding distribution. T he SPM is designed to provide information on aggregate levels of for program eligibility or funding distribution. T he SPM is designed to provide information on aggregate levels of
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the impact of government programs designed to assist low-income families and individuals that the impact of government programs designed to assist low-income families and individuals that
are not included in the official poverty measure, the overal SPM poverty rate was 9.1%, which are not included in the official poverty measure, the overal SPM poverty rate was 9.1%, which
was 2.6 percentage points below the 2019 rate of 11.8%, representing 8.5 mil ion people lifted out was 2.6 percentage points below the 2019 rate of 11.8%, representing 8.5 mil ion people lifted out
of poverty due to the government stimulus payments.195 The SPM report also indicated that in of poverty due to the government stimulus payments.195 The SPM report also indicated that in
2020: unemployment rates were down for al major age categories, Social Security continued to 2020: unemployment rates were down for al major age categories, Social Security continued to
be the most important anti-poverty program and moved 26.5 mil ion individuals out of poverty, be the most important anti-poverty program and moved 26.5 mil ion individuals out of poverty,
and pandemic-related stimulus payments moved 11.7 mil ion people out of poverty. and pandemic-related stimulus payments moved 11.7 mil ion people out of poverty.
During the first half of 2021, wages and salaries to individuals, general y the major source of During the first half of 2021, wages and salaries to individuals, general y the major source of
income for households, increased by 2.9%, compared with a drop in total personal income of income for households, increased by 2.9%, compared with a drop in total personal income of
4.0% and a drop in transfer receipts of 26% in 2020.196 Similar to early 20204.0% and a drop in transfer receipts of 26% in 2020.196 Similar to early 2020 data, transfer payments , transfer payments
to households in early 2021 increased personal income and sustained personal consumption. In to households in early 2021 increased personal income and sustained personal consumption. In
addition, household savings rates were bolstered by the transfer payments, although the peak addition, household savings rates were bolstered by the transfer payments, although the peak
saving rate in 2021 was lower than the rate in 2020. After peaking again in saving rate in 2021 was lower than the rate in 2020. After peaking again in ~~April~~ April 2021, the rate 2021, the rate
declined steadily as consumers drew down accumulated savings to support consumption as declined steadily as consumers drew down accumulated savings to support consumption as
~~economic activity began recovering.~~
economic activity began recovering. By August 2021, most measures had returned to their first quarter 2019 levels, except for the personal saving rate, which remained slightly elevated compared with data for early 2020, prior to the pandemic.

economic need at a national level or within large subpopulations or areas. As economic need at a national level or within large subpopulations or areas. As ~~suc h~~such , the SPM provides an additional , the SPM provides an additional
macroeconomic statistic for further understanding economic well-being, conditions, and trends. macroeconomic statistic for further understanding economic well-being, conditions, and trends.
195 Ibid 195 Ibid, ., p. 25. p. 25.
196 196 Personal Income and Outlays, ~~July 2021 and Annual Update~~August 2021, Bureau of Economic Analysis, , Bureau of Economic Analysis, ~~August 27~~October 1, 2021. , 2021.
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Figure 21. U.S. Personal Income, Consumption, and Saving

Source: Personal Income and Outlays, ~~June 2021 and Annual Update~~, August 2021, Bureau of Economic Analysis, Bureau of Economic Analysis, ~~August 27,~~
October 1, 2021. Created by CRS. 2021. Created by CRS.
GDP Output “Gap”
Another measure of the economic impact of the COVID-19 pandemic on the global economy is Another measure of the economic impact of the COVID-19 pandemic on the global economy is
represented by the difference between actual economic performance, measured by gross domestic represented by the difference between actual economic performance, measured by gross domestic
product (GDP), and potential output, or the maximum amount an economy can produce at full product (GDP), and potential output, or the maximum amount an economy can produce at full
employment, referred to as the output gap.197 The IMF estimated that the loss in economic output employment, referred to as the output gap.197 The IMF estimated that the loss in economic output
represented by the GDP output gap among major advanced economies, which as a group account represented by the GDP output gap among major advanced economies, which as a group account
for about 60% of global GDP, would be -3.6% in 2020, or that the economies operated at a rate for about 60% of global GDP, would be -3.6% in 2020, or that the economies operated at a rate
that was 3.6% below their combined potential, as indicated in that was 3.6% below their combined potential, as indicated in Table 13.198 According to the .198 According to the
IMF’s assessment, not only would the major advanced economies as a group operate below their IMF’s assessment, not only would the major advanced economies as a group operate below their
full potential through 2025, but none of the individual economies was projected to operate above full potential through 2025, but none of the individual economies was projected to operate above
potential during the 2020-2025 forecasting period. The Euro area as a whole, and France and Italy potential during the 2020-2025 forecasting period. The Euro area as a whole, and France and Italy
in particular, were projected to experience the largest output gap through 2022. At 3.2% the U.S. in particular, were projected to experience the largest output gap through 2022. At 3.2% the U.S.
output gap was among the smal est of the major advanced economies. output gap was among the smal est of the major advanced economies.

197 According to the Congressional Budget Office, T he output gap is the difference between GDP and potential GDP, 197 According to the Congressional Budget Office, T he output gap is the difference between GDP and potential GDP,
expressed as a percentage of potential GDP. A positive value indicates that GDP exceeds potential GDP; a negative expressed as a percentage of potential GDP. A positive value indicates that GDP exceeds potential GDP; a negative
value indicates that GDP falls shortvalue indicates that GDP falls short of potential GDP. Values for the output gap are for the fourth quarter of each year. of potential GDP. Values for the output gap are for the fourth quarter of each year.
198 198 World Economic Outlook, International Monetary Fund, October 2020, T able A.8. , International Monetary Fund, October 2020, T able A.8.
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Table 13. IMF Forecast of Major Advanced Economy GDP Output Gap
In percentage terms In percentage terms

Projected

2017 2017
2018 2018
2019 2019
2020 2020
2021 2021
2022 2022
2023 2023
2024 2024
2025 2025
Major Advanced Major Advanced
–0.5% –0.5%
0.2% 0.2%
0.4% 0.4%
-3.6% -3.6%
-2.2% -2.2%
-1.0% -1.0%
-0.4% -0.4%
-0.2% -0.2%
-0.1% -0.1%
Economies Economies
United States United States
–1.0 –1.0
0.4 0.4
1.0 1.0
-3.2 -3.2
-1.5 -1.5
-0.5 -0.5
-0.2 -0.2
-0.1 -0.1
-0.1 -0.1
Euro Area Euro Area
–0.4 –0.4
0.2 0.2
0.1 0.1
-5.1 -5.1
-3.2 -3.2
-1.6 -1.6
-0.6 -0.6
-0.2 -0.2
0.0 0.0
Germany Germany
1.0 1.0
1.2 1.2
0.4 0.4
-3.5 -3.5
-1.8 -1.8
-0.7 -0.7
-0.2 -0.2
-0.1 -0.1
0.0 0.0
France France
–1.3 –1.3
–0.5 –0.5
0.0 0.0
-5.6 -5.6
-4.0 -4.0
-2.5 -2.5
-1.4 -1.4
-0.6 -0.6
0.0 0.0
Italy Italy
–1.2 –1.2
–0.7 –0.7
–0.7 –0.7
-5.4 -5.4
-5.4 -5.4
-2.6 -2.6
-0.9 -0.9
-0.6 -0.6
-0.5 -0.5
Japan Japan
–0.3 –0.3
–0.8 –0.8
–0.7 –0.7
-3.0 -3.0
-2.1 -2.1
-1.0 -1.0
-0.4 -0.4
0.0 0.0
0.0 0.0
United Kingdom United Kingdom
0.3 0.3
0.0 0.0
0.0 0.0
-3.9 -3.9
-3.5 -3.5
-1.7 -1.7
-1.0 -1.0
-0.5 -0.5
0.0 0.0
Canada Canada
0.4 0.4
0.6 0.6
0.4 0.4
-3.8 -3.8
-1.4 -1.4
-0.3 -0.3
-0.1 -0.1
0.0 0.0
0.0 0.0
Source: International Monetary Fund. International Monetary Fund.
Notes: The output gap is the difference between GDP and potential GDP, expressed as a percentage of The output gap is the difference between GDP and potential GDP, expressed as a percentage of
potential GDP. A positive value indicates that GDP exceeds potential GDP; a negative value indicates that GDP potential GDP. A positive value indicates that GDP exceeds potential GDP; a negative value indicates that GDP
fal s short of potential GDP. fal s short of potential GDP.
On July 2, 2021, the Congressional Budget Office (CBO) issued an updated estimate of the On July 2, 2021, the Congressional Budget Office (CBO) issued an updated estimate of the
impact of the COVID-19 pandemic on the U.S. GDP output gap and on other major indicators. 199 impact of the COVID-19 pandemic on the U.S. GDP output gap and on other major indicators. 199
In the forecast, the U.S. output gap in 2020 was estimated at 3.3%, similar to the size of the gap In the forecast, the U.S. output gap in 2020 was estimated at 3.3%, similar to the size of the gap
estimated by the IMF, the largest difference between the actual and potential output in the U.S. estimated by the IMF, the largest difference between the actual and potential output in the U.S.
economy since the period following the 2008-2009 financial crisis, as indicated in economy since the period following the 2008-2009 financial crisis, as indicated in Figure 22. The . The
CBO also estimated that the output gap following the financial crisis persisted from 2009-2016, CBO also estimated that the output gap following the financial crisis persisted from 2009-2016,
reflecting the lengthy period of the recovery. In the current context, the CBO estimates that reflecting the lengthy period of the recovery. In the current context, the CBO estimates that
 a rise in vaccinations wil lead to reductions in social distancing and an economic  a rise in vaccinations wil lead to reductions in social distancing and an economic
recovery; recovery;
 real GDP wil expand in 2021 and reach its pre-pandemic peak in mid-2021;  real GDP wil expand in 2021 and reach its pre-pandemic peak in mid-2021;
 the labor force participation rate wil recover, but lag behind the pre-pandemic  the labor force participation rate wil recover, but lag behind the pre-pandemic
rate through the estimation period.200 rate through the estimation period.200

199 199 An Update to the Budget and Economic Outlook: 2021 to 2031, Congressional Budget Office, July 2021. , Congressional Budget Office, July 2021.
200 Ibid., p. 2. 200 Ibid., p. 2.
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Figure 22. Real and Potential U.S. GDP and the Output Gap

Source: Congressional Budget Office, July 2021. Created by CRS. Congressional Budget Office, July 2021. Created by CRS.
Notes: The output gap is the difference between GDP and potential GDP, expressed as a percentage of The output gap is the difference between GDP and potential GDP, expressed as a percentage of
potential GDP. A positive value indicates that GDP exceeds potential GDP; a negative value indicates that GDP potential GDP. A positive value indicates that GDP exceeds potential GDP; a negative value indicates that GDP
fal s short of potential GDP. Values for the output gap are for the fourth quarter of each year. fal s short of potential GDP. Values for the output gap are for the fourth quarter of each year.
CBO also estimated that U.S. GDP would grow at an annual rate of 6.7% in 2021, outpacing the CBO also estimated that U.S. GDP would grow at an annual rate of 6.7% in 2021, outpacing the
CBO’s February forecast of 4.6%. The CBO attributes this higher growth estimate to three CBO’s February forecast of 4.6%. The CBO attributes this higher growth estimate to three
factors: added fiscal spending is projected to increase output; a more rapid return to pre-pandemic factors: added fiscal spending is projected to increase output; a more rapid return to pre-pandemic
levels of social activity; higher levels of consumer spending propel ed by savings accumulated levels of social activity; higher levels of consumer spending propel ed by savings accumulated
during the pandemic.201 After growing by 5.0% in 2022, the economy is projected to grow at pre-during the pandemic.201 After growing by 5.0% in 2022, the economy is projected to grow at pre-
pandemic rates in the 2024-2031 period, as indicated in pandemic rates in the 2024-2031 period, as indicated in Table 14. The unemployment rate was . The unemployment rate was
also projected to peak in 2020 at 8.1%, but trend downward and reach the pre-pandemic rate in also projected to peak in 2020 at 8.1%, but trend downward and reach the pre-pandemic rate in
the 2024 to 2025 period. Similarly, the growth rates of exports and imports were projected to fal the 2024 to 2025 period. Similarly, the growth rates of exports and imports were projected to fal
by 12.9% and 9.3%, respectively, in 2020, before growing at positive rates through the forecast by 12.9% and 9.3%, respectively, in 2020, before growing at positive rates through the forecast
period. period.
Table 14. Congressional Budget Office Projection of Major U.S. Economic Indicators,
2021 to 2031
Annual percentage change Annual percentage change

Average annual

2024-
2026-
2017 2017
2018 2018
2019 2019
2020
2021
2022
2023
2025
2031

Projected
Gross Domestic Gross Domestic
2.3 2.3
3.0 3.0
2.2 2.2
-3.5 -3.5
6.7 6.7
5.0 5.0
1.5 1.5
1.2 1.2
1.6 1.6
Product (GDP) Product (GDP)
Potential GDP Potential GDP
1.7 1.7
1.8 1.8
1.9 1.9
1.9 1.9
1.9 1.9
2.1 2.1
2.1 2.1
1.9 1.9
1.7 1.7
Output Gap Output Gap
0.0 0.0
0.6 0.6
1.0 1.0
-3.3 -3.3
-1.3 -1.3
-0.8 -0.8
-0.4 -0.4
0.4 0.4
-0.1 -0.1
Civilian Unemp. Civilian Unemp.
4.4 4.4
3.9 3.9
3.7 3.7
8.1 8.1
5.5 5.5
3.8 3.8
3.7 3.7
4.1 4.1
4.4 4.4
Rate Rate

201 Ibid201 Ibid, ., p. 3. p. 3.
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Average annual

2024-
2026-
2017 2017
2018 2018
2019 2019
2020
2021
2022
2023
2025
2031

Projected
Labor Force Labor Force
62.9 62.9
62.9 62.9
63.1 63.1
61.7 61.7
61.9 61.9
62.6 62.6
62.9 62.9
62.3 62.3
61.3 61.3
Participation Rate Participation Rate
Exports Exports
3.9 3.9
3.0 3.0
-0.1 -0.1
-12.9 -12.9
7.7 7.7
9.1 9.1
3.9 3.9
1.3 1.3
1.5 1.5
Imports Imports
4.7 4.7
4.1 4.1
1.1 1.1
-9.3 -9.3
14.4 14.4
4.0 4.0
1.9 1.9
0.7 0.7
2.1 2.1
Source: An Update to the Budget and Economic Outlook: 2021-2031, Congressional Budget Office, July 2021. Congressional Budget Office, July 2021.
Federal Reserve Forecast
On June 16, 2021, the Federal Open Market Committee released an updated forecast of the U.S. On June 16, 2021, the Federal Open Market Committee released an updated forecast of the U.S.
economy. In testimony before the House Select Subcommittee on the Coronavirus Crisis, Fed economy. In testimony before the House Select Subcommittee on the Coronavirus Crisis, Fed
Chairman Powel reviewed the major conclusions of the assessment and indicated the U.S. Chairman Powel reviewed the major conclusions of the assessment and indicated the U.S.
economy was recovering at a faster pace than it had forecasted in March. According to Powel , economy was recovering at a faster pace than it had forecasted in March. According to Powel ,
“Widespread vaccinations have joined unprecedented monetary and fiscal policy actions in “Widespread vaccinations have joined unprecedented monetary and fiscal policy actions in
providing strong support to the recovery.”202 Despite progress, Powel indicated the pandemic providing strong support to the recovery.”202 Despite progress, Powel indicated the pandemic
posed continued risks to the economic outlook in part due to a slower rate of vaccinations and posed continued risks to the economic outlook in part due to a slower rate of vaccinations and
new strains of the virus. He concluded by indicating that progress on vaccinations would support new strains of the virus. He concluded by indicating that progress on vaccinations would support
a return to more normal economic conditions and that the Fed was wil ing to do “everything we a return to more normal economic conditions and that the Fed was wil ing to do “everything we
can to support the economy for as long as it takes to complete the recovery.”203 can to support the economy for as long as it takes to complete the recovery.”203
The Fed’s June 2021 forecast also offered a more positive assessment of the economy than The Fed’s June 2021 forecast also offered a more positive assessment of the economy than
previous forecasts released in March and December, with the economy projected to grow by 7.0% previous forecasts released in March and December, with the economy projected to grow by 7.0%
in 2021, compared with the March forecast of 6.5%, as indicated iin 2021, compared with the March forecast of 6.5%, as indicated in Table 15. The forecast The forecast
typical y makes three projections for such major economic variables as GDP, the unemployment typical y makes three projections for such major economic variables as GDP, the unemployment
rate, and the personal consumption expenditure (PCE) measure of inflation compared with its rate, and the personal consumption expenditure (PCE) measure of inflation compared with its
March 2021 projections of the same variables. The three measures include (1) the median March 2021 projections of the same variables. The three measures include (1) the median
projected change; (2) the central tendency, which excludes the highest and lowest three projected change; (2) the central tendency, which excludes the highest and lowest three
projections; and (3) the range, which indicates forecasts from the highest to the lowest values. projections; and (3) the range, which indicates forecasts from the highest to the lowest values.
According to the June median forecast, U.S. GDP between 2021 and 2023 was projected grow at According to the June median forecast, U.S. GDP between 2021 and 2023 was projected grow at
a slightly faster pace in 2021, but at about the same pace for 2022 and 2023 compared with the a slightly faster pace in 2021, but at about the same pace for 2022 and 2023 compared with the
March forecast; the unemployment rate at 4.5% is the same as the previous forecast; the rate of March forecast; the unemployment rate at 4.5% is the same as the previous forecast; the rate of
inflation could rise by 1.0% above the rate forecasted in March. The possible range for GDP, inflation could rise by 1.0% above the rate forecasted in March. The possible range for GDP,
however could vary between 6.3% and 7.8% in 2021, or 0.5% to 1.0% above the previous however could vary between 6.3% and 7.8% in 2021, or 0.5% to 1.0% above the previous
forecast with a possible rate of unemployment between 4.2% and 5.0%, comparable to the forecast with a possible rate of unemployment between 4.2% and 5.0%, comparable to the
previous forecast. The Fed indicated it based its forecast on the best available information, but previous forecast. The Fed indicated it based its forecast on the best available information, but
cautioned there was “considerable uncertainty” about the forecast.204 cautioned there was “considerable uncertainty” about the forecast.204
The Fed also announced it would continue its dollar liquidity swap lines with nine central banks The Fed also announced it would continue its dollar liquidity swap lines with nine central banks
until the end of 2021 to facilitate liquidity in the global U.S. dollar funding market. The swap until the end of 2021 to facilitate liquidity in the global U.S. dollar funding market. The swap

202 Powell, Jerome H., 202 Powell, Jerome H., Statement, House of Representatives, Select Subcommittee on the Coronavirus Crisis, June 22, House of Representatives, Select Subcommittee on the Coronavirus Crisis, June 22,
2021, p. 1. 2021, p. 1.
203 Ibid 203 Ibid, ., p. 4. p. 4.
204 204 Summary of Economic Projections, Board of Governors of the Federal Reserve System, June 16, 2021, p. 17. T he , Board of Governors of the Federal Reserve System, June 16, 2021, p. 17. T he
Fed indicated that due to the level of uncertainty, its forecasts could vary within a range of ±1.5% to ±2.0% for GDP; Fed indicated that due to the level of uncertainty, its forecasts could vary within a range of ±1.5% to ±2.0% for GDP;
±0.9% to ±1.8% for unemployment; and ±0.9% to ±1.0% for prices. ±0.9% to ±1.8% for unemployment; and ±0.9% to ±1.0% for prices.
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lines include providing up to $60 bil ion to: the Reserve Bank of Australia, the Banco Central do lines include providing up to $60 bil ion to: the Reserve Bank of Australia, the Banco Central do
Brasil, the Bank of Korea, the Banco de México, the Monetary Authority of Singapore, and the Brasil, the Bank of Korea, the Banco de México, the Monetary Authority of Singapore, and the
Sveriges Riksbank (Sweden); and up to $30 bil ion each for the Danmarks Nationalbank Sveriges Riksbank (Sweden); and up to $30 bil ion each for the Danmarks Nationalbank
(Denmark), the Norges Bank (Norway), and the Reserve Bank of New Zealand. (Denmark), the Norges Bank (Norway), and the Reserve Bank of New Zealand.
In previous statements, the FOMC had stated that the range of estimates is necessary to represent In previous statements, the FOMC had stated that the range of estimates is necessary to represent
the “extremely elevated” uncertainty related to the economic effects of the pandemic and the the “extremely elevated” uncertainty related to the economic effects of the pandemic and the
limited historical response of the U.S. economy to past economic shocks. As a result of the limited historical response of the U.S. economy to past economic shocks. As a result of the
“significant uncertainty and downside risks associated with the pandemic, including how much “significant uncertainty and downside risks associated with the pandemic, including how much
the economy would weaken and how long it would take to recover,” the assessment of a more the economy would weaken and how long it would take to recover,” the assessment of a more
pessimistic projection was judged to be no less pessimistic than the baseline scenario (median). pessimistic projection was judged to be no less pessimistic than the baseline scenario (median).
Another member of the Fed indicated that the pandemic-related economic crisis should be used to Another member of the Fed indicated that the pandemic-related economic crisis should be used to
distil lessons and “institute reforms so our system is more resilient and better able to withstand a distil lessons and “institute reforms so our system is more resilient and better able to withstand a
variety of possible shocks in the future, including those emanating from outside the financial variety of possible shocks in the future, including those emanating from outside the financial
system.205 system.205
Table 15. Federal Reserve Economic Projections, September 2021
Percentage change, fourth quarter over previous year fourth quarter Percentage change, fourth quarter over previous year fourth quarter

Core Core
Change in Change in
June June
Unemploy- Unemploy-
June June
PCE PCE
June June
PCE PCE
June June
real GDP real GDP
projection projection
ment rate ment rate
projection projection
inflation projection inflation projection
inflation inflation
projection projection
Median1 Median1
2021 2021
5.9 5.9
7.0 7.0
4.8 4.8
4.5 4.5
4.2 4.2
3.4 3.4
3.7 3.7
3.0 3.0
2022 2022
3.8 3.8
3.3 3.3
3.8 3.8
3.8 3.8
2.2 2.2
2.1 2.1
2.3 2.3
2.1 2.1
2023 2023
2.5 2.5
2.4 2.4
3.5 3.5
3.5 3.5
2.2 2.2
2.2 2.2
2.2 2.2
2.1 2.1
2024 2024
2.0 2.0

3.5 3.5

2.1 2.1

2.1 2.1

Longer Longer
1.8 1.8
1.8 1.8
4.0 4.0
4.0 4.0
2.0 2.0
2.0 2.0

run run
Central Tendency2 Central Tendency2
2021 2021
5.8–6.0 5.8–6.0
6.8–7.3 6.8–7.3
4.6–4.8 4.6–4.8
4.4–4.8 4.4–4.8
4.0–4.3 4.0–4.3
3.1–3.5 3.1–3.5
3.6–3.8 3.6–3.8
2.9–3.1 2.9–3.1
2022 2022
3.4–4.5 3.4–4.5
2.8–3.8 2.8–3.8
3.6–4.0 3.6–4.0
3.5–4.0 3.5–4.0
2.0–2.5 2.0–2.5
1.9–2.3 1.9–2.3
2.0–2.5 2.0–2.5
1.9–2.3 1.9–2.3
2023 2023
2.2–2.5 2.2–2.5
2.0–2.5 2.0–2.5
3.3–3.7 3.3–3.7
3.2–3.8 3.2–3.8
2.0–2.3 2.0–2.3
2.0–2.2 2.0–2.2
2.0–2.3 2.0–2.3
2.0–2.2 2.0–2.2
2024 2024
2.0–2.2 2.0–2.2

3.3–3.6 3.3–3.6

2.0–2.2 2.0–2.2

2.0–2.2 2.0–2.2

Longer Longer
1.8–2.0 1.8–2.0
1.8–2.0 1.8–2.0
3.8–4.3 3.8–4.3
3.8–4.3 3.8–4.3
2.0 2.0
2.0 2.0

run run
Range3 Range3
2021 2021
5.5–6.3 5.5–6.3
6.3–7.8 6.3–7.8
4.5–5.1 4.5–5.1
4.2–5.0 4.2–5.0
3.4–4.4 3.4–4.4
3.0–3.9 3.0–3.9
3.5–4.2 3.5–4.2
2.7–3.3 2.7–3.3
2022 2022
3.1–4.9 3.1–4.9
2.6–4.2 2.6–4.2
3.0–4.0 3.0–4.0
3.2–4.2 3.2–4.2
1.7–3.0 1.7–3.0
1.6–2.5 1.6–2.5
1.9–2.8 1.9–2.8
1.7–2.5 1.7–2.5
2023 2023
1.8–3.0 1.8–3.0
1.7–2.7 1.7–2.7
2.8–4.0 2.8–4.0
3.0–3.9 3.0–3.9
1.9–2.4 1.9–2.4
1.9–2.3 1.9–2.3
2.0–2.3 2.0–2.3
2.0–2.3 2.0–2.3
2024 2024
1.8–2.5 1.8–2.5

3.0–4.0 3.0–4.0

2.0–2.3 2.0–2.3

2.0–2.4 2.0–2.4

Longer Longer
1.6–2.2 1.6–2.2
1.6–2.2 1.6–2.2
3.5–4.5 3.5–4.5
3.5–4.5 3.5–4.5
2.0 2.0
2.0 2.0

run run

205 Brainard, Lael, 205 Brainard, Lael, Some Preliminary Financial Stability Lessons From the COVID -19 Shock, At the 2021 Annual , At the 2021 Annual
Washington Conference, Institute of International Bankers March 1, 2021. Washington Conference, Institute of International Bankers March 1, 2021.
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Source: Summary of Economic Projections, September 22, 2021. Summary of Economic Projections, September 22, 2021.
Notes: (1) For each period, the median is the middle projection when the projections are arranged from lowest (1) For each period, the median is the middle projection when the projections are arranged from lowest
to highest. (2) The central tendency excludes the three highest and three lowest projections for each variable in to highest. (2) The central tendency excludes the three highest and three lowest projections for each variable in
each year. (3) The range for a variable in a given year includes al participants’ projections, from lowest to each year. (3) The range for a variable in a given year includes al participants’ projections, from lowest to
highest, for that variable in that year. Projections for the unemployment rate represent the average civilian highest, for that variable in that year. Projections for the unemployment rate represent the average civilian
unemployment rate in the fourth quarter of the year indicated. unemployment rate in the fourth quarter of the year indicated.
For additional information about the impact of COVID-19 on the U.S. economy see CRS Insight For additional information about the impact of COVID-19 on the U.S. economy see CRS Insight
IN11235, IN11235, COVID-19: Potential Economic Effects.206 .206
Europe
In the early stages of the pandemic, European countries did not adopt a synchronized fiscal policy In the early stages of the pandemic, European countries did not adopt a synchronized fiscal policy
response similar to the one they developed during the 2008-2009 global financial crisis. For the response similar to the one they developed during the 2008-2009 global financial crisis. For the
most part, EU members used a combination of national fiscal policies and bond buying by the most part, EU members used a combination of national fiscal policies and bond buying by the
ECB to address the economic impact of the pandemic. Individual countries adopted quarantines ECB to address the economic impact of the pandemic. Individual countries adopted quarantines
and required business closures, travel and border restrictions, tax holidays for businesses, and required business closures, travel and border restrictions, tax holidays for businesses,
extensions of certain payments and loan guarantees, and subsidies for workers and businesses. extensions of certain payments and loan guarantees, and subsidies for workers and businesses.
The European Commission advocated for greater coordination among the EU members in The European Commission advocated for greater coordination among the EU members in
developing and implementing monetary and fiscal policies to address the economic fal out from developing and implementing monetary and fiscal policies to address the economic fal out from
the viral pandemic. the viral pandemic.
Over the summer of 2020, European governments attempted a phased reopening of businesses.207 Over the summer of 2020, European governments attempted a phased reopening of businesses.207
These efforts generated a 12.4% increase in GDP in the Eurozone in the third quarter of 2020. These efforts generated a 12.4% increase in GDP in the Eurozone in the third quarter of 2020.
Initial estimates indicated the EU economic rate of growth nearly stal ed in the fourth quarter, Initial estimates indicated the EU economic rate of growth nearly stal ed in the fourth quarter,
fal ing by 0.5% due to a resumption of lockdown measures. After several months of data fal ing by 0.5% due to a resumption of lockdown measures. After several months of data
indicating an economic rebound had begun in the Eurozone, surveys of business activity in indicating an economic rebound had begun in the Eurozone, surveys of business activity in
August 2020 indicated the recovery had slowed amid an increase in new COVID-19 cases after August 2020 indicated the recovery had slowed amid an increase in new COVID-19 cases after
countries had begun countries had begun ~~re-imposing~~reimposing new quarantines and lockdowns in various parts of the Euro new quarantines and lockdowns in various parts of the Euro
area, although most lockdowns did not include schools or some manufacturing firms.208 Such area, although most lockdowns did not include schools or some manufacturing firms.208 Such
lockdowns became more widespread in September and October as infections cases began rising lockdowns became more widespread in September and October as infections cases began rising
in Germany, France, the United Kingdom, the Czech Republic, the Netherlands, Spain, and in Germany, France, the United Kingdom, the Czech Republic, the Netherlands, Spain, and
Poland.209 By mid-October, Greece and Belgium also had begun implementing business Poland.209 By mid-October, Greece and Belgium also had begun implementing business
lockdowns and social distancing measures. Germany reportedly closed bars, restaurants, and most lockdowns and social distancing measures. Germany reportedly closed bars, restaurants, and most
public entertainment, France closed bars and restaurants and imposed travel restrictions, and on public entertainment, France closed bars and restaurants and imposed travel restrictions, and on
October 31, UK Prime Minister Boris Johnson announced a month-long lockdown across the October 31, UK Prime Minister Boris Johnson announced a month-long lockdown across the
UK.210 UK.210

206 CRS Insight IN11235, 206 CRS Insight IN11235, COVID-19: Potential Economic Effects, by Marc Labonte. , by Marc Labonte.
207 Stott, Michael, Coronavirus Set to Push 29m Latin Americans Into Poverty, 207 Stott, Michael, Coronavirus Set to Push 29m Latin Americans Into Poverty, Financial Times, April 24, 2020. , April 24, 2020.
https://www.ft.com/content/3bf48b80-8fba-410c-9bb8-31e33fffc3b8; Hall, Benjamin, Coronavirus Pandemic https://www.ft.com/content/3bf48b80-8fba-410c-9bb8-31e33fffc3b8; Hall, Benjamin, Coronavirus Pandemic
T hreatens Livelihoods of 59m European Workers, T hreatens Livelihoods of 59m European Workers, Financial Tim es, April 19, 2020, https://www.ft.com/content/, April 19, 2020, https://www.ft.com/content/
36239c82-84ae-4cc9-89bc-8e71e53d6649, Romei, Valentina and Martin Arnold, Eurozone Economy Shrinks by 36239c82-84ae-4cc9-89bc-8e71e53d6649, Romei, Valentina and Martin Arnold, Eurozone Economy Shrinks by
Fastest Rate on Record, Fastest Rate on Record, Financial Tim es, April 30, 2020, https://www.ft.com/content/dd6cfafa-a56d-48f3-a9fd-, April 30, 2020, https://www.ft.com/content/dd6cfafa-a56d-48f3-a9fd-
aa71d17d49a8. aa71d17d49a8.
208 Arnold, Martin, Eurozone Economic Rebound is Losing Steam, Surveys Suggest, 208 Arnold, Martin, Eurozone Economic Rebound is Losing Steam, Surveys Suggest, Financial Times, August 21, , August 21,
2020. https://www.ft.com/content/cc4fa3df-40e7-4e19-be9f-9d01efb74f69. Chazan, Guy and Anna Gross, Europe 2020. https://www.ft.com/content/cc4fa3df-40e7-4e19-be9f-9d01efb74f69. Chazan, Guy and Anna Gross, Europe
Battles to Contain Surge in Coronavirus Cases. Battles to Contain Surge in Coronavirus Cases. Financial Tim es, July 29, 2020. https://www.ft.com/content/bcddc297-, July 29, 2020. https://www.ft.com/content/bcddc297-
b7f2-444d-908f-54e8ce6f4f98. b7f2-444d-908f-54e8ce6f4f98.
209 Lockdown 2.0: Europe Imposes Painful Curbs as Infections Surge, 209 Lockdown 2.0: Europe Imposes Painful Curbs as Infections Surge, Financial Times, October 16, 2020. , October 16, 2020.
https://www.ft.com/content/b1a7d1e8-4bb9-41cf-be5b-2f7f04bdb9bb. https://www.ft.com/content/b1a7d1e8-4bb9-41cf-be5b-2f7f04bdb9bb.
210 Peel, Michael, European Countries Impose Shutdowns as Covid-19 Cases Rise, 210 Peel, Michael, European Countries Impose Shutdowns as Covid-19 Cases Rise, Financial Times, October 30, 2020. , October 30, 2020.
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The WHO indicated in early January 2021, that 230 mil ion Europeans were living under The WHO indicated in early January 2021, that 230 mil ion Europeans were living under
lockdown restrictions at that time and that 26 mil ion Europeans had contracted COVID-19 in lockdown restrictions at that time and that 26 mil ion Europeans had contracted COVID-19 in
2020.211 On April 13, 2021, the WHO estimated that 1 mil ion Europeans had died from the 2020.211 On April 13, 2021, the WHO estimated that 1 mil ion Europeans had died from the
disease, nearly twice as many as in the United States. In an attempt to stop the spread of new disease, nearly twice as many as in the United States. In an attempt to stop the spread of new
variant strains of the virus, the UK, Ireland, Germany, Denmark, and some northern Italian variant strains of the virus, the UK, Ireland, Germany, Denmark, and some northern Italian
regions closed schools in January 2021 for several weeks.212 Reportedly, disputes over vaccine regions closed schools in January 2021 for several weeks.212 Reportedly, disputes over vaccine
distribution within and among European countries and with Britain and the spread of more distribution within and among European countries and with Britain and the spread of more
virulent strains of the COVID-19 virus increased public criticism of government leaders in some virulent strains of the COVID-19 virus increased public criticism of government leaders in some
EU countries and prompted renewed business lockdowns and school closures.213 EU countries and prompted renewed business lockdowns and school closures.213
After protracted talks, European leaders agreed on July 21, 2020, to a €750 bil ion (about $859 After protracted talks, European leaders agreed on July 21, 2020, to a €750 bil ion (about $859
bil ion) pandemic economic assistance package to support European economies. On December bil ion) pandemic economic assistance package to support European economies. On December
11, 2020, EU members finalized the agreement, which took effect on February 2021. The package 11, 2020, EU members finalized the agreement, which took effect on February 2021. The package
consists of a Recovery and Resilience Facility (RRF) that wil provide up to €312.5 bil ion in consists of a Recovery and Resilience Facility (RRF) that wil provide up to €312.5 bil ion in
grants and €360 bil ion in loans and support and funds for existing budget priorities to speed up grants and €360 bil ion in loans and support and funds for existing budget priorities to speed up
Europe’s recovery from the economic impact of the pandemic. The EU describes the Facility as Europe’s recovery from the economic impact of the pandemic. The EU describes the Facility as
the centerpiece of its NextGenerationEU program, a temporary recovery instrument that al ows the centerpiece of its NextGenerationEU program, a temporary recovery instrument that al ows
the EC to raise funds to address the economic and social impact of the pandemic.214 Individual the EC to raise funds to address the economic and social impact of the pandemic.214 Individual
EU members developed recovery and resilience plans to support clean technologies and EU members developed recovery and resilience plans to support clean technologies and
renewable energy, energy efficiency, sustainable transportation and recharging stations, renewable energy, energy efficiency, sustainable transportation and recharging stations,
broadband services, green transition, digital transformation, and education and skil s training, broadband services, green transition, digital transformation, and education and skil s training,
among other areas. among other areas.
According to data released by Eurostat in August 2021, the EU rate of GDP growth during the According to data released by Eurostat in August 2021, the EU rate of GDP growth during the
second quarter of 2020 contracted by 11.1%, relative to the first quarter, and by 11.4% in the Euro second quarter of 2020 contracted by 11.1%, relative to the first quarter, and by 11.4% in the Euro
area from the previous quarter, reflecting negative rates of growth across al EU countries, as area from the previous quarter, reflecting negative rates of growth across al EU countries, as
indicated in indicated in Table 16. In contrast, the EU and the Euro area grew by 11.6% and 12.4%, . In contrast, the EU and the Euro area grew by 11.6% and 12.4%,
respectively, in the third quarter. Compared with growth during the third quarter in the previous respectively, in the third quarter. Compared with growth during the third quarter in the previous
year, however, EU and Euro area growth rates were down 3.9% and 4.0%, respectively. During year, however, EU and Euro area growth rates were down 3.9% and 4.0%, respectively. During
fourth quarter 2020 and first quarter 2021, the rate of economic growth declined by 0.4% and fourth quarter 2020 and first quarter 2021, the rate of economic growth declined by 0.4% and
0.1%, respectively, in the EU and by 0.6% 0.3% in the Euro area as a result of a renewed social 0.1%, respectively, in the EU and by 0.6% 0.3% in the Euro area as a result of a renewed social
activity restrictions and business lockdowns during the period that dampened expectations activity restrictions and business lockdowns during the period that dampened expectations
somewhat of a strong recovery across the EU in the first half of 2021. At 18.8%, the United somewhat of a strong recovery across the EU in the first half of 2021. At 18.8%, the United
Kingdom experienced the largest contraction in its GDP growth rate in the Kingdom experienced the largest contraction in its GDP growth rate in the ~~second~~sec ond quarter of quarter of
2020, compared with the previous quarter among European countries, but third quarter growth 2020, compared with the previous quarter among European countries, but third quarter growth
rate rebounded by 16.0%, the third fastest rate behind France (18.8%) and Spain (17.1%). rate rebounded by 16.0%, the third fastest rate behind France (18.8%) and Spain (17.1%).

https://www.ft.com/content/a89f89ba-08be-44e2-8d21-3e9ada605e17; Packard, Jim, Boris Johnson Announces Second https://www.ft.com/content/a89f89ba-08be-44e2-8d21-3e9ada605e17; Packard, Jim, Boris Johnson Announces Second
Lockdown for England, Lockdown for England, Financial Tim es, October 31, 2020, https://www.ft.com/content/8c2ede22-9dcf-4d31-81ef-, October 31, 2020, https://www.ft.com/content/8c2ede22-9dcf-4d31-81ef-
82ae4ee76e10. 82ae4ee76e10.
211 Clarfelt, Harriet, Pandemic at ‘tipping point’, Says WHO Europe Official, 211 Clarfelt, Harriet, Pandemic at ‘tipping point’, Says WHO Europe Official, Financial Times, January 7, 2021. , January 7, 2021.
https://www.ft.com/content/9b42e8fa-dde1-3663-a4ad-7d6605121866. https://www.ft.com/content/9b42e8fa-dde1-3663-a4ad-7d6605121866.
212 Hall, Ben, Bethan Staton, Joshua Chaffin, Guy Chazan, European Capitals Follow UK With School Closures as 212 Hall, Ben, Bethan Staton, Joshua Chaffin, Guy Chazan, European Capitals Follow UK With School Closures as
Virus Surges, Virus Surges, Financial Tim es, January 7, 2021. https://www.ft.com/content/8121ca0a-4d96-4cf5-b5df-a73adc16a606. , January 7, 2021. https://www.ft.com/content/8121ca0a-4d96-4cf5-b5df-a73adc16a606.
213 Chazan, Guy, We Are a Laughing Stock’: Covid-19 and Germany’s Political Malaise, 213 Chazan, Guy, We Are a Laughing Stock’: Covid-19 and Germany’s Political Malaise, Financial Times, April 1, , April 1,
2021. https://www.ft.com/content/bc5a3b02-a90d-4206-a441-1bada29feba2. 2021. https://www.ft.com/content/bc5a3b02-a90d-4206-a441-1bada29feba2.
214 European Commission, 214 European Commission, The Recovery and Resilience Facility. https://ec.europa.eu/info/business-economy-. https://ec.europa.eu/info/business-economy-
euro/recovery-coronavirus/recovery-and-resilience-facility_en#the-recovery-and-resilience-task-force. euro/recovery-coronavirus/recovery-and-resilience-facility_en#the-recovery-and-resilience-task-force.
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Table 16. EU Real GDP Growth Rates 2020 and 2021
Seasonal y adjusted data Seasonal y adjusted data
Percentage change compared with
Percentage change compared with the
the previous quarter
same quarter of the previous year

2020 2020
2020 2020
2020 2020
2020 2020
2021 2021
2020 2020
2020 2020
2020 2020
2020 2020
2021 2021
Q1 Q1
Q2 Q2
Q3 Q3
Q4 Q4
Q1 Q1
Q1 Q1
Q2 Q2
Q3 Q3
Q4 Q4
Q1 Q1
EU EU
-3.2 -3.2
-11.1 -11.1
11.6 11.6
-0.4 -0.4
-0.1 -0.1
-2.6 -2.6
-13.6 -13.6
-3.9 -3.9
-4.3 -4.3
-1.3 -1.3
Euro area Euro area
-3.6 -3.6
-11.4 -11.4
12.4 12.4
-0.6 -0.6
-0.3 -0.3
-3.2 -3.2
-14.4 -14.4
-4.0 -4.0
-4.6 -4.6
-1.3 -1.3
Belgium Belgium
-3.3 -3.3
-11.9 -11.9
11.8 11.8
-0.1 -0.1
1.1 1.1
-2.0 -2.0
-14.0 -14.0
-4.3 -4.3
-4.9 -4.9
-0.5 -0.5
Bulgaria Bulgaria
0.4 0.4
-10.1 -10.1
4.3 4.3
2.2 2.2
2.5 2.5
2.3 2.3
-8.6 -8.6
-5.2 -5.2
-3.8 -3.8
-1.8 -1.8
Czechnia Czechnia
-3.4 -3.4
-8.9 -8.9
6.8 6.8
0.7 0.7
-0.3 -0.3
-1.5 -1.5
-10.9 -10.9
-5.4 -5.4
-5.3 -5.3
-2.4 -2.4
Denmark Denmark
-0.7 -0.7
-6.3 -6.3
6.0 6.0
0.9 0.9
-1.0 -1.0
0.2 0.2
-6.6 -6.6
-1.3 -1.3
-0.5 -0.5
-0.8 -0.8
Germany Germany
-1.8 -1.8
-10.0 -10.0
9.0 9.0
0.7 0.7
-2.1 -2.1
-1.9 -1.9
-11.3 -11.3
-3.7 -3.7
-2.9 -2.9
-3.2 -3.2
Estonia Estonia
-1.6 -1.6
-5.1 -5.1
2.7 2.7
2.8 2.8
4.8 4.8
-0.1 -0.1
-5.6 -5.6
-3.5 -3.5
-1.3 -1.3
5.0 5.0
Ireland Ireland
3.1 3.1
-1.4 -1.4
8.3 8.3
-5.2 -5.2
8.6 8.6
6.7 6.7
1.4 1.4
11.2 11.2
4.3 4.3
9.9 9.9
Greece Greece
-0.5 -0.5
-12.9 -12.9
3.8 3.8
3.4 3.4
4.4 4.4
-0.5 -0.5
-13.9 -13.9
-10.0 -10.0
-6.9 -6.9
-2.3 -2.3
Spain Spain
-5.4 -5.4
-17.8 -17.8
17.1 17.1
0.0 0.0
-0.4 -0.4
-4.3 -4.3
-21.6 -21.6
-8.6 -8.6
-8.9 -8.9
-4.2 -4.2
France France
-5.8 -5.8
-13.5 -13.5
18.8 18.8
-1.0 -1.0
0.0 0.0
-5.5 -5.5
-18.7 -18.7
-3.6 -3.6
-4.2 -4.2
1.7 1.7
Croatia Croatia
-0.6 -0.6
-15.1 -15.1
5.9 5.9
4.1 4.1
5.8 5.8
0.8 0.8
-14.6 -14.6
-10.1 -10.1
-6.9 -6.9
-0.9 -0.9
Italy Italy
-5.7 -5.7
-13.1 -13.1
16.0 16.0
-1.8 -1.8
0.2 0.2
-5.8 -5.8
-18.2 -18.2
-5.2 -5.2
-6.5 -6.5
-0.7 -0.7
Cyprus Cyprus
-0.8 -0.8
-13.0 -13.0
9.5 9.5
1.1 1.1
2.0 2.0
1.1 1.1
-12.5 -12.5
-4.6 -4.6
-4.4 -4.4
-1.6 -1.6
Latvia Latvia
-2.3 -2.3
-7.0 -7.0
6.9 6.9
1.1 1.1
-1.7 -1.7
-1.2 -1.2
-8.6 -8.6
-2.8 -2.8
-1.8 -1.8
-1.2 -1.2
Lithuania Lithuania
-0.3 -0.3
-6.2 -6.2
6.1 6.1
-0.3 -0.3
2.2 2.2
2.5 2.5
-4.7 -4.7
0.1 0.1
-1.1 -1.1
1.4 1.4
Luxem- Luxem-
-1.6 -1.6
-7.1 -7.1
9.2 9.2
1.9 1.9
1.4 1.4
1.1 1.1
-8.0 -8.0
-0.1 -0.1
1.7 1.7
4.9 4.9
bourg bourg
Hungary Hungary
-0.4 -0.4
-14.5 -14.5
9.7 9.7
2.8 2.8
2.0 2.0
2.1 2.1
-13.3 -13.3
-5.2 -5.2
-3.9 -3.9
-1.6 -1.6
Malta Malta
-3.9 -3.9
-13.9 -13.9
7.4 7.4
4.0 4.0
1.9 1.9
1.6 1.6
-14.8 -14.8
-9.6 -9.6
-7.7 -7.7
-2.0 -2.0
Nether- Nether-
-1.6 -1.6
-8.4 -8.4
7.5 7.5
0.0 0.0
-0.8 -0.8
-0.4 -0.4
-9.1 -9.1
-2.6 -2.6
-3.1 -3.1
-2.3 -2.3
lands lands
Austria Austria
-2.6 -2.6
-10.6 -10.6
11.6 11.6
-3.1 -3.1
-1.1 -1.1
-3.1 -3.1
-13.2 -13.2
-3.4 -3.4
-5.9 -5.9
-4.5 -4.5
Poland Poland
-0.2 -0.2
-8.9 -8.9
7.5 7.5
-0.5 -0.5
1.1 1.1
2.0 2.0
-7.9 -7.9
-2.0 -2.0
-2.7 -2.7
-1.4 -1.4
Portugal Portugal
-4.0 -4.0
-14.0 -14.0
13.4 13.4
0.2 0.2
-3.2 -3.2
-2.2 -2.2
-16.4 -16.4
-5.6 -5.6
-6.1 -6.1
-5.3 -5.3
Romania Romania
0.7 0.7
-11.8 -11.8
5.5 5.5
4.6 4.6
2.9 2.9
2.8 2.8
-10.0 -10.0
-5.5 -5.5
-2.0 -2.0
0.1 0.1
Slovenia Slovenia
-5.6 -5.6
-9.9 -9.9
12.6 12.6
-0.6 -0.6
1.4 1.4
-3.5 -3.5
-13.1 -13.1
-2.9 -2.9
-4.8 -4.8
2.3 2.3
Slovakia Slovakia
-4.6 -4.6
-7.5 -7.5
9.9 9.9
0.8 0.8
-2.0 -2.0
-3.3 -3.3
-10.9 -10.9
-2.5 -2.5
-2.3 -2.3
0.3 0.3
Finland Finland
-0.5 -0.5
-6.1 -6.1
4.5 4.5
0.5 0.5
0.0 0.0
0.0 0.0
-7.0 -7.0
-2.7 -2.7
-1.9 -1.9
-1.4 -1.4
Sweden Sweden
-0.9 -0.9
-7.8 -7.8
7.4 7.4
0.0 0.0
0.8 0.8
0.1 0.1
-8.1 -8.1
-1.8 -1.8
-1.8 -1.8
-0.1 -0.1
Other countries Other countries

United United
-3.0 -3.0
-18.8 -18.8
16.0 16.0
: :
: :
-2.4 -2.4
-20.8 -20.8
-8.6 -8.6
: :
: :
Kingdom Kingdom
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Percentage change compared with
Percentage change compared with the
the previous quarter
same quarter of the previous year

2020 2020
2020 2020
2020 2020
2020 2020
2021 2021
2020 2020
2020 2020
2020 2020
2020 2020
2021 2021
Q1 Q1
Q2 Q2
Q3 Q3
Q4 Q4
Q1 Q1
Q1 Q1
Q2 Q2
Q3 Q3
Q4 Q4
Q1 Q1
Iceland Iceland
: :
: :
: :
: :
: :
: :
: :
: :
: :
: :
Norway Norway
-1.5 -1.5
-4.6 -4.6
4.3 4.3
0.8 0.8
-0.6 -0.6
0.4 0.4
-4.3 -4.3
-0.2 -0.2
-1.1 -1.1
-0.2 -0.2
Switzer- Switzer-
-1.7 -1.7
-6.8 -6.8
7.2 7.2
0.1 0.1
-0.5 -0.5
-0.3 -0.3
-7.5 -7.5
-1.4 -1.4
-1.7 -1.7
-0.5 -0.5
land land
Source: Eurostat, August 13, 2021. , August 13, 2021.
Draft budget estimates submitted by Eurozone governments in the fal of 2020 indicated the Draft budget estimates submitted by Eurozone governments in the fal of 2020 indicated the
countries could experience a combined budget deficit of nearly €1 tril ion, or equivalent to about countries could experience a combined budget deficit of nearly €1 tril ion, or equivalent to about
9% of their annual GDP.215 The rise in budget deficits reflects the growing cost to governments of 9% of their annual GDP.215 The rise in budget deficits reflects the growing cost to governments of
supporting their economies to sustain economic activity and a marked change in attitudes toward supporting their economies to sustain economic activity and a marked change in attitudes toward
budget deficits also reflected in statements by the IMF and World Bank. Second quarter data budget deficits also reflected in statements by the IMF and World Bank. Second quarter data
indicated that employment among EU countries fel by 2.6%, or 5.5 mil ion jobs in 2020. The indicated that employment among EU countries fel by 2.6%, or 5.5 mil ion jobs in 2020. The
jobs data, however, do not include roughly 45 mil ion people, or a third of the workforce in jobs data, however, do not include roughly 45 mil ion people, or a third of the workforce in
Germany, France, Britain, Italy, and Spain, that were covered by employment protection Germany, France, Britain, Italy, and Spain, that were covered by employment protection
programs.216 programs.216
In its June summer 2021 economic forecast, the European Commission projected that EU GDP In its June summer 2021 economic forecast, the European Commission projected that EU GDP
growth rate would rise by 4.8% in 2021, after fal ing by 6.0% in 2020, more than a full growth rate would rise by 4.8% in 2021, after fal ing by 6.0% in 2020, more than a full
percentage point lower than it had estimated in its Autumn forecast of -7.4%, as indicated in percentage point lower than it had estimated in its Autumn forecast of -7.4%, as indicated in
Table 17.217 The EC forecast indicated a smal er drop in gross domestic product (GDP) in 2020 217 The EC forecast indicated a smal er drop in gross domestic product (GDP) in 2020
among European economies than it had forecasted in its autumn 2020 report, as a result of a third among European economies than it had forecasted in its autumn 2020 report, as a result of a third
quarter rebound in growth before an anticipated slow-down in the fourth quarter as a result of the quarter rebound in growth before an anticipated slow-down in the fourth quarter as a result of the
resumption of business lockdowns. The forecast projects a rebound in the EU economy in the resumption of business lockdowns. The forecast projects a rebound in the EU economy in the
second and third quarters of 2021 before a slowdown in the fourth quarter. The forecast indicated second and third quarters of 2021 before a slowdown in the fourth quarter. The forecast indicated
that: that:
 Firms and households were adapting to pandemic-related constraints and a more  Firms and households were adapting to pandemic-related constraints and a more
positive global environment combined with increased global trade and the effects positive global environment combined with increased global trade and the effects
of domestic economic stimulus policies that were contributing to growth. of domestic economic stimulus policies that were contributing to growth.
 A faster-than-expected recovery in travel, including intra-EU travel, was  A faster-than-expected recovery in travel, including intra-EU travel, was
reflecting higher levels of consumer spending. reflecting higher levels of consumer spending.
 Certain manufacturing sectors were continuing to experience supply shortages,  Certain manufacturing sectors were continuing to experience supply shortages,
but the impact was expected to be transitory. but the impact was expected to be transitory.
 Inflation pressures were increasing as a result of rising energy and commodity  Inflation pressures were increasing as a result of rising energy and commodity
prices, production bottlenecks, and rising demand, but there was uncertainty prices, production bottlenecks, and rising demand, but there was uncertainty
about whether the increase was transitory or could become entrenched. about whether the increase was transitory or could become entrenched.
 National public and private investment spending was expected to help sustain the  National public and private investment spending was expected to help sustain the
economic recovery in 2021 and 2022.218 economic recovery in 2021 and 2022.218

215 Arnold, Martin and Sam Fleming, Eurozone Budget Deficits Rise Nearly T enfold to Counter Pandemic, 215 Arnold, Martin and Sam Fleming, Eurozone Budget Deficits Rise Nearly T enfold to Counter Pandemic, Financial
Tim es, October 19, 2020. https://www.ft.com/content/5579361f-5aac-4cd3-9e93-190fffdc0baf. , October 19, 2020. https://www.ft.com/content/5579361f-5aac-4cd3-9e93-190fffdc0baf.
216 Ben Hall, Ben, Delphine Strauss, and Daniel Dombey, Millions of European Jobs at Risk When Furlough Support 216 Ben Hall, Ben, Delphine Strauss, and Daniel Dombey, Millions of European Jobs at Risk When Furlough Support
Ends, Ends, Financial Tim es, August 14, 2020. https://www.ft.com/content/0f01a9ed-5b15-4e2d-921c-6eed7a80d0bd. August 14, 2020. https://www.ft.com/content/0f01a9ed-5b15-4e2d-921c-6eed7a80d0bd.
217 217 European Economic Forecast Summer 2021, European Commission, July 2021. , European Commission, July 2021.
218 Ibid218 Ibid, ., 2. 2.
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Table 17. European Commission Economic Forecast
Percentage change, real GDP Percentage change, real GDP

Summer Forecast 2021 Summer Forecast 2021
Spring Forecast 2021 Spring Forecast 2021
Autumn Forecast 2020 Autumn Forecast 2020
2021 2021
2022 2022
2020 2020
2021 2021
2022 2022
2020 2020
2021 2021
2022 2022

EU EU
4.8 4.8
4.5 4.5
-6.0 -6.0
4.2 4.2
4.4 4.4
-7.4 -7.4
4.1 4.1
3.0 3.0
Euro area Euro area
4.8 4.8
4.5 4.5
-6.5 -6.5
4.3 4.3
4.4 4.4
-7.8 -7.8
4.2 4.2
3.0 3.0
Belgium Belgium
5.4 5.4
3.7 3.7
-6.3 -6.3
4.5 4.5
3.7 3.7
-8.4 -8.4
4.1 4.1
3.5 3.5
Germany Germany
3.6 3.6
4.6 4.6
-4.8 -4.8
3.4 3.4
4.1 4.1
-5.6 -5.6
3.5 3.5
2.6 2.6
Ireland Ireland
7.2 7.2
5.1 5.1
3.4 3.4
4.6 4.6
5.0 5.0
-2.3 -2.3
2.9 2.9
2.6 2.6
Greece Greece
4.3 4.3
6.0 6.0
-8.2 -8.2
4.1 4.1
6.0 6.0
-9.0 -9.0
5.0 5.0
3.5 3.5
Spain Spain
6.2 6.2
6.3 6.3
-10.8 -10.8
5.9 5.9
6.8 6.8
-12.4 -12.4
5.4 5.4
4.8 4.8
France France
6.0 6.0
4.2 4.2
-7.9 -7.9
5.7 5.7
4.2 4.2
-7.8 -7.8
4.2 4.2
3.0 3.0
Italy Italy
5.0 5.0
4.2 4.2
-8.9 -8.9
4.2 4.2
4.4 4.4
-9.4 -9.4
5.8 5.8
3.1 3.1
Luxembourg Luxembourg
4.8 4.8
3.3 3.3
-1.3 -1.3
4.5 4.5
3.3 3.3
-9.9 -9.9
4.1 4.1
2.8 2.8
Malta Malta
5.6 5.6
5.8 5.8
-7.8 -7.8
4.6 4.6
6.1 6.1
-4.5 -4.5
3.9 3.9
2.7 2.7
Netherlands Netherlands
3.3 3.3
3.3 3.3
-3.7 -3.7
2.3 2.3
3.6 3.6
-7.3 -7.3
3.0 3.0
6.2 6.2
Austria Austria
3.8 3.8
4.5 4.5
-6.3 -6.3
3.4 3.4
4.3 4.3
-5.3 -5.3
2.2 2.2
1.9 1.9
Portugal Portugal
3.9 3.9
5.1 5.1
-7.6 -7.6
3.9 3.9
5.1 5.1
-7.1 -7.1
4.1 4.1
2.5 2.5
Finland Finland
2.7 2.7
2.9 2.9
-2.8 -2.8
2.7 2.7
2.8 2.8
-9.3 -9.3
5.4 5.4
3.5 3.5
Denmark Denmark
3.0 3.0
3.4 3.4
-2.7 -2.7
2.9 2.9
3.5 3.5
-4.3 -4.3
2.9 2.9
2.2 2.2
Sweden Sweden
4.6 4.6
3.6 3.6
-2.8 -2.8
4.4 4.4
3.3 3.3
-3.9 -3.9
3.5 3.5
2.4 2.4
World World
5.9 5.9
4.2 4.2
-2.9 -2.9
5.9 5.9
4.2 4.2
-3.4 -3.4
3.3 3.3
2.4 2.4
Source: European Economic Forecast Summer 2021, European Commission, July 2021. , European Commission, July 2021.
The Commission indicated the EU economy was weaker in the fal of 2020 and weaker going into The Commission indicated the EU economy was weaker in the fal of 2020 and weaker going into
2021 than its earlier forecast had indicated as a result of a resurgence of COVID-19 cases and the 2021 than its earlier forecast had indicated as a result of a resurgence of COVID-19 cases and the
emergence of new, more virulent strains of the virus in the fal that led countries to emergence of new, more virulent strains of the virus in the fal that led countries to ~~re-impose~~reimpose
restrictions. The Commission concluded, however, that the outlook for the EU economy had restrictions. The Commission concluded, however, that the outlook for the EU economy had
improved since its November 2020 forecast due to the development of vaccines and the pace of improved since its November 2020 forecast due to the development of vaccines and the pace of
vaccinations. The economic impact of the renewed lockdowns was projected to be unequal across vaccinations. The economic impact of the renewed lockdowns was projected to be unequal across
EU members due to differences in the stringency of containment measures, the severity of the EU members due to differences in the stringency of containment measures, the severity of the
infections and differences in economic institutions and policy responses.219 infections and differences in economic institutions and policy responses.219
The Commission forecast assumed that trade activity in the EU and the UK would be negatively The Commission forecast assumed that trade activity in the EU and the UK would be negatively
affected beginning in January 2021 due to the UK withdrawal from the EU. By country, Spain, affected beginning in January 2021 due to the UK withdrawal from the EU. By country, Spain,
France, Italy, Portugal, and Greece were forecasted to experience the largest declines in GDP in France, Italy, Portugal, and Greece were forecasted to experience the largest declines in GDP in
2020 due to a number of factors, including a dependence on tourism, which is expected to 2020 due to a number of factors, including a dependence on tourism, which is expected to
experience a slow economic recovery. Germany and other Northern European countries were experience a slow economic recovery. Germany and other Northern European countries were
projected to experience a more modest decline in economic activity. Some analysts argue that this projected to experience a more modest decline in economic activity. Some analysts argue that this
disparity in economic effects may complicate efforts to coordinate economic policies.220 disparity in economic effects may complicate efforts to coordinate economic policies.220

219 219 European Economic Forecast Winter 2021, European Commission, February 2021, p. 1. , European Commission, February 2021, p. 1.
220 Birnbaum, Michael, European Union Says T hat Pandemic Recession Will be Worst in its History, 220 Birnbaum, Michael, European Union Says T hat Pandemic Recession Will be Worst in its History, Washington Post,
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In assessing the chal enge of the crisis, the Commission argued that, “[t]he risk … is that the In assessing the chal enge of the crisis, the Commission argued that, “[t]he risk … is that the
crisis wil lead to severe distortions within the Single Market and to entrenched economic, crisis wil lead to severe distortions within the Single Market and to entrenched economic,
financial and social divergences between euro area Member States that could ultimately threaten financial and social divergences between euro area Member States that could ultimately threaten
the stability of the Economic and Monetary Union.”221 The Commission estimated that European the stability of the Economic and Monetary Union.”221 The Commission estimated that European
countries would emerge from the recession at different rates and different paths, reflecting countries would emerge from the recession at different rates and different paths, reflecting
differences in the timing of the introduction and removal of social distancing measures, differences in the timing of the introduction and removal of social distancing measures,
dependency on tourism, and the magnitude and effectiveness of economic policies. The dependency on tourism, and the magnitude and effectiveness of economic policies. The
Commission also noted the rise in saving among EU households that it argued was mostly Commission also noted the rise in saving among EU households that it argued was mostly
involuntary, rather than precautionary and was projected to revert to pre-crisis levels once involuntary, rather than precautionary and was projected to revert to pre-crisis levels once
consumers resumed their regular spending patterns. consumers resumed their regular spending patterns.
In previous actions, the European Commission announced that it would relax rules on In previous actions, the European Commission announced that it would relax rules on
government debt to al ow countries more flexibility in using fiscal policies. Also, the European government debt to al ow countries more flexibility in using fiscal policies. Also, the European
Central Bank (ECB) announced that it was ready to take “appropriate and targeted measures,” if Central Bank (ECB) announced that it was ready to take “appropriate and targeted measures,” if
needed. France, Italy, Spain and six other Eurozone countries have argued for creating a needed. France, Italy, Spain and six other Eurozone countries have argued for creating a
“coronabond,” a joint common European debt instrument. Similar attempts to create a common “coronabond,” a joint common European debt instrument. Similar attempts to create a common
Eurozone-wide debt instrument have been opposed by Germany and the Netherlands, among Eurozone-wide debt instrument have been opposed by Germany and the Netherlands, among
other Eurozone members.222 With interest rates already low, however, it indicated that it would other Eurozone members.222 With interest rates already low, however, it indicated that it would
expand its program of providing loans to EU banks, or buying debt from EU firms, and possibly expand its program of providing loans to EU banks, or buying debt from EU firms, and possibly
lowering its deposit rate further into negative territory in an attempt to shore up the Euro’s lowering its deposit rate further into negative territory in an attempt to shore up the Euro’s
exchange rate.223 ECB President-designate Christine Lagarde cal ed on EU leaders to take more exchange rate.223 ECB President-designate Christine Lagarde cal ed on EU leaders to take more
urgent action to avoid the spread of COVID-19 from triggering a serious economic slowdown. urgent action to avoid the spread of COVID-19 from triggering a serious economic slowdown.
The European Commission indicated that it was creating a $30 bil ion investment fund to address The European Commission indicated that it was creating a $30 bil ion investment fund to address
COVID-19 issues.224 In other actions taken in 2020 to address the economic crisis: COVID-19 issues.224 In other actions taken in 2020 to address the economic crisis:
 On March 12, 2020, the ECB decided to (1) expand its longer-term refinance  On March 12, 2020, the ECB decided to (1) expand its longer-term refinance
operations (LTRO) to provide low-cost loans to Eurozone banks to increase bank operations (LTRO) to provide low-cost loans to Eurozone banks to increase bank
liquidity; (2) extend targeted longer-term refinance operations (TLTRO) to liquidity; (2) extend targeted longer-term refinance operations (TLTRO) to
provide loans at below-market rates to businesses, especial y provide loans at below-market rates to businesses, especial y ~~small~~ smal and medium-and medium-
sized businesses, directly affected by COVID-19; (3) provide an additional €120 sized businesses, directly affected by COVID-19; (3) provide an additional €120
bil ion (about $130 bil ion) for the Bank’s asset purchase program to provide bil ion (about $130 bil ion) for the Bank’s asset purchase program to provide
liquidity to firms that was in addition to €20 bil ion a month it previously had liquidity to firms that was in addition to €20 bil ion a month it previously had
committed to purchasing.225 committed to purchasing.225
 On March 13, 2020, financial market regulators in the UK, Italy, and Spain  On March 13, 2020, financial market regulators in the UK, Italy, and Spain
intervened in stock and bond markets to stabilize prices after historic swings in intervened in stock and bond markets to stabilize prices after historic swings in

May 6, 2020. https://www.washingtonpost.com/world/european-union-says-pandemic-recession-will-be-worst-in-its-May 6, 2020. https://www.washingtonpost.com/world/european-union-says-pandemic-recession-will-be-worst-in-its-
history/2020/05/06/e787a70e-8f96-11ea-9322-a29e75effc93_story.html. history/2020/05/06/e787a70e-8f96-11ea-9322-a29e75effc93_story.html.
221 221 European Economic Forecast Autumn 2020. .
222 Dombey, Daniel Dombey, Guy Chazan, and Jim Brunsden, “Nine Eurozone Countries Issue Call for 222 Dombey, Daniel Dombey, Guy Chazan, and Jim Brunsden, “Nine Eurozone Countries Issue Call for
‘Coronabonds,’” ‘Coronabonds,’” Financial Times, March 26, 2020. https://www.ft.com/content/258308f6-6e94-11ea-89df- March 26, 2020. https://www.ft.com/content/258308f6-6e94-11ea-89df-
41bea055720b. 41bea055720b.
223 “US Fed’s Covid-19 Rate Cut Is First Move in a Dance with Markets,” 223 “US Fed’s Covid-19 Rate Cut Is First Move in a Dance with Markets,” Financial Times, March 4, 2020. , March 4, 2020.
https://www.ft.com/content/83c07594-5e3a-11ea-b0ab-339c2307bcd4. Giles, Chris, Martin Arnold, Sam Jones, and https://www.ft.com/content/83c07594-5e3a-11ea-b0ab-339c2307bcd4. Giles, Chris, Martin Arnold, Sam Jones, and
Jamie Smyth,Jamie Smyth, “Finance Ministers ‘Ready to T ake Action’ on Covid-19,” Finance Ministers ‘Ready to T ake Action’ on Covid-19,” Financial Tim es, March 3, 2020. , March 3, 2020.
https://www.ft.com/content/b86f7d92-5d38-11ea-b0ab-339c2307bcd4. https://www.ft.com/content/b86f7d92-5d38-11ea-b0ab-339c2307bcd4.
224 Arnold, Martin and Guy Chazan, “Christine Lagarde Calls on EU Leaders to Ramp up Covid-19 Response,” 224 Arnold, Martin and Guy Chazan, “Christine Lagarde Calls on EU Leaders to Ramp up Covid-19 Response,”
Financial Tim es, March 11, 2020. https://www.ft.com/content/44eac1f2-6386-11ea-a6cd-df28cc3c6a68. , March 11, 2020. https://www.ft.com/content/44eac1f2-6386-11ea-a6cd-df28cc3c6a68.
225 225 Monetary Policy Decisions, T he European Central Bank, March 12, 2020. https://www.ecb.europa.eu/press/pr/date/, T he European Central Bank, March 12, 2020. https://www.ecb.europa.eu/press/pr/date/
2020/html/ecb.mp200312~8d3aec3ff2.en.htm. 2020/html/ecb.mp200312~8d3aec3ff2.en.htm.
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indexes on March 12, 2020.226 In addition, the ECB announced that it would do indexes on March 12, 2020.226 In addition, the ECB announced that it would do
more to assist financial markets in distress, including altering self-imposed rules more to assist financial markets in distress, including altering self-imposed rules
on purchases of sovereign debt.227 on purchases of sovereign debt.227
 Germany’s Economic Minister announced on March 13, 2020, that Germany  Germany’s Economic Minister announced on March 13, 2020, that Germany
would provide unlimited loans to businesses experiencing negative economic would provide unlimited loans to businesses experiencing negative economic
activity (initial y providing $555 bil ion), tax breaks for businesses,228 and export activity (initial y providing $555 bil ion), tax breaks for businesses,228 and export
credits and guarantees.229 credits and guarantees.229
 On March 18, the ECB indicated that it would: create a €750 bil ion (about $800  On March 18, the ECB indicated that it would: create a €750 bil ion (about $800
bil ion) Pandemic Emergency Purchase Program to purchase public and private bil ion) Pandemic Emergency Purchase Program to purchase public and private
securities; expand the securities it wil purchase to include nonfinancial securities; expand the securities it wil purchase to include nonfinancial
commercial paper; and ease some collateral standards.230 In announcing the commercial paper; and ease some collateral standards.230 In announcing the
program, President-designate Lagarde indicated that the ECB would, “do program, President-designate Lagarde indicated that the ECB would, “do
everything necessary.” In creating the program, the ECB removed or significantly everything necessary.” In creating the program, the ECB removed or significantly
loosened almost al constraints that applied to previous asset-purchase programs, loosened almost al constraints that applied to previous asset-purchase programs,
including a self-imposed limit of buying no more than one-third of any one including a self-imposed limit of buying no more than one-third of any one
country’s eligible bonds, a move that was expected to benefit Italy. country’s eligible bonds, a move that was expected to benefit Italy.
 The ECB also indicated that it would make available up to €3 tril ion in liquidity  The ECB also indicated that it would make available up to €3 tril ion in liquidity
through refinancing operations.231 Britain ($400 bil ion) and France ($50 bil ion) through refinancing operations.231 Britain ($400 bil ion) and France ($50 bil ion)
also announced plans to increase spending to blunt the economic effects of the also announced plans to increase spending to blunt the economic effects of the
virus. Recent forecasts indicate that the economic effect of COVID-19 could virus. Recent forecasts indicate that the economic effect of COVID-19 could
push the Eurozone into an economic recession in 2020.232 push the Eurozone into an economic recession in 2020.232
 On March 23, 2020, Germany announced that it would adopt a €750 bil ion (over  On March 23, 2020, Germany announced that it would adopt a €750 bil ion (over
$800 bil ion) package in economic stimulus funding. $800 bil ion) package in economic stimulus funding.
 On April 15, Eurozone finance ministers announced a €500 bil ion (about $550  On April 15, Eurozone finance ministers announced a €500 bil ion (about $550
bil ion) emergency spending package to support governments, businesses, and bil ion) emergency spending package to support governments, businesses, and
workers and wil provide funds to the European Stability Mechanism, the workers and wil provide funds to the European Stability Mechanism, the
European Investment Bank, and for unemployment insurance.233 European Investment Bank, and for unemployment insurance.233
On May 5, 2020, Germany’s Constitutional Court issued a ruling chal enging the legality of a On May 5, 2020, Germany’s Constitutional Court issued a ruling chal enging the legality of a
bond-buying program conducted by the ECB since 2015, the Public Sector Purchase Program bond-buying program conducted by the ECB since 2015, the Public Sector Purchase Program
(PSPP). In its ruling, the court directed the German government to request clarification from the (PSPP). In its ruling, the court directed the German government to request clarification from the

226 Stafford, Philip and Adam Samson, “European Regulators Intervene in Bid to Stabilize Stock and Bond Prices,” 226 Stafford, Philip and Adam Samson, “European Regulators Intervene in Bid to Stabilize Stock and Bond Prices,”
Financial Tim es, March 13, 2020. https://www.ft.com/content/77f57d4c-6509-11ea-a6cd-df28cc3c6a68. , March 13, 2020. https://www.ft.com/content/77f57d4c-6509-11ea-a6cd-df28cc3c6a68.
227 Arnold, Martin, “ECB Enters Damage-Limitation Mode with Pledge of More Action,” 227 Arnold, Martin, “ECB Enters Damage-Limitation Mode with Pledge of More Action,” Financial Times, March 13, , March 13,
2020. https://www.ft.com/content/f1cbd4f8-650f-11ea-b3f3-fe4680ea68b5. 2020. https://www.ft.com/content/f1cbd4f8-650f-11ea-b3f3-fe4680ea68b5.
228 Loveday, Morris and Louisa Beck, “Germany Announces ‘Bazooka’ Economic Plan to Mitigate Covid-19 Hit,” 228 Loveday, Morris and Louisa Beck, “Germany Announces ‘Bazooka’ Economic Plan to Mitigate Covid-19 Hit,”
Washington Post, March 13, 2020. https://www.washingtonpost.com/world/2020/03/13/Covid-19-latest-news/. , March 13, 2020. https://www.washingtonpost.com/world/2020/03/13/Covid-19-latest-news/.
229 Arnold, Martin, Guy Chazan, Victor Mallet, Miles Johnson, and Daniel Dombey, “How European Economies Are 229 Arnold, Martin, Guy Chazan, Victor Mallet, Miles Johnson, and Daniel Dombey, “How European Economies Are
T rying to Mitigate the Covid-19 Shock,” T rying to Mitigate the Covid-19 Shock,” Financial Tim es, March 17, 2020. https://www.ft.com/content/26af5520- March 17, 2020. https://www.ft.com/content/26af5520-
6793-11ea-800d-da70cff6e4d3. 6793-11ea-800d-da70cff6e4d3.
230 230 ECB Announces €759 Billion Pandemic Emergency Purchase Program , the European Central Bank, March 18, , the European Central Bank, March 18,
2020. https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200318_1~3949d6f266.en.html. 2020. https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200318_1~3949d6f266.en.html.
231 Lagarde, Christine, “T he ECB Will Do Everything Necessary to Counter the Virus,”231 Lagarde, Christine, “T he ECB Will Do Everything Necessary to Counter the Virus,” Financial Times, March 20, , March 20,
2020. https://www.ft.com/content/281d600c-69f8-11ea-a6ac-9122541af204. 2020. https://www.ft.com/content/281d600c-69f8-11ea-a6ac-9122541af204.
232 “Lagarde to Confront Covid-19 Crisis at ECB Policy Meeting,” 232 “Lagarde to Confront Covid-19 Crisis at ECB Policy Meeting,” Financial Times, March 8, 2020. , March 8, 2020.
https://www.ft.com/content/79a280c6-5fb5-11ea-b0ab-339c2307bcd4. https://www.ft.com/content/79a280c6-5fb5-11ea-b0ab-339c2307bcd4.
233 Fleming, Sam and Mehreen Khan, “Eurozone Countries Strike Emergency Deal on Coronavirus Rescue,” 233 Fleming, Sam and Mehreen Khan, “Eurozone Countries Strike Emergency Deal on Coronavirus Rescue,” Financial
Tim es, April 9, 2020. https://www.ft.com/content/b984101a-42b8-40db-9a92-6786aec2ba5c. , April 9, 2020. https://www.ft.com/content/b984101a-42b8-40db-9a92-6786aec2ba5c.
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ECB about various aspects of the PSPP program that the court argued might exceed the ECB’s ECB about various aspects of the PSPP program that the court argued might exceed the ECB’s
legal mandate. The German government did not immediately respond to the ruling, but many legal mandate. The German government did not immediately respond to the ruling, but many
analysts contended the ruling—and the chal enge to the authority of the ECB and the European analysts contended the ruling—and the chal enge to the authority of the ECB and the European
Court of Justice—could have far-reaching implications for future ECB activities. This potential y Court of Justice—could have far-reaching implications for future ECB activities. This potential y
included chal enges to the ECB’s Pandemic Emergency Purchase Program (PEPP) initiated in included chal enges to the ECB’s Pandemic Emergency Purchase Program (PEPP) initiated in
March. The PEPP is a temporary program that authorized the ECB to acquire up to €750 bil ion March. The PEPP is a temporary program that authorized the ECB to acquire up to €750 bil ion
(about $820 bil ion) in private and public sector securities to address the economic effects of the (about $820 bil ion) in private and public sector securities to address the economic effects of the
pandemic crisis. pandemic crisis.
The German court’s ruling heightened tensions between the court and the European Court of The German court’s ruling heightened tensions between the court and the European Court of
Justice. Following the 2008-2009 financial crisis and the subsequent Eurozone financial crisis, the Justice. Following the 2008-2009 financial crisis and the subsequent Eurozone financial crisis, the
ECB launched four asset purchase programs in 2014 to provide assistance to financial y strapped ECB launched four asset purchase programs in 2014 to provide assistance to financial y strapped
Eurozone governments and to sustain financial liquidity in Eurozone banks. Those programs Eurozone governments and to sustain financial liquidity in Eurozone banks. Those programs
included the Corporate Sector Purchase Program (CSPP), the Public Sector Purchase Program included the Corporate Sector Purchase Program (CSPP), the Public Sector Purchase Program
(PSPP), the Asset-Backed Securities Purchase Program (ABSPP), and the Third Covered Bond (PSPP), the Asset-Backed Securities Purchase Program (ABSPP), and the Third Covered Bond
Purchase Program (CBPP3). The programs operated from 2014 to 2018; the PSPP was restarted Purchase Program (CBPP3). The programs operated from 2014 to 2018; the PSPP was restarted
in November 2019. As of May 8, 2020, the PSPP program held €2.2 tril ion (about $2.5 tril ion) in November 2019. As of May 8, 2020, the PSPP program held €2.2 tril ion (about $2.5 tril ion)
with another €600 bil ion (about $700 bil ion) held under other asset purchase programs.234 with another €600 bil ion (about $700 bil ion) held under other asset purchase programs.234
Various groups in Germany chal enged the legality of the ECB bond-buying programs before the Various groups in Germany chal enged the legality of the ECB bond-buying programs before the
German Constitutional Court by arguing the programs exceeded the ECB’s legal mandate. In German Constitutional Court by arguing the programs exceeded the ECB’s legal mandate. In
turn, the German court referred the case to the European Court of Justice, which ruled in turn, the German court referred the case to the European Court of Justice, which ruled in
December 2019 that the ECB’s actions were fully within the ECB’s authority. December 2019 that the ECB’s actions were fully within the ECB’s authority.
In the German Constitutional Court’s May 5, 2020 ruling, the German judges characterized the In the German Constitutional Court’s May 5, 2020 ruling, the German judges characterized the
ECJ’s ruling as “incomprehensible,” and directly chal enged the ECB and the European Court of ECJ’s ruling as “incomprehensible,” and directly chal enged the ECB and the European Court of
Justice and the primacy of the European Court of Justice ruling over national law. The German Justice and the primacy of the European Court of Justice ruling over national law. The German
justices argued the ECB had exceeded its authority by not fully evaluating the economic costs and justices argued the ECB had exceeded its authority by not fully evaluating the economic costs and
benefits of previous bond-buying activities, including the impact on national budgets, property benefits of previous bond-buying activities, including the impact on national budgets, property
values, stock markets, life insurance and other economic effects. The German court also argued values, stock markets, life insurance and other economic effects. The German court also argued
that the ECB’s lack of a strategy for reducing its holdings of sovereign debt of Eurozone that the ECB’s lack of a strategy for reducing its holdings of sovereign debt of Eurozone
members increased risks for national governments that back up the ECB, and it chal enged the members increased risks for national governments that back up the ECB, and it chal enged the
ECB’s strategy for reducing its holdings of sovereign debt. By the end of June, however, the ECB’s strategy for reducing its holdings of sovereign debt. By the end of June, however, the
standoff appeared to be reaching a resolution. The ECB reportedly agreed to provide the German standoff appeared to be reaching a resolution. The ECB reportedly agreed to provide the German
court with the Bank’s analysis of the economic and fiscal policy impact of the ECB bond-buying court with the Bank’s analysis of the economic and fiscal policy impact of the ECB bond-buying
programs. The ECB reportedly wil also provide the unpublished full minutes of the central programs. The ECB reportedly wil also provide the unpublished full minutes of the central
bank’s governing council monetary policy meetings, including the ECB’s discussions in March bank’s governing council monetary policy meetings, including the ECB’s discussions in March
2015 of its purchases of sovereign bonds.235 2015 of its purchases of sovereign bonds.235
On March 26, 2021, Germany’s highest court stopped a law that would have ratified the PEPP On March 26, 2021, Germany’s highest court stopped a law that would have ratified the PEPP
bond-buying program. The program required ratification by each of the EU member’s national bond-buying program. The program required ratification by each of the EU member’s national
parliaments. The legislation was adopted by both of Germany’s houses of Parliament and was parliaments. The legislation was adopted by both of Germany’s houses of Parliament and was
expected to be signed by German president, Frank-Walter Steinmeier when the court expected to be signed by German president, Frank-Walter Steinmeier when the court
intervened.236 intervened.236
On May 18, German Chancel or Angela Merkel and French President Emmanuel Macron On May 18, German Chancel or Angela Merkel and French President Emmanuel Macron
proposed a €500 bil ion (about $620 bil ion) EU recovery fund in an effort to gain a coordinated proposed a €500 bil ion (about $620 bil ion) EU recovery fund in an effort to gain a coordinated

234 European Central Bank. https://www.ecb.europa.eu/mopo/implement/pepp/html/pepp-qa.en.html. 234 European Central Bank. https://www.ecb.europa.eu/mopo/implement/pepp/html/pepp-qa.en.html.
235 Arnold, Martin, Berlin and ECB Signal End to Legal Impasse Over Bond-Buying, 235 Arnold, Martin, Berlin and ECB Signal End to Legal Impasse Over Bond-Buying, Financial Times, June 25, 2020. , June 25, 2020.
https://www.ft.com/content/5f000a25-3d54-4610-8579-cab9b21759ee. https://www.ft.com/content/5f000a25-3d54-4610-8579-cab9b21759ee.
236 Chazan, Guy, Germany’s Highest Court Blocks Ratification of EU Recovery Fund, 236 Chazan, Guy, Germany’s Highest Court Blocks Ratification of EU Recovery Fund, Financial Times, March 26, , March 26,
2021. https://www.ft.com/content/74841ea6-4fbf-4c7a-b015-66ba191ffc9b. 2021. https://www.ft.com/content/74841ea6-4fbf-4c7a-b015-66ba191ffc9b.
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EU fiscal response to the pandemic.237 Reportedly, the funds would have been raised by the EU fiscal response to the pandemic.237 Reportedly, the funds would have been raised by the
European Commission and used to fund EU spending through grants to individual members to European Commission and used to fund EU spending through grants to individual members to
ease the economic strain in some of the southern EU members that have been the most negatively ease the economic strain in some of the southern EU members that have been the most negatively
affected. Austria, the Netherland, Denmark, and Sweden indicated they would only support affected. Austria, the Netherland, Denmark, and Sweden indicated they would only support
proposals that provided funds to members through loans that would be required to be repaid. proposals that provided funds to members through loans that would be required to be repaid.
On May 27, ECB President Lagarde indicated the ECB projected a drop in the EU economy of On May 27, ECB President Lagarde indicated the ECB projected a drop in the EU economy of
8% to 12% in 2020, twice as severe as the recession following the 2008 financial crisis, and 8% to 12% in 2020, twice as severe as the recession following the 2008 financial crisis, and
cal ed for a €500 bil ion (about $620 bil ion) stimulus package.238 In addition, European cal ed for a €500 bil ion (about $620 bil ion) stimulus package.238 In addition, European
Commission President Ursula von der Leyen proposed a €750 bil ion (about $820 bil ion) EU Commission President Ursula von der Leyen proposed a €750 bil ion (about $820 bil ion) EU
recovery fund, termed the “Next Generation Fund,” that would provide €500 bil ion ($550 recovery fund, termed the “Next Generation Fund,” that would provide €500 bil ion ($550
bil ion) in grants in a Recovery and Resilience Facility and €250 bil ion ($270 bil ion) in loans. bil ion) in grants in a Recovery and Resilience Facility and €250 bil ion ($270 bil ion) in loans.
The proposal would take the unprecedented step of al owing the EU to issues bonds The proposal would take the unprecedented step of al owing the EU to issues bonds
independently from the other EU central banks.239 Questions remained over the source and independently from the other EU central banks.239 Questions remained over the source and
distribution of the funds. The program may have limited appeal given various restrictions: distribution of the funds. The program may have limited appeal given various restrictions:
reportedly, the funds must be used to achieve certain EU goals, including increasing reportedly, the funds must be used to achieve certain EU goals, including increasing
competitiveness, shifting away from declining heavy industry, supporting a green economy, and competitiveness, shifting away from declining heavy industry, supporting a green economy, and
building the digital economy.240 Proposals for raising funds include issuing 30-year bonds and building the digital economy.240 Proposals for raising funds include issuing 30-year bonds and
raising taxes on large technology firms, such as Google and Facebook. In addition to the recovery raising taxes on large technology firms, such as Google and Facebook. In addition to the recovery
fund, von der Leyen proposed a revised EC seven-year budget, the Multiannual Financial fund, von der Leyen proposed a revised EC seven-year budget, the Multiannual Financial
Framework (MFF), of €1.1tril ion for 2021 to 2027. Framework (MFF), of €1.1tril ion for 2021 to 2027.
On May 28, several key political groups within the EU Parliament voiced their support for new On May 28, several key political groups within the EU Parliament voiced their support for new
rules that would al ow the EU rules that would al ow the EU to retaliate in such trade areas as services and intel ectual property to retaliate in such trade areas as services and intel ectual property
protection without waiting for a WTO ruling. Some Parliamentarians reportedly argued that such protection without waiting for a WTO ruling. Some Parliamentarians reportedly argued that such
expanded authority, termed a “trade bazooka,” was necessary to respond to trade disputes, expanded authority, termed a “trade bazooka,” was necessary to respond to trade disputes,
because the United States had blocked the appointment of judges to the WTO’s appel ate body.241 because the United States had blocked the appointment of judges to the WTO’s appel ate body.241
European leaders, reportedly interested in finalizing an investment agreement with China, European leaders, reportedly interested in finalizing an investment agreement with China,
announced they would not follow President Trump in applying trade restrictions on China for announced they would not follow President Trump in applying trade restrictions on China for
positioning itself to limit Hong Kong’s autonomy granted by the “one country two systems” positioning itself to limit Hong Kong’s autonomy granted by the “one country two systems”
principle after the end of British rule in 1997.242 principle after the end of British rule in 1997.242
The European Central Bank announced on June 4 that it would double to $1.5 tril ion its The European Central Bank announced on June 4 that it would double to $1.5 tril ion its
Pandemic Emergency Purchase Program to stimulate the European economy; it also extended the Pandemic Emergency Purchase Program to stimulate the European economy; it also extended the
program to at least June 2021.243 At the same time, the German government announced a package program to at least June 2021.243 At the same time, the German government announced a package
of fiscal measures, including tax cuts, aid to smal businesses, cash payments to parents, and other of fiscal measures, including tax cuts, aid to smal businesses, cash payments to parents, and other

237 Fleming, Sam, Victor Mallet, and Guy Chazan, Germany and France Unite in Call for €500 Billion Europe237 Fleming, Sam, Victor Mallet, and Guy Chazan, Germany and France Unite in Call for €500 Billion Europe
Recovery Fund, Recovery Fund, Financial Tim es, May 18, 2020. https://www.ft.com/content/c23ebc5e-cbf3-4ad8-85aa-032b574d0562. , May 18, 2020. https://www.ft.com/content/c23ebc5e-cbf3-4ad8-85aa-032b574d0562.
238 Arnold, Martin, Coronavirus Hit to Eurozone Economy Set to Dwarf Financial Crisis, 238 Arnold, Martin, Coronavirus Hit to Eurozone Economy Set to Dwarf Financial Crisis, Financial Times, May 27, May 27,
2020. https://www.ft.com/content/a01424e8-089d-4618-babe-72f88184ac57. 2020. https://www.ft.com/content/a01424e8-089d-4618-babe-72f88184ac57.
239 Birnbaum, Michael, and Loveday Morris, E.U. Proposes $825 Billion Coronavirus Rescue Plan Giving Brussels 239 Birnbaum, Michael, and Loveday Morris, E.U. Proposes $825 Billion Coronavirus Rescue Plan Giving Brussels
Power to Raise Money for First T ime, Power to Raise Money for First T ime, Washington Post, May 27, 2020. https://www.washingtonpost.com/world/ May 27, 2020. https://www.washingtonpost.com/world/
europe/angela-merkel-economic-rescue/2020/05/27/9d21b998-9f7c-11ea-be06-af5514ee0385_story.html. europe/angela-merkel-economic-rescue/2020/05/27/9d21b998-9f7c-11ea-be06-af5514ee0385_story.html.
240 Brunsden, Jim and Sam Fleming, How Would Ursula von der Leyen’s Coronavirus Recovery Fund Work?, 240 Brunsden, Jim and Sam Fleming, How Would Ursula von der Leyen’s Coronavirus Recovery Fund Work?,
Financial Tim es, May 27, 2020. https://www.ft.com/content/ebaa7dcd-b6f7-418f-802b-7a8dbc9668f1. , May 27, 2020. https://www.ft.com/content/ebaa7dcd-b6f7-418f-802b-7a8dbc9668f1.
241 Vela, Jakob Hanke, T rade Bazooka Gets Backing From Main Political Groups in EU Parliament, 241 Vela, Jakob Hanke, T rade Bazooka Gets Backing From Main Political Groups in EU Parliament, Politico Pro, May , May
28, 2020; 28, 2020; Draft Report, 2019/10273(COD), European Parliament, Committee on International T rade, May 6, 2020., 2019/10273(COD), European Parliament, Committee on International T rade, May 6, 2020.
242 Lau, Stuart Lau, Jakob Hanke Vela, Jacopo Barigazzi, and Finbarr Bermingham, EU Won't Follow T rump Into a 242 Lau, Stuart Lau, Jakob Hanke Vela, Jacopo Barigazzi, and Finbarr Bermingham, EU Won't Follow T rump Into a
T rade War Over Hong Kong, Politico Pro, May 28, 2020. T rade War Over Hong Kong, Politico Pro, May 28, 2020.
243 Arnold, Martin, ECB Boosts Bond-Buying Stimulus Package by €600, 243 Arnold, Martin, ECB Boosts Bond-Buying Stimulus Package by €600, Financial Times, June 4, 2020. , June 4, 2020.
https://www.ft.com/content/c59ab92d-e614-4284-a028-46ee3bcf92f9. https://www.ft.com/content/c59ab92d-e614-4284-a028-46ee3bcf92f9.
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measures totaling €135 bil ion (about $150 bil ion). Austria, Denmark, the Netherland, and measures totaling €135 bil ion (about $150 bil ion). Austria, Denmark, the Netherland, and
Sweden resisted payouts in grants instead of loans that require repayment. The German plan Sweden resisted payouts in grants instead of loans that require repayment. The German plan
would have given households $336 per child, reduced value added taxes on daily items, and would have given households $336 per child, reduced value added taxes on daily items, and
reduced households’ utility bil s. The plan also included about $6 bil ion for the social security reduced households’ utility bil s. The plan also included about $6 bil ion for the social security
system, $11 bil ion to assist cities cover housing and other costs, about $2 bil ion for cultural system, $11 bil ion to assist cities cover housing and other costs, about $2 bil ion for cultural
institutions and nonprofit groups and incentives for purchases of electric vehicles.244 institutions and nonprofit groups and incentives for purchases of electric vehicles.244
On June 25, Germany’s Minister for Economic Affairs and Energy announced that the German On June 25, Germany’s Minister for Economic Affairs and Energy announced that the German
government would provide more than €300 mil ion (about $330 mil ion), to acquire a 25% stake government would provide more than €300 mil ion (about $330 mil ion), to acquire a 25% stake
in a privately owned German drug company that is conducting trials on a possible COVID-19 in a privately owned German drug company that is conducting trials on a possible COVID-19
vaccine. Reportedly, the U.S. Government had attempted to acquire part of the company to secure vaccine. Reportedly, the U.S. Government had attempted to acquire part of the company to secure
supplies of a potential vaccine. Germany placed legal restrictions on foreign investments in supplies of a potential vaccine. Germany placed legal restrictions on foreign investments in
critical industries such as energy and telecoms, but the German Parliament amended Germany’s critical industries such as energy and telecoms, but the German Parliament amended Germany’s
Foreign Trade Act, set to become law in 2020, that broadened the scope of transactions that must Foreign Trade Act, set to become law in 2020, that broadened the scope of transactions that must
be approved by the Federal government to include “critical” technologies, including robotics, be approved by the Federal government to include “critical” technologies, including robotics,
biotech, and quantum computing.245 biotech, and quantum computing.245
On July 17, the European Commission met to approve the proposed €750 bil ion support fund to On July 17, the European Commission met to approve the proposed €750 bil ion support fund to
assist European countries address the economic effects of the pandemic. Initial y, the Commission assist European countries address the economic effects of the pandemic. Initial y, the Commission
was unable to agree on various aspects of the program, but talks continued over the weekend and was unable to agree on various aspects of the program, but talks continued over the weekend and
resumed on July 20. European leaders announced on July 21 they had approved a €750 bil ion resumed on July 20. European leaders announced on July 21 they had approved a €750 bil ion
(about $859 bil ion) pandemic relief package and a multi-year EU budget, referred to as the (about $859 bil ion) pandemic relief package and a multi-year EU budget, referred to as the
Multiannual Financial Framework (MFF), with a combined value of over €2 tril ion. The Multiannual Financial Framework (MFF), with a combined value of over €2 tril ion. The
pandemic plan was developed to direct funding to post-pandemic economic recovery efforts with pandemic plan was developed to direct funding to post-pandemic economic recovery efforts with
the European Commission set to borrow an unprecedented amount of funds on European capital the European Commission set to borrow an unprecedented amount of funds on European capital
markets.246 The €750 bil ion relief fund reportedly included the proposed Recovery and markets.246 The €750 bil ion relief fund reportedly included the proposed Recovery and
Resilience Facility of €672.5 bil ion, which included €360 bil ion in loans and €312.5 bil ion in Resilience Facility of €672.5 bil ion, which included €360 bil ion in loans and €312.5 bil ion in
grants and half a dozen other initiatives to assist economical y weakened member states. The grants and half a dozen other initiatives to assist economical y weakened member states. The
relief fund was coupled with rebates on EU budget contributions for so-cal ed “frugal” states, or relief fund was coupled with rebates on EU budget contributions for so-cal ed “frugal” states, or
EU members with stronger fiscal balances. Austria, the Netherlands, Denmark, and Sweden EU members with stronger fiscal balances. Austria, the Netherlands, Denmark, and Sweden
reportedly would receive such budget rebates.247 reportedly would receive such budget rebates.247
On March 31, 2021, French President Macron announced a four-week country-wide business On March 31, 2021, French President Macron announced a four-week country-wide business
lockdown to curb a resurgence in viral cases that were overwhelming French hospitals and lockdown to curb a resurgence in viral cases that were overwhelming French hospitals and
extending by one week a planned two week closure of schools.248 The EU also blocked shipments extending by one week a planned two week closure of schools.248 The EU also blocked shipments
to Britain of the AstraZeneca vaccine produced in Belgium and the Netherlands until to Britain of the AstraZeneca vaccine produced in Belgium and the Netherlands until
commitments made to supply the EU had been met, or until other countries showed reciprocity in commitments made to supply the EU had been met, or until other countries showed reciprocity in
their distribution of vaccines.249At the same time, 16 European countries, including Germany, their distribution of vaccines.249At the same time, 16 European countries, including Germany,

244 Ewing, Jack, and Melissa Eddy, ‘Europe Finally Got the Message’: Leaders Act T ogether on Message,244 Ewing, Jack, and Melissa Eddy, ‘Europe Finally Got the Message’: Leaders Act T ogether on Message, The New
York Tim es, June 4, 2020. https://www.nytimes.com/2020/06/04/business/europe-coronavirus-economic-support.html?, June 4, 2020. https://www.nytimes.com/2020/06/04/business/europe-coronavirus-economic-support.html?
action=click&module=T op%20Stories&pgtype=Homepage. action=click&module=T op%20Stories&pgtype=Homepage.
245 Miller, Joe, Germany Flexes its Muscles on Foreign Investment, 245 Miller, Joe, Germany Flexes its Muscles on Foreign Investment, Financial Times, June 25, 2020. , June 25, 2020.
https://www.ft.com/content/54f92ca5-5380-466b-95f8-3e98b40ebc82. https://www.ft.com/content/54f92ca5-5380-466b-95f8-3e98b40ebc82.
246 Special Meeting of the European Council-Conclusions, EUCP 10/20, July 21, 2020. 246 Special Meeting of the European Council-Conclusions, EUCP 10/20, July 21, 2020.
247 Fleming, Sam, Mehreen Khan and Jim Brunsden, EU Leaders Strike Deal on €750bn Recovery Fund After 247 Fleming, Sam, Mehreen Khan and Jim Brunsden, EU Leaders Strike Deal on €750bn Recovery Fund After
Marathon Summit , Marathon Summit , Financial Tim es, July 21, 2020. https://www.ft.com/content/713be467-ed19-4663-95ff-, July 21, 2020. https://www.ft.com/content/713be467-ed19-4663-95ff-
66f775af55cc. 66f775af55cc.
248 Mallet, Victor, Macron Extends Lockdown Across France to Combat Covid Surge, 248 Mallet, Victor, Macron Extends Lockdown Across France to Combat Covid Surge, Financial Times, April 1, 2021. , April 1, 2021.
https://www.ft.com/content/731ec423-03dc-405c-9ff4-f8670b953f2d. https://www.ft.com/content/731ec423-03dc-405c-9ff4-f8670b953f2d.
249 Fleming, Sam, Michael Peel, and George Parker, EU Warns ‘zero’ Jabs Shipped to UK Until AstraZeneca Meets 249 Fleming, Sam, Michael Peel, and George Parker, EU Warns ‘zero’ Jabs Shipped to UK Until AstraZeneca Meets
Bloc’s T argets, Bloc’s T argets, Financial Tim es, April 1, 2021. https://www.ft.com/content/28158bed-5f07-4504-9a00-2f3d8f7519df. , April 1, 2021. https://www.ft.com/content/28158bed-5f07-4504-9a00-2f3d8f7519df.
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France, Italy, and Spain, temporarily suspended use of the AstraZeneca vaccine over concerns of France, Italy, and Spain, temporarily suspended use of the AstraZeneca vaccine over concerns of
possible negative side-effects, despite assurances by EU drug regulators that the benefits of the possible negative side-effects, despite assurances by EU drug regulators that the benefits of the
vaccine outweighed any risks.250 On September 3, 2020, French Prime Minister Jean Castex vaccine outweighed any risks.250 On September 3, 2020, French Prime Minister Jean Castex
announced that France would implement a €100 bil ion (about $130 bil ion) spending plan to announced that France would implement a €100 bil ion (about $130 bil ion) spending plan to
speed the economy’s recovery from the economic effects of the COVID-19 pandemic. speed the economy’s recovery from the economic effects of the COVID-19 pandemic.
Reportedly, the plan included funding for green energy (including hydrogen energy), Reportedly, the plan included funding for green energy (including hydrogen energy),
transportation (state railways), and industrial innovation.251 transportation (state railways), and industrial innovation.251
The United Kingdom
The United Kingdom has taken a number of steps to support economic activity that were The United Kingdom has taken a number of steps to support economic activity that were
expected to limit the damage to the UK economy. The Bank of England (BOE) forecasted in May expected to limit the damage to the UK economy. The Bank of England (BOE) forecasted in May
2020 that the UK economy would contract by 30% in the first half of 2020, but then rebound 2020 that the UK economy would contract by 30% in the first half of 2020, but then rebound
sharply in the second half of the year, exhibiting a “V” shaped recovery. During the initial stages sharply in the second half of the year, exhibiting a “V” shaped recovery. During the initial stages
of the economic crisis, the Bank of England announced a number of policy initiatives including of the economic crisis, the Bank of England announced a number of policy initiatives including
 On March 11, the BOE adopted a package of four measures to deal with any  On March 11, the BOE adopted a package of four measures to deal with any
economic disruptions associated with COVID-19. The measures included an economic disruptions associated with COVID-19. The measures included an
unscheduled cut in the benchmark interest rate by 50 basis points (0.5%) to a unscheduled cut in the benchmark interest rate by 50 basis points (0.5%) to a
historic low of 0.25%; the reintroduction of the Term Funding Scheme for Smal historic low of 0.25%; the reintroduction of the Term Funding Scheme for Smal
and Medium-sized Enterprises (TFSME) that provides banks with over $110 and Medium-sized Enterprises (TFSME) that provides banks with over $110
bil ion for loans at low interest rates; a lowering of banks’ countercyclical capital bil ion for loans at low interest rates; a lowering of banks’ countercyclical capital
buffer from 1% to zero, which is estimated to support over $200 bil ion of bank buffer from 1% to zero, which is estimated to support over $200 bil ion of bank
lending to businesses; and a freeze in banks’ dividend payments.252 lending to businesses; and a freeze in banks’ dividend payments.252
 On March 15, the BOE reinstituted U.S. dollar swap lines with the Federal  On March 15, the BOE reinstituted U.S. dollar swap lines with the Federal
Reserve. Reserve.
 On March 17, the BOE and the UK Treasury introduced the COVID Corporate  On March 17, the BOE and the UK Treasury introduced the COVID Corporate
Financing Facility (CCFF) to provide assistance to UK firms to bridge through Financing Facility (CCFF) to provide assistance to UK firms to bridge through
Covid-19-related disruptions to their cash flow. Covid-19-related disruptions to their cash flow.
 On March 19, during a Special Monetary Policy Meeting, the Bank of England  On March 19, during a Special Monetary Policy Meeting, the Bank of England
reduced its main interest rate to 0.1%, increased the size of its TFSME fund, and reduced its main interest rate to 0.1%, increased the size of its TFSME fund, and
increased the stock of asset purchases by £200 bil ion to a total of £645 bil ion increased the stock of asset purchases by £200 bil ion to a total of £645 bil ion
financed by issuing UK government bonds and some additional nonfinancial financed by issuing UK government bonds and some additional nonfinancial
investment-grade corporate bonds.253 investment-grade corporate bonds.253
 On March 20, the BOE participated in an international y coordinated central bank  On March 20, the BOE participated in an international y coordinated central bank
expansion of liquidity through U.S. standing dollar liquidity swap line expansion of liquidity through U.S. standing dollar liquidity swap line
arrangements. arrangements.
 On March, the BOE activated the Contingent Term Repo Facility (CTRF).  On March, the BOE activated the Contingent Term Repo Facility (CTRF).

250 Paolo Mancini, Donato, Miles Johnson, Michael Peel, David Keohane, Richard Milne, and Sarah Neville, European 250 Paolo Mancini, Donato, Miles Johnson, Michael Peel, David Keohane, Richard Milne, and Sarah Neville, European
Capitals Coordinated Suspension of Oxford/AstraZeneca Covid Jab, Capitals Coordinated Suspension of Oxford/AstraZeneca Covid Jab, Financial Tim es, April 1, 2021. , April 1, 2021.
https://www.ft.com/content/a046e340-892b-4e68-bfae-4f5c40a5506a. https://www.ft.com/content/a046e340-892b-4e68-bfae-4f5c40a5506a.
251 Mallet, Victor, France Launches €100 Billion Coronavirus Recovery Plan, 251 Mallet, Victor, France Launches €100 Billion Coronavirus Recovery Plan, Financial Times, September 3, 2020. , September 3, 2020.
https://www.ft.com/content/0921c871-17b5-4e2e-bdea-aab78c2d0090. https://www.ft.com/content/0921c871-17b5-4e2e-bdea-aab78c2d0090.
252 Romei, Valentina, “Covid-19 Fallout: Bank of England Launches 4 Key Measures,” 252 Romei, Valentina, “Covid-19 Fallout: Bank of England Launches 4 Key Measures,” Financial Times. .
https://www.ft.com/content/4e60c08e-6380-11ea-b3f3-fe4680ea68b5. https://www.ft.com/content/4e60c08e-6380-11ea-b3f3-fe4680ea68b5.
253 Johnson, Miles, Chris Giles, Martin Arnold, and James Politi, “Italy’s PM Urges Brussels to Unleash €500bn 253 Johnson, Miles, Chris Giles, Martin Arnold, and James Politi, “Italy’s PM Urges Brussels to Unleash €500bn
Rescue Fund,” Rescue Fund,” Financial Tim es, March 18, 2020. https://www.ft.com/content/5b8205ac-6a06-11ea-800d- March 18, 2020. https://www.ft.com/content/5b8205ac-6a06-11ea-800d-
da70cff6e4d3. da70cff6e4d3.
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 On April 6, announced the activation of the TFSME ahead of schedule.  On April 6, announced the activation of the TFSME ahead of schedule.
 On April 23, the Bank of England indicated it would quadruple its borrowing  On April 23, the Bank of England indicated it would quadruple its borrowing
over the second quarter of 2020, reflecting a contraction in the UK economy, over the second quarter of 2020, reflecting a contraction in the UK economy,
lower tax revenues, and increased financial demands to support fiscal policy lower tax revenues, and increased financial demands to support fiscal policy
measures.254 measures.254
In terms of fiscal policy, UK Chancel or of the Exchequer Rishi Sunak proposed a national In terms of fiscal policy, UK Chancel or of the Exchequer Rishi Sunak proposed a national
budget on March 11, 2020, that included nearly $3.5 bil ion in fiscal spending to counter adverse budget on March 11, 2020, that included nearly $3.5 bil ion in fiscal spending to counter adverse
economic effects of the pandemic and increased in statutory sick leave by about $2.5 bil ion in economic effects of the pandemic and increased in statutory sick leave by about $2.5 bil ion in
funds to smal and medium businesses to provide up to 14 days of sick leave for affected funds to smal and medium businesses to provide up to 14 days of sick leave for affected
employees. The plan provided affected workers up to 80% of their salary, or up to £2,500 a month employees. The plan provided affected workers up to 80% of their salary, or up to £2,500 a month
(about $2,800) if they were laid off. Some estimates indicated that UK spending to support its (about $2,800) if they were laid off. Some estimates indicated that UK spending to support its
economy would rise to about $60 bil ion in 2020.255 Identified as the Coronavirus Job Retention economy would rise to about $60 bil ion in 2020.255 Identified as the Coronavirus Job Retention
Scheme (CJRS), the program was backdated to start on March 1 and had been expected to run Scheme (CJRS), the program was backdated to start on March 1 and had been expected to run
through May, but was extended to expire the end of June 2020. Prime Minister Johnson also through May, but was extended to expire the end of June 2020. Prime Minister Johnson also
announced that al pubs, cafés, restaurants, theatres, cinemas, nightclubs, gyms and leisure centers announced that al pubs, cafés, restaurants, theatres, cinemas, nightclubs, gyms and leisure centers
would be closed.256 Part of the fiscal spending package included open-ended funding for the would be closed.256 Part of the fiscal spending package included open-ended funding for the
National Health Service (NHS), $6 bil ion in emergency funds to the NHS, $600 mil ion hardship National Health Service (NHS), $6 bil ion in emergency funds to the NHS, $600 mil ion hardship
fund to assist vulnerable people, and tax cuts and tax holidays for smal businesses in certain fund to assist vulnerable people, and tax cuts and tax holidays for smal businesses in certain
affected sectors.257 affected sectors.257
On July 8, Chancel or Sunak proposed additional fiscal measures to support the UK economy.258 On July 8, Chancel or Sunak proposed additional fiscal measures to support the UK economy.258
The measures included raising threshold tax levels on home purchases, reducing taxes for the The measures included raising threshold tax levels on home purchases, reducing taxes for the
hospitality industry, and a “job retention bonus” of £1.000 (around $1,200) per worker to hospitality industry, and a “job retention bonus” of £1.000 (around $1,200) per worker to
companies that bring employees out of furlough, estimated at around 9 mil ion workers, and a companies that bring employees out of furlough, estimated at around 9 mil ion workers, and a
subsidy of £2.000 for firms that hire new apprentices. In addition, the proposed plan includes a subsidy of £2.000 for firms that hire new apprentices. In addition, the proposed plan includes a
50% discount on meals and nonalcoholic drinks eaten at restaurants and cafes during August, 50% discount on meals and nonalcoholic drinks eaten at restaurants and cafes during August,
with some restrictions. with some restrictions.
After fal ing in the first and second quarters of 2020, growth accelerated in the 3rd and 4th After fal ing in the first and second quarters of 2020, growth accelerated in the 3rd and 4th
quarters, as indicated in quarters, as indicated in Table 18. Despite this growth,Despite this growth, the UK economy at the end of 2020 the UK economy at the end of 2020
remained 8.4% below the level where it was at the end of 2019. For 2020 as a whole, the rate of remained 8.4% below the level where it was at the end of 2019. For 2020 as a whole, the rate of
growth of the UK economic contracted by 9.8%. As was typical of other developed economies, growth of the UK economic contracted by 9.8%. As was typical of other developed economies,
the Q2 decline was driven by lower levels of activity by households (-20.8%), business the Q2 decline was driven by lower levels of activity by households (-20.8%), business
investment (gross fixed capital formation) (-20.7%)-primarily manufacturing, and construction investment (gross fixed capital formation) (-20.7%)-primarily manufacturing, and construction
(35%) and declines in both exports and imports, constituting the largest quarterly decline since (35%) and declines in both exports and imports, constituting the largest quarterly decline since
1955.259 In contrast, the Q3 and Q4 expansion occurred in services, industrial production, and 1955.259 In contrast, the Q3 and Q4 expansion occurred in services, industrial production, and
construction. construction.

254 Giles, Chris, and T ommy Stubbington, UK T reasury to Quadruple Borrowing to £180bn Over Next Quarter, 254 Giles, Chris, and T ommy Stubbington, UK T reasury to Quadruple Borrowing to £180bn Over Next Quarter,
Financial Tim es, April 23, 2020. https://www.ft.com/content/8886e002-c260-4daa-8b7b-509b3f7e6edb. , April 23, 2020. https://www.ft.com/content/8886e002-c260-4daa-8b7b-509b3f7e6edb.
255 Parker, George, Chris Giles, and Sebastian Payne, “Sunak T urns on Financial Firepower to Help Workers,” 255 Parker, George, Chris Giles, and Sebastian Payne, “Sunak T urns on Financial Firepower to Help Workers,”
Financial Tim es, March 20, 2020. https://www.ft.com/content/826d465a-6ac3-11ea-a3c9-1fe6fedcca75. March 20, 2020. https://www.ft.com/content/826d465a-6ac3-11ea-a3c9-1fe6fedcca75.
256 Ibid. 256 Ibid.
257 Payne, Sebastian and Chris Giles, “Budget 2020: Sunak Unveils £30bn Stimulus to Counter UK Covid-19 Shock,” 257 Payne, Sebastian and Chris Giles, “Budget 2020: Sunak Unveils £30bn Stimulus to Counter UK Covid-19 Shock,”
Financial Tim es. https://www.ft.com/content/f7b27264-6384-11ea-a6cd-df28cc3c6a68. . https://www.ft.com/content/f7b27264-6384-11ea-a6cd-df28cc3c6a68.
258 Pickard, Jim and Chris Giles, Sunak’s Summer Statement: UK Government to Pay Companies to Bring Workers 258 Pickard, Jim and Chris Giles, Sunak’s Summer Statement: UK Government to Pay Companies to Bring Workers
Back From Furlough, Back From Furlough, Financial Tim es, July 7, 2020. https://www.ft.com/content/ad1688ee-3d8d-4e52-9b16-, July 7, 2020. https://www.ft.com/content/ad1688ee-3d8d-4e52-9b16-
a3632eed8be9. a3632eed8be9.
259 259 GDP Quarterly National Accounts, UK: October to December 2020, Office for National Statistics, March 31, 2021. , Office for National Statistics, March 31, 2021.
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On August 12, 2021, the UK Government announced that UK GDP in the second first quarter of On August 12, 2021, the UK Government announced that UK GDP in the second first quarter of
2021 grew by 4.8%, after contracting by 1.6% in the first quarter of 2021, based on market prices, 2021 grew by 4.8%, after contracting by 1.6% in the first quarter of 2021, based on market prices,
as indicated in as indicated in Figure 23.260 The Bank of England indicated in August 2021 that it would .260 The Bank of England indicated in August 2021 that it would
maintain its base interest rate at 0.1% and begin reducing its bond purchases.261 maintain its base interest rate at 0.1% and begin reducing its bond purchases.261
Figure 23. UK Month Over Month Quarterly Percentage Change in GDP
~~4.8%~~
~~-1.6%~~

Source: GDP First Quarterly Estimate, UK: April to June 2021, Office for National Statistics, August 12, 2021. Office for National Statistics, August 12, 2021.
Created by CRS. Created by CRS.

Table 18. UK Quarterly GDP Aggregates 2019-2021
Percent change from preceding period Percent change from preceding period

Gross Fixed
Capital
GDP
Households
Formation
Government
Exports
Imports
2019 2019
1.4% 1.4%
1.1% 1.1%
1.5% 1.5%
4.0% 4.0%
2.7% 2.7%
1.9% 1.9%
Q1 Q1
0.6 0.6
0.0 0.0
2.1 2.1
1.4 1.4
-1.2 -1.2
6.5 6.5
Q2 Q2
0.1 0.1
0.6 0.6
-1.1 -1.1
2.3 2.3
-0.8 -0.8
-9.0 -9.0
Q3 Q3
0.5 0.5
0.1 0.1
1.3 1.3
-0.9 -0.9
5.3 5.3
1.5 1.5
Q4 Q4
0.0 0.0
-0.3 -0.3
-1.6 -1.6
0.0 0.0
3.8 3.8
-3.1 -3.1
2020 2020
-9.8 -9.8
-10.6 -10.6
-8.8 -8.8
-6.5 -6.5
-15.8 -15.8
-11.8 -11.8
Q1 Q1
-2.8 -2.8
-2.6 -2.6
-1.2 -1.2
-1.8 -1.8
-18.8 -18.8
-5.3 -5.3
Q2 Q2
-19.5 -19.5
-20.8 -20.8
-20.7 -20.7
-17.3 -17.3
-5.1 -5.1
-20.2 -20.2
Q3 Q3
16.9 16.9
19.7 19.7
19.0 19.0
15.8 15.8
-2.6 -2.6
20.9 20.9
Q4 Q4
1.3 1.3
-1.7 -1.7
4.4 4.4
6.7 6.7
9.0 9.0
14.3 14.3

260 Giles, Chris and Valentina Romei, BoE Economist Warns Against Pessimism After Record Drop in GDP, 260 Giles, Chris and Valentina Romei, BoE Economist Warns Against Pessimism After Record Drop in GDP, Financial
T imes, September 30, 2020. https://www.ft.com/content/fed4fe06-8c6a-4272-b0b3-a0759805eb64. T imes, September 30, 2020. https://www.ft.com/content/fed4fe06-8c6a-4272-b0b3-a0759805eb64.
261 Milliken, David, Francesco Canepa, and William Schomberg, Bank of England Sets Out Plans to Wean UK 261 Milliken, David, Francesco Canepa, and William Schomberg, Bank of England Sets Out Plans to Wean UK
Economy Off Stimulus, Economy Off Stimulus, Reuters, August 5, 2021. August 5, 2021.

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Gross Fixed
Capital
GDP
Households
Formation
Government
Exports
Imports
2021 2021

Q1 Q1
-1.6 -1.6
-4.6 -4.6
-1.7 -1.7
1.5 1.5
-10.2 -10.2
-16.4 -16.4
Q2 Q2
4.8 4.8
7.3 7.3
-0.5 -0.5
6.1 6.1
9.6 9.6
10.0 10.0
Source: GDP First Quarterly Estimate, UK; April to June 2021 Office for National Statistics, August 12, 2021. Office for National Statistics, August 12, 2021.
Note: Chained volume measures. Chained volume measures.
The UK-EU trade arrangement, the Trade and Cooperation Agreement, which became effective The UK-EU trade arrangement, the Trade and Cooperation Agreement, which became effective
on December 24, 2020, was projected to raise some barriers on UK-EU trade and increase on December 24, 2020, was projected to raise some barriers on UK-EU trade and increase
administrative costs, which could reduce UK trade and GDP by 10.5% and 3.25%, respectively, administrative costs, which could reduce UK trade and GDP by 10.5% and 3.25%, respectively,
over the long run, compared with earlier forecasts. Trade during first quarter 2021 was also over the long run, compared with earlier forecasts. Trade during first quarter 2021 was also
projected to be dampened as a consequence of UK firms adjusting to the new trade rules.262 As projected to be dampened as a consequence of UK firms adjusting to the new trade rules.262 As
lockdowns and restrictions were lessened or removed in the second quarter of 2021, UK exports lockdowns and restrictions were lessened or removed in the second quarter of 2021, UK exports
and imports posted positive gains of 9.6% and 10.0%, respectively. Consumer spending also and imports posted positive gains of 9.6% and 10.0%, respectively. Consumer spending also
rebounded from the decline in the first quarter in response to renewed social restrictions and rebounded from the decline in the first quarter in response to renewed social restrictions and
buoyed by the extra 5% of savings households accumulated during 2020. buoyed by the extra 5% of savings households accumulated during 2020.
As indicated in As indicated in Table 19, the growth catch-up period is projected to last through 2022, before , the growth catch-up period is projected to last through 2022, before
slowing in 2023. The Bank of England also conducted stress tests on UK banks in 2020 and slowing in 2023. The Bank of England also conducted stress tests on UK banks in 2020 and
concluded the banks had sufficient capital buffers to absorb the losses that could arise under the concluded the banks had sufficient capital buffers to absorb the losses that could arise under the
Bank’s main projections.263 The Bank also concluded that UK businesses had successfully raised Bank’s main projections.263 The Bank also concluded that UK businesses had successfully raised
the funds they needed to satisfy their cash-flow requirements. In addition, the government the funds they needed to satisfy their cash-flow requirements. In addition, the government
extended three financing facilities for businesses – the Bounce Back Loan Scheme (BBLS), the extended three financing facilities for businesses – the Bounce Back Loan Scheme (BBLS), the
Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption
Loan Scheme -through to the end of January 2021.264 The forecast also projected an increase in Loan Scheme -through to the end of January 2021.264 The forecast also projected an increase in
unemployment and business insolvencies in 2021. unemployment and business insolvencies in 2021.
Table 19. UK Forecast of Major Aggregate National Accounts, 2020-2023
Percentage change from the preceding period Percentage change from the preceding period

Averages
Projection

2010-2019 2010-2019
2021 2021
2022 2022
2023 2023
GDP GDP
1.75% 1.75%
5.00% 5.00%
7.25% 7.25%
1.25% 1.25%
Households Households
1.75 1.75
4.25 4.25
11.75 11.75
1.00 1.00
Business Business
3.75 3.75
4.00 4.00
12.00 12.00
4.50 4.50
Exports Exports
3.25 3.25
-3.00 -3.00
5.25 5.25
4.25 4.25
Imports Imports
3.50 3.50
5.25 5.25
12.75 12.75
3.50 3.50
Source: GDP Quarterly National Accounts, UK: October to December 2020, Office of National Statistics, March 31, , Office of National Statistics, March 31,
2021. 2021.
On March 3, 2021, Chancel or of the Exchequer Sunak proposed a £65 bil ion financial assistance On March 3, 2021, Chancel or of the Exchequer Sunak proposed a £65 bil ion financial assistance
package spread out over two-years to assist UK businesses and households recover from the package spread out over two-years to assist UK businesses and households recover from the

262 Ibid262 Ibid, ., p. 4. p. 4.
263 263 Financial Stability Report, Bank of England, December 2020, p. ii. Bank of England, December 2020, p. ii.
264 Ibid., p. 3. 264 Ibid., p. 3.
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economic effects of the pandemic. The Chancel or argued the spending was necessary, because economic effects of the pandemic. The Chancel or argued the spending was necessary, because
the UK economy was projected to not fully recover for at least five years. With a continuation of the UK economy was projected to not fully recover for at least five years. With a continuation of
state supported measures into the summer, the total cost to the UK economy of addressing the state supported measures into the summer, the total cost to the UK economy of addressing the
pandemic-related economic recession was estimated at £407 bil ion over two years. The spending pandemic-related economic recession was estimated at £407 bil ion over two years. The spending
initiative was expected to be followed by large increases in corporate and individual taxes starting initiative was expected to be followed by large increases in corporate and individual taxes starting
in 2023.265 Given the announced planned tax increases in subsequent years, some economists in 2023.265 Given the announced planned tax increases in subsequent years, some economists
could argue the spending initiative could fal short of the estimated stimulative effects. On June could argue the spending initiative could fal short of the estimated stimulative effects. On June
14, 2021, UK Prime Minister Boris Johnson announced a four-week extension in social 14, 2021, UK Prime Minister Boris Johnson announced a four-week extension in social
restrictions and business lockdowns in response to a rise in viral infections, further delaying the restrictions and business lockdowns in response to a rise in viral infections, further delaying the
return of the UK economy to pre-pandemic activity.266 By early July, Prime Minister Johnson return of the UK economy to pre-pandemic activity.266 By early July, Prime Minister Johnson
announced that England (exclusive of Scotland, Wales, and Northern Ireland) would remove al announced that England (exclusive of Scotland, Wales, and Northern Ireland) would remove al
social restrictions by July 19, despite warnings from UK health officials that the rapidly spreading social restrictions by July 19, despite warnings from UK health officials that the rapidly spreading
Delta viral variant could result in 100,000 deaths per day by the end of summer, surpassing the Delta viral variant could result in 100,000 deaths per day by the end of summer, surpassing the
previous record of 60,000 deaths per day.267 previous record of 60,000 deaths per day.267
Japan
As a countermeasure to the pandemic-related economic crisis, the Bank of Japan, injected $4.6 As a countermeasure to the pandemic-related economic crisis, the Bank of Japan, injected $4.6
bil ion in liquidity into Japanese banks in March 2020 to provide short-term loans for purchases bil ion in liquidity into Japanese banks in March 2020 to provide short-term loans for purchases
of corporate bonds and commercial paper and twice that amount into exchange traded funds to of corporate bonds and commercial paper and twice that amount into exchange traded funds to
aid Japanese businesses. The Japanese government also pledged to provide wage subsidies for aid Japanese businesses. The Japanese government also pledged to provide wage subsidies for
parents forced to take time off due to school closures.268 In March, Japan also adopted an parents forced to take time off due to school closures.268 In March, Japan also adopted an
emergency fiscal package of about $1.1 tril ion, roughly equivalent to 10% of Japan’s annual emergency fiscal package of about $1.1 tril ion, roughly equivalent to 10% of Japan’s annual
gross domestic product (GDP). On April 27, 2020, the Bank of Japan announced it would gross domestic product (GDP). On April 27, 2020, the Bank of Japan announced it would
purchase unlimited amounts of government bonds and quadruple its purchases of corporate debt purchase unlimited amounts of government bonds and quadruple its purchases of corporate debt
to keep interest rates low and stimulate the Japanese economy.269 to keep interest rates low and stimulate the Japanese economy.269
In May 2020, the Japanese Cabinet proposed a second supplemental appropriation measure that In May 2020, the Japanese Cabinet proposed a second supplemental appropriation measure that
included $296 bil ion in spending and a total value of about $1.1 tril ion in loans and guarantees, included $296 bil ion in spending and a total value of about $1.1 tril ion in loans and guarantees,
funded through new bonds. This and a previous set of spending measures reportedly were funded through new bonds. This and a previous set of spending measures reportedly were
comparable to 40% of Japan’s GDP and included grants for businesses to pay rents through the comparable to 40% of Japan’s GDP and included grants for businesses to pay rents through the
Development Bank of Japan and funds to smal and medium-sized businesses through the Development Bank of Japan and funds to smal and medium-sized businesses through the
Regional Economy Vitalization Corporation of Japan, payments to assist furloughed workers, and Regional Economy Vitalization Corporation of Japan, payments to assist furloughed workers, and
a reserve fund to provide capital injections to struggling firms through the Japan Investment a reserve fund to provide capital injections to struggling firms through the Japan Investment
Corporation.270 Corporation.270
In terms of monetary policy, the Bank of Japan (BOJ) maintained its low interest rates policy In terms of monetary policy, the Bank of Japan (BOJ) maintained its low interest rates policy
of -0.1%, even as it increased its coronavirus lending facility from $700 bil ion to $1 tril ion and of -0.1%, even as it increased its coronavirus lending facility from $700 bil ion to $1 tril ion and

265 Pickard, Jim, Chris Giles and George Parker, Rishi Sunak Delivers Spend Now, T ax Later Budget to Kickstart UK 265 Pickard, Jim, Chris Giles and George Parker, Rishi Sunak Delivers Spend Now, T ax Later Budget to Kickstart UK
Economy, Economy, Financial Tim es, March 3, 2021. https://www.ft.com/content/da66ce9a-6dfc-4a3a-bde7-d4f4faed6c4a. March 3, 2021. https://www.ft.com/content/da66ce9a-6dfc-4a3a-bde7-d4f4faed6c4a.
266 Payne, Sebastian, Jim Pickard and Daniel T homas, Four-week Extension to England’s Lockdown Dashes Business 266 Payne, Sebastian, Jim Pickard and Daniel T homas, Four-week Extension to England’s Lockdown Dashes Business
Hopes, Hopes, Financial Tim es, June 14, 2021. https://www.ft.com/content/2d00de1a-92d7-4b63-a151-53a6ae064368. , June 14, 2021. https://www.ft.com/content/2d00de1a-92d7-4b63-a151-53a6ae064368.
267 Cunningham, Erin, Britain’s Daily Infections Could Reach 100,000 T his Summer, Health Secretary Says, 267 Cunningham, Erin, Britain’s Daily Infections Could Reach 100,000 T his Summer, Health Secretary Says, The
Washington Post, July 6, 2021. , July 6, 2021.
268 Harding, Robin and Hudson Lockett, “ BoJ Spurs Asia Markets Rebound with Vow to Fight Covid-19,” 268 Harding, Robin and Hudson Lockett, “ BoJ Spurs Asia Markets Rebound with Vow to Fight Covid-19,” Financial
Tim es, March 2, 2020. https://www.ft.com/content/9fa91e06-5c3b-11ea-b0ab-339c2307bcd4. March 2, 2020. https://www.ft.com/content/9fa91e06-5c3b-11ea-b0ab-339c2307bcd4.
269 Harding, Robin, Bank of Japan Steps up Coronavirus Stimulus With Bond-buying Pledge, 269 Harding, Robin, Bank of Japan Steps up Coronavirus Stimulus With Bond-buying Pledge, Financial Times, April , April
27, 2020. https://www.ft.com/content/7ba5c507-df9e-4107-87eb-73afa2c13e91. 27, 2020. https://www.ft.com/content/7ba5c507-df9e-4107-87eb-73afa2c13e91.
270 Harding, Robin, Japan’s Cabinet Approves Extra $1.1 T rillion Budget to Counter Recession, 270 Harding, Robin, Japan’s Cabinet Approves Extra $1.1 T rillion Budget to Counter Recession, Financial Times, May , May
27, 2020. https://www.ft.com/content/ce7f3564-c997-339c-ad3d-c6d092fb7f1e. 27, 2020. https://www.ft.com/content/ce7f3564-c997-339c-ad3d-c6d092fb7f1e.
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stated it would continue purchasing commercial paper, corporate bonds, and exchange traded stated it would continue purchasing commercial paper, corporate bonds, and exchange traded
funds at the rate of ¥12 tril ion a year.271 The COVID-19 lending facility assisted banks in funds at the rate of ¥12 tril ion a year.271 The COVID-19 lending facility assisted banks in
providing zero interest rate loans to businesses. In a separate program, the BOJ provided about providing zero interest rate loans to businesses. In a separate program, the BOJ provided about
¥110 tril ion to buy commercial paper and corporate bonds and provided dollars through swap ¥110 tril ion to buy commercial paper and corporate bonds and provided dollars through swap
arrangements with the U.S. Federal Reserve. Japan reported on August 17 that its economy had arrangements with the U.S. Federal Reserve. Japan reported on August 17 that its economy had
contracted by 7.8% in the second quarter of 2020, compared with the previous quarter, or at an contracted by 7.8% in the second quarter of 2020, compared with the previous quarter, or at an
annual a rate of 27.8%. This drop in economic activity was precipitated by a drop in exports of annual a rate of 27.8%. This drop in economic activity was precipitated by a drop in exports of
18.5% from the preceding quarter (56.0% at an annual rate) and a decline in personal 18.5% from the preceding quarter (56.0% at an annual rate) and a decline in personal
consumption of 8.6% (30.1% at an annual rate).272 consumption of 8.6% (30.1% at an annual rate).272
On July 19, 2021, the Bank of Japan issued a revised forecast that indicated Japan’s GDP had On July 19, 2021, the Bank of Japan issued a revised forecast that indicated Japan’s GDP had
contracted by 4.6% in Japan’s fiscal year ending March 2021, as indicated in contracted by 4.6% in Japan’s fiscal year ending March 2021, as indicated in Table 20. The The
economy was projected to grow by 3.5% to 4.0% in 2021 and by 2.6% to 2.9% the following economy was projected to grow by 3.5% to 4.0% in 2021 and by 2.6% to 2.9% the following
year. However, the Bank remained “highly uncertain” and its forecast faced large downside risks year. However, the Bank remained “highly uncertain” and its forecast faced large downside risks
that the impact of the pandemic would begin to wane in 2021 as a result of an increase in that the impact of the pandemic would begin to wane in 2021 as a result of an increase in
vaccinations.273 The Bank also indicated that its forecast was based on the assumption that events vaccinations.273 The Bank also indicated that its forecast was based on the assumption that events
outside Japan, particularly growth in trade as other economies began reviving, and as domestic outside Japan, particularly growth in trade as other economies began reviving, and as domestic
consumer spending and business investment strengthened. As indicated, the Bank estimated the consumer spending and business investment strengthened. As indicated, the Bank estimated the
Japanese economy would grow by 0.3% in the second quarter of 2021, compared with a decline Japanese economy would grow by 0.3% in the second quarter of 2021, compared with a decline
of 0.9% in the first quarter. of 0.9% in the first quarter.
Table 20. Japan Main Economic Accounts, 2020 and 2021
(Percent change over previous period) (Percent change over previous period)

2019
2020
2020
2021

Q1 Q1
Q2 Q2
Q3 Q3
Q4 Q4
Q1 Q1
Q2 Q2
GDP GDP
0.6% 0.6%
-3.8% -3.8%
-0.6% -0.6%
-7.9% -7.9%
5.3% 5.3%
2.8% 2.8%
-0.9% -0.9%
0.3% 0.3%
Household Household
0.2 0.2
-5.2 -5.2
-0.8 -0.8
-8.3 -8.3
5.1 5.1
2.3 2.3
-1.0 -1.0
0.8 0.8
consumption consumption
Government Government
2.2 2.2
2.3 2.3
-0.3 -0.3
0.7 0.7
2.8 2.8
1.8 1.8
-1.7 -1.7
0.5 0.5
spending spending
Gross fixed capital Gross fixed capital
1.7 1.7
-4.1 -4.1
0.2 0.2
-3.2 -3.2
-2.0 -2.0
2.9 2.9
-0.9 -0.9
1.1 1.1
formation formation
Exports (goods and Exports (goods and
-4.4 -4.4
-13.9 -13.9
-4.7 -4.7
-17.5 -17.5
7.3 7.3
11.7 11.7
2.4 2.4
2.9 2.9
services) services)
Imports (goods and Imports (goods and
-2.7 -2.7
-14.0 -14.0
-3.0 -3.0
-0.7 -0.7
-8.2 -8.2
4.8 4.8
4.0 4.0
5.1 5.1
services) services)
Source: Bank of Japan, Outlook for Economic Activity and Prices, July 19, 2021. Bank of Japan, Outlook for Economic Activity and Prices, July 19, 2021.
In other actions, Japan’s Prime Minister Suga announced on January 5, 2021, that Tokyo and In other actions, Japan’s Prime Minister Suga announced on January 5, 2021, that Tokyo and
three surrounding prefectures would initiate a voluntary “soft” state of emergency on January 8 three surrounding prefectures would initiate a voluntary “soft” state of emergency on January 8
that stressed teleworking, restricting unnecessary travel, and reducing sporting and cultural that stressed teleworking, restricting unnecessary travel, and reducing sporting and cultural
events.274 On April 23, 2021, Japan announced new two-week lockdown protocols for Tokyo, events.274 On April 23, 2021, Japan announced new two-week lockdown protocols for Tokyo,

271 Harding, Bank of Japan Pledges $1 trillion in Coronavirus Lending. 271 Harding, Bank of Japan Pledges $1 trillion in Coronavirus Lending.
272 272 Quarterly Estimates of GDP for April - June 2020 (First Preliminary Estimates), Cabinet Office, August 17, 2020. Cabinet Office, August 17, 2020.
273 273 Outlook for Economic Activity and Prices, Bank of Japan, July 19, 2021. , Bank of Japan, July 19, 2021.
274 Harding, Robin and Kana Inagaki, Japan Declares State of Emergency in T okyo as Coronavirus Cases Surge, 274 Harding, Robin and Kana Inagaki, Japan Declares State of Emergency in T okyo as Coronavirus Cases Surge,
Financial Tim es, January 5, 2021. https://www.ft.com/content/72ceb064-2231-4d17-bd8f-92bd7f99f33c. , January 5, 2021. https://www.ft.com/content/72ceb064-2231-4d17-bd8f-92bd7f99f33c.
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Osaka, and two other large cities as Japan faced a rise in viral infections. The lockdowns were Osaka, and two other large cities as Japan faced a rise in viral infections. The lockdowns were
intended to encourage workers to work from home, to close al venues that serve alcohol and intended to encourage workers to work from home, to close al venues that serve alcohol and
supermarkets, but not close schools.275 In April, May, and June, 2021, Japan again experienced a supermarkets, but not close schools.275 In April, May, and June, 2021, Japan again experienced a
resurgence of cases, reportedly raising the total number of diagnosed case to 811,000. On July 8, resurgence of cases, reportedly raising the total number of diagnosed case to 811,000. On July 8,
Japanese officials announced that no spectators would be al owed to attend the summer Japanese officials announced that no spectators would be al owed to attend the summer
Olympics, which began on July 23, after Japan declared a state of emergency amid a rise in Olympics, which began on July 23, after Japan declared a state of emergency amid a rise in
diagnosed COVID-19 cases.276 Previously, Japan had indicated it would limit attendees to a diagnosed COVID-19 cases.276 Previously, Japan had indicated it would limit attendees to a
maximum of 10,000 Japanese residents per event. It is unclear if the new ban included sponsors maximum of 10,000 Japanese residents per event. It is unclear if the new ban included sponsors
and sporting federation officials.277 and sporting federation officials.277
China
According to a recent CRS In Focus,278 China emerged in June 2020 as the first major country to According to a recent CRS In Focus,278 China emerged in June 2020 as the first major country to
announce a return to economic growth since the outbreak of the COVID-19 pandemic. The announce a return to economic growth since the outbreak of the COVID-19 pandemic. The
government reported 3.2% gross domestic product (GDP) growth in the second quarter and 4.9% government reported 3.2% gross domestic product (GDP) growth in the second quarter and 4.9%
GDP growth in the third quarter of 2020. China is GDP growth in the third quarter of 2020. China is ~~stil~~ still grappling with the economic effects of the grappling with the economic effects of the
COVID-19 pandemic, however, including sluggish domestic consumption, slow recovery in its COVID-19 pandemic, however, including sluggish domestic consumption, slow recovery in its
top export markets, and reliance on government spending and exports to boost initial growth. top export markets, and reliance on government spending and exports to boost initial growth.
China also is facing growing restrictions on its overseas commercial activities and access to China also is facing growing restrictions on its overseas commercial activities and access to
foreign technology and pressures for firms to diversify China-based supply chains. Against this foreign technology and pressures for firms to diversify China-based supply chains. Against this
backdrop, China’s leadership is deliberating the country’s economic direction and national backdrop, China’s leadership is deliberating the country’s economic direction and national
industrial plans for the next 5 to 15 years. industrial plans for the next 5 to 15 years.
To boost economic growth, China has provided an estimated $506 bil ion in stimulus since To boost economic growth, China has provided an estimated $506 bil ion in stimulus since
February 2020 and increased the government’s budget deficit target to a record high of 3.6% of February 2020 and increased the government’s budget deficit target to a record high of 3.6% of
GDP, up from 2.8% in 2019. China reduced the value-added tax (VAT) rate and introduced VAT GDP, up from 2.8% in 2019. China reduced the value-added tax (VAT) rate and introduced VAT
exemptions for certain goods and services. China’s central bank extended monetary support with exemptions for certain goods and services. China’s central bank extended monetary support with
interest rate cuts, eased loan terms, and injected liquidity into banks. Shifting from efforts to interest rate cuts, eased loan terms, and injected liquidity into banks. Shifting from efforts to
reduce debt, the government announced the issuance of $142.9 bil ion of special treasury bonds reduce debt, the government announced the issuance of $142.9 bil ion of special treasury bonds
for the first time since 2007; increased the quota for local government special bonds (a source of for the first time since 2007; increased the quota for local government special bonds (a source of
infrastructure funding); and fast-tracked issuance of corporate bonds to cover pandemic costs but infrastructure funding); and fast-tracked issuance of corporate bonds to cover pandemic costs but
with potential broader uses. The IMF estimates that the fiscal measures and financing plans with potential broader uses. The IMF estimates that the fiscal measures and financing plans
announced amounted to 4.1% of the China’s GDP, as of July 2020. The government says it seeks announced amounted to 4.1% of the China’s GDP, as of July 2020. The government says it seeks
to control credit risk but the need for additional fiscal and monetary support to boost growth may to control credit risk but the need for additional fiscal and monetary support to boost growth may
undermine this goal. undermine this goal.

275 Harding, Robin, Japan to Impose New State of Emergency as COVID-19 Cases Rise, 275 Harding, Robin, Japan to Impose New State of Emergency as COVID-19 Cases Rise, Financial Times, April 23, April 23,
2021. https://www.ft.com/content/a3d3a8bc-6d0e-4b2b-9e09-3310db13222e. 2021. https://www.ft.com/content/a3d3a8bc-6d0e-4b2b-9e09-3310db13222e.
276 Dooley, Ben, Spectators Will Be Barred at T okyo Olympics Amid New Covid Emergency , T he New York T imes, 276 Dooley, Ben, Spectators Will Be Barred at T okyo Olympics Amid New Covid Emergency , T he New York T imes,
July 8, 2021. https://www.nytimes.com/2021/07/08/world/asia/tokyo-state-of-emergency-olympics.html. July 8, 2021. https://www.nytimes.com/2021/07/08/world/asia/tokyo-state-of-emergency-olympics.html.
277 Wade, Stephen, T okyo Olympics to Allow Local Fans-But With Strict Limits, 277 Wade, Stephen, T okyo Olympics to Allow Local Fans-But With Strict Limits, AP, June 21, 2021. , June 21, 2021.
278 CRS In Focus IF11667, 278 CRS In Focus IF11667, China’s Economy: Current Trends and Issues, by Karen M. Sutter and Michael D. , by Karen M. Sutter and Michael D.
Sutherland. Sutherland.
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Multilateral Response279
International Monetary Fund
Created in the aftermath of World War II, the IMF’s fundamental mission is to promote Created in the aftermath of World War II, the IMF’s fundamental mission is to promote
international monetary stability. To advance this goal, one of the key functions of the IMF is international monetary stability. To advance this goal, one of the key functions of the IMF is
providing emergency loans to countries facing economic crises. The COVID-19 pandemic has providing emergency loans to countries facing economic crises. The COVID-19 pandemic has
resulted in an unprecedented demand for IMF financial assistance. More than 100 of the IMF’s resulted in an unprecedented demand for IMF financial assistance. More than 100 of the IMF’s
189 member countries have requested IMF programs,280 and IMF Managing Director Kristalina 189 member countries have requested IMF programs,280 and IMF Managing Director Kristalina
Georgieva stated the IMF stands ready to deploy the entirety of its current lending capacity—Georgieva stated the IMF stands ready to deploy the entirety of its current lending capacity—
approximately $1 tril ion—in response to the pandemic and resulting economic crises.281 The approximately $1 tril ion—in response to the pandemic and resulting economic crises.281 The
IMF has already approved several COVID-related programs, including for Bolivia, Chad, the IMF has already approved several COVID-related programs, including for Bolivia, Chad, the
Democratic Republic of Congo, Kyrgyz Republic, Nigeria, Niger, Rwanda, Madagascar, Democratic Republic of Congo, Kyrgyz Republic, Nigeria, Niger, Rwanda, Madagascar,
Mozambique, Pakistan, and Togo, among others, and additional programs are expected.282 Mozambique, Pakistan, and Togo, among others, and additional programs are expected.282
In addition to loans, the IMF has taken a number of other policy steps to bolster its COVID-19 In addition to loans, the IMF has taken a number of other policy steps to bolster its COVID-19
response. The IMF is tapping its Catastrophe Containment and Relief Trust (CCRT), a donor response. The IMF is tapping its Catastrophe Containment and Relief Trust (CCRT), a donor
country trust fund at the IMF, to cover six months of debt payments owed by 29 low-income country trust fund at the IMF, to cover six months of debt payments owed by 29 low-income
countries to the IMF. The IMF also created a new a new Short-term Liquidity Line.283 It is a countries to the IMF. The IMF also created a new a new Short-term Liquidity Line.283 It is a
revolving and renewable backstop for member countries with very strong economic policies in revolving and renewable backstop for member countries with very strong economic policies in
need of short-term and moderate financial support, and intends to support a country’s liquidity need of short-term and moderate financial support, and intends to support a country’s liquidity
buffers. The IMF also adopted proposals to accelerate Board consideration of member financing buffers. The IMF also adopted proposals to accelerate Board consideration of member financing
requests for emergency financing and doubled (to about $100 bil ion) access to IMF emergency requests for emergency financing and doubled (to about $100 bil ion) access to IMF emergency
assistance. The International Monetary Fund (IMF) is providing funding to poor and emerging assistance. The International Monetary Fund (IMF) is providing funding to poor and emerging
market economies that are short on financial resources.284 If the economic effects of the virus market economies that are short on financial resources.284 If the economic effects of the virus
persist, countries may need to be proactive in coordinating fiscal and monetary policy responses, persist, countries may need to be proactive in coordinating fiscal and monetary policy responses,
similar to actions taken by of the G-20 following the 2008-2009 global financial crisis. similar to actions taken by of the G-20 following the 2008-2009 global financial crisis.
In August 2021, the IMF announced it was supporting low and middle-income countries in their In August 2021, the IMF announced it was supporting low and middle-income countries in their
response to the pandemic crisis through a $650 bil ion al ocation in special drawing rights response to the pandemic crisis through a $650 bil ion al ocation in special drawing rights
(SDRs)–reportedly the largest increase on record. The SDR al ocation is intended to supplement (SDRs)–reportedly the largest increase on record. The SDR al ocation is intended to supplement
the existing financial reserves to reduce their need to turn to domestic or external sources of the existing financial reserves to reduce their need to turn to domestic or external sources of
funds. About $275 bil ion of the funds is intended to be al ocated to emerging and developing funds. About $275 bil ion of the funds is intended to be al ocated to emerging and developing
economies, with the rest intended for larger developed economies.285 economies, with the rest intended for larger developed economies.285
For FY2021, the Administration had requested authorization for about $38 bil ion for a For FY2021, the Administration had requested authorization for about $38 bil ion for a
supplemental fund at the IMF (the New Arrangements to Borrow [NAB]). In March 2020, supplemental fund at the IMF (the New Arrangements to Borrow [NAB]). In March 2020,

279 For more information, see CRS Report R46342, 279 For more information, see CRS Report R46342, COVID-19: Role of the International Financial Institutions, by , by
Rebecca M. Nelson and Martin A. Weiss. Rebecca M. Nelson and Martin A. Weiss.
280 Remarks by IMF Managing Director Kristalina Georgieva During the G20 Finance Ministers and Central Bank 280 Remarks by IMF Managing Director Kristalina Georgieva During the G20 Finance Ministers and Central Bank
Governors Meeting, International Monetary Fund, April 15, 2020. Governors Meeting, International Monetary Fund, April 15, 2020.
281 IMF Managing Director Kristalina Georgieva’s Statement Following a G20 Ministerial Call on the Coronavirus 281 IMF Managing Director Kristalina Georgieva’s Statement Following a G20 Ministerial Call on the Coronavirus
Emergency, March 23, 2020. Some policy experts estimate the IMF’s current maximum Emergency, March 23, 2020. Some policy experts estimate the IMF’s current maximum ~~lending~~lendin g capacity is about $787 capacity is about $787
billion. billion.
282 IMF Lending T racker, https://www.imf.org/en/T opics/imf-and-covid19/COVID-Lending-T racker. 282 IMF Lending T racker, https://www.imf.org/en/T opics/imf-and-covid19/COVID-Lending-T racker.
283 “IMF Adds Liquidity Line to Strengthen COVID-19 Response,” International Monetary Fund, April 15, 2020. 283 “IMF Adds Liquidity Line to Strengthen COVID-19 Response,” International Monetary Fund, April 15, 2020.
284 Politi, James, “ IMF Sets Aside $50bn for Covid-19-Hit Countries,” 284 Politi, James, “ IMF Sets Aside $50bn for Covid-19-Hit Countries,” Financial Times, March 4, 2020, , March 4, 2020,
https://www.ft.com/content/83c07594-5e3a-11ea-b0ab-339c2307bcd4. https://www.ft.com/content/83c07594-5e3a-11ea-b0ab-339c2307bcd4.
285 Jonathan Wheatley in London and Colby Smith, IMF Allocates $650bn to Boost Pandemic-hit Economies, 285 Jonathan Wheatley in London and Colby Smith, IMF Allocates $650bn to Boost Pandemic-hit Economies,
Financial Tim es, August 2, 2021. August 2, 2021.
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Congress enacted this authorization in the Coronavirus Aid, Relief, and Economic Security Act Congress enacted this authorization in the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act, P.L. 116-136) as a way to bolster IMF resources available to support countries (CARES Act, P.L. 116-136) as a way to bolster IMF resources available to support countries
during the pandemic. There is ongoing debate about whether member countries should contribute during the pandemic. There is ongoing debate about whether member countries should contribute
additional resources to the IMF, whether the IMF should raise funds by sel ing a portion of its additional resources to the IMF, whether the IMF should raise funds by sel ing a portion of its
gold holdings, and whether the IMF should enact policies to buffer member state reserves, gold holdings, and whether the IMF should enact policies to buffer member state reserves,
through a process cal ed an SDR al ocation. through a process cal ed an SDR al ocation.
World Bank and Regional Development Banks
The World Bank, which finances economic development projects in middle- and low-income The World Bank, which finances economic development projects in middle- and low-income
countries, among other activities, is mobilizing its resources to support developing countries countries, among other activities, is mobilizing its resources to support developing countries
during the COVID-19 pandemic.286 As of June 1, 2020, the World Bank had approved, or was in during the COVID-19 pandemic.286 As of June 1, 2020, the World Bank had approved, or was in
the process of approving, 150 COVID-19 projects, totaling $15 bil ion, in 99 countries.287 the process of approving, 150 COVID-19 projects, totaling $15 bil ion, in 99 countries.287
Examples of approved projects include $47 mil ion for the Democratic Republic of Congo to Examples of approved projects include $47 mil ion for the Democratic Republic of Congo to
support containment strategies, train medical staff, and provide equipment for diagnostic testing support containment strategies, train medical staff, and provide equipment for diagnostic testing
to ensure rapid case detection; $11.3 mil ion for Tajikistan to expand intensive care capacity; $20 to ensure rapid case detection; $11.3 mil ion for Tajikistan to expand intensive care capacity; $20
mil ion for Haiti to support diagnostic testing, rapid response teams, and outbreak containment; mil ion for Haiti to support diagnostic testing, rapid response teams, and outbreak containment;
and $1 bil ion for India to support screening, contract tracing, and laboratory diagnostics, procure and $1 bil ion for India to support screening, contract tracing, and laboratory diagnostics, procure
personal protective equipment, and set up new isolation wards, among other projects.288 personal protective equipment, and set up new isolation wards, among other projects.288
Over the next 15 months, the World Bank Group estimates it could deploy as much as $160 Over the next 15 months, the World Bank Group estimates it could deploy as much as $160
bil ion to respond to the COVID-19 pandemic, more than double the amount it committed in bil ion to respond to the COVID-19 pandemic, more than double the amount it committed in
FY2019. In April 2020, the World Bank also announced its plans to establish a new multi-donor FY2019. In April 2020, the World Bank also announced its plans to establish a new multi-donor
trust fund to help countries prepare for disease outbreaks, the Health Emergency Preparedness trust fund to help countries prepare for disease outbreaks, the Health Emergency Preparedness
and Response Multi-Donor Fund (HEPRF).289 The new fund is to complement, and augment, the and Response Multi-Donor Fund (HEPRF).289 The new fund is to complement, and augment, the
$160 bil ion of financing provided by the World Bank. $160 bil ion of financing provided by the World Bank.
In addition to the World Bank, which has a near-global membership and operates in many sectors In addition to the World Bank, which has a near-global membership and operates in many sectors
in developing countries worldwide, a number of smal er and more specialized multilateral in developing countries worldwide, a number of smal er and more specialized multilateral
development banks (MDBs) are also mobilizing resources in response to the COVID-19 development banks (MDBs) are also mobilizing resources in response to the COVID-19
pandemic. The United States is a member of a number of regional y focused MDBs, including the pandemic. The United States is a member of a number of regional y focused MDBs, including the
African Development Bank, the Asian Development Bank, the European Bank for Reconstruction African Development Bank, the Asian Development Bank, the European Bank for Reconstruction
and Development, and the Inter-American Development Bank, as wel as the functional y focused and Development, and the Inter-American Development Bank, as wel as the functional y focused
International Fund for Agricultural Development. The United States does not belong to some International Fund for Agricultural Development. The United States does not belong to some
MDBs, including the Chinese-led Asian Infrastructure Investment Bank and the New MDBs, including the Chinese-led Asian Infrastructure Investment Bank and the New
Development Bank created by the BRICS countries (Brazil, Russia, India, China, and South Development Bank created by the BRICS countries (Brazil, Russia, India, China, and South
Africa), the European Investment Bank, or the Islamic Development Bank. Africa), the European Investment Bank, or the Islamic Development Bank.
In response to COVID-19, MDBs are reprogramming existing projects, establishing and funding In response to COVID-19, MDBs are reprogramming existing projects, establishing and funding
with existing resources lending facilities dedicated to the COVID-19 response, and streamlining with existing resources lending facilities dedicated to the COVID-19 response, and streamlining
approval procedures. According to the President of the World Bank, other multilateral approval procedures. According to the President of the World Bank, other multilateral
development banks have committed roughly $80 bil ion over the next 15 months to respond to development banks have committed roughly $80 bil ion over the next 15 months to respond to

286 Remarks by World Bank Group President David Malpass on G20 Finance Ministers Conference Call on COVID286 Remarks by World Bank Group President David Malpass on G20 Finance Ministers Conference Call on COVID -19, -19,
March 23, 2020. March 23, 2020.
287 https://maps.worldbank.org/. Accessed on June 1, 2020. 287 https://maps.worldbank.org/. Accessed on June 1, 2020.
288 World Bank, “World Bank Group Launches First Operations for COVID-19 (Coronavirus) Emergency Health 288 World Bank, “World Bank Group Launches First Operations for COVID-19 (Coronavirus) Emergency Health
Support, Strengthening Developing Country Response,” Press Release, April 2, 2020. Support, Strengthening Developing Country Response,” Press Release, April 2, 2020.
289 World Bank, “World Bank Group to Launch New Multi-donor T rust Fund to help Countries Prepare for Disease 289 World Bank, “World Bank Group to Launch New Multi-donor T rust Fund to help Countries Prepare for Disease
Outbreaks,” Press Release, April 17, 2020. Outbreaks,” Press Release, April 17, 2020.
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COVID-19.290 Together with the World Bank’s commitment of $160 bil ion, $240 bil ion in COVID-19.290 Together with the World Bank’s commitment of $160 bil ion, $240 bil ion in
financing is to be made available to developing countries from the MDBs during this time financing is to be made available to developing countries from the MDBs during this time
period.291 period.291
To support the MDB response to COVID-19, Congress accelerated authorizations requested by To support the MDB response to COVID-19, Congress accelerated authorizations requested by
the Administration for FY2021 for two lending facilities at the World Bank and two lending the Administration for FY2021 for two lending facilities at the World Bank and two lending
facilities at the African Development Bank in the CARES Act (P.L. 116-136). Given the facilities at the African Development Bank in the CARES Act (P.L. 116-136). Given the
unprecedented demand for MDB resources, discussions are underway about whether the MDBs unprecedented demand for MDB resources, discussions are underway about whether the MDBs
should pursue fiduciary reforms that would al ow them to expand their lending based on existing should pursue fiduciary reforms that would al ow them to expand their lending based on existing
resources, particularly lending against donor country guarantees to the institutions (cal ed resources, particularly lending against donor country guarantees to the institutions (cal ed
“cal able” capital). “cal able” capital).
International Economic Cooperation
On March 16, 2020, the leaders of the G-7 countries (Canada, France, Germany, Italy, Japan, the On March 16, 2020, the leaders of the G-7 countries (Canada, France, Germany, Italy, Japan, the
United Kingdom, and the United States) held an emergency summit by teleconference to discuss United Kingdom, and the United States) held an emergency summit by teleconference to discuss
and coordinate their policy responses to the economic fal out from the global spread of COVID-and coordinate their policy responses to the economic fal out from the global spread of COVID-
19. In the joint statement released by the G-7 leaders after the emergency teleconference summit, 19. In the joint statement released by the G-7 leaders after the emergency teleconference summit,
the leaders stressed they are committed to doing “whatever is necessary to ensure a strong global the leaders stressed they are committed to doing “whatever is necessary to ensure a strong global
response through closer cooperation and enhanced cooperation of efforts.”292 The countries response through closer cooperation and enhanced cooperation of efforts.”292 The countries
pledged to coordinate research efforts, increase the availability of medical equipment; mobilize pledged to coordinate research efforts, increase the availability of medical equipment; mobilize
“the full range” of policy instruments, including monetary and fiscal measures as wel as targeted “the full range” of policy instruments, including monetary and fiscal measures as wel as targeted
actions, to support workers, companies, and sectors most affected by the spread of COVID-19; actions, to support workers, companies, and sectors most affected by the spread of COVID-19;
task the finance ministers to coordinate on a weekly basis, and direct the IMF and the World Bank task the finance ministers to coordinate on a weekly basis, and direct the IMF and the World Bank
Group, as wel as other international organizations, to support countries worldwide as part of a Group, as wel as other international organizations, to support countries worldwide as part of a
coordinated global response.293 coordinated global response.293
Saudi Arabia, the 2020 chair of the G-20, cal ed an emergency G-20 summit on March 25 to Saudi Arabia, the 2020 chair of the G-20, cal ed an emergency G-20 summit on March 25 to
discuss a response to the pandemic.294 The G-20 is a broader group of economies, including the discuss a response to the pandemic.294 The G-20 is a broader group of economies, including the
G-7 countries and several major emerging markets.295 During the global financial crisis, world G-7 countries and several major emerging markets.295 During the global financial crisis, world
leaders decided that henceforth the G-20 would be the premiere forum for international economic leaders decided that henceforth the G-20 would be the premiere forum for international economic
cooperation. Some analysts have been surprised that the G-7 has been in front of the G-20 in cooperation. Some analysts have been surprised that the G-7 has been in front of the G-20 in
responding to COVID-19, while other analysts have questioned whether the larger size and responding to COVID-19, while other analysts have questioned whether the larger size and
diversity of economies in the G-20 can make coordination more difficult.296 diversity of economies in the G-20 can make coordination more difficult.296
Analysts are hopeful that the recent G-7 summit, and a G-20 summit, wil mark a shift towards Analysts are hopeful that the recent G-7 summit, and a G-20 summit, wil mark a shift towards
greater international cooperation at the highest (leader) levels in combatting the economic fal out greater international cooperation at the highest (leader) levels in combatting the economic fal out
from the spread of COVID-19.297 An emergency meeting of G-7 finance ministers on March 3, from the spread of COVID-19.297 An emergency meeting of G-7 finance ministers on March 3,

290 David Malpass, “ Remarks to G20 Finance Ministers,” World Bank, April 15, 2020. 290 David Malpass, “ Remarks to G20 Finance Ministers,” World Bank, April 15, 2020.
291 World Bank Group President David Malpass: Remarks to G20 Finance Ministers, April 15, 2020. 291 World Bank Group President David Malpass: Remarks to G20 Finance Ministers, April 15, 2020.
292 White House, G-7 Leaders’ Statement, March 16, 2020, https://www.whitehouse.gov/briefings-statements/g7-292 White House, G-7 Leaders’ Statement, March 16, 2020, https://www.whitehouse.gov/briefings-statements/g7-
leaders-statement/. leaders-statement/.
293 Ibid. 293 Ibid.
294 “Spain Says Saudi Arabia to Cal G-20 to Meet on Covid-19 in Coming Days,” 294 “Spain Says Saudi Arabia to Cal G-20 to Meet on Covid-19 in Coming Days,” Reuters, March 16, 2020. , March 16, 2020.
295 T he G-20 includes the G-7 countries plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, 295 T he G-20 includes the G-7 countries plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia,
Saudi Arabia, South Africa, South Korea, T urkey, and the European Union (EU).Saudi Arabia, South Africa, South Korea, T urkey, and the European Union (EU).
296 For more information about the G-20, see CRS Report R40977, 296 For more information about the G-20, see CRS Report R40977, International Economic Policy Coordination at the
G-7 and the G-20, by Rebecca M. Nelson. , by Rebecca M. Nelson.
297 See for example, Jennifer Rankin, “EU Leaders Divided on How to Protect Economies after Covid-19,” 297 See for example, Jennifer Rankin, “EU Leaders Divided on How to Protect Economies after Covid-19,” The
Guardian, March 14, 2020. , March 14, 2020.
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2020, fel short of the aggressive and concrete coordinated action that investors and economists 2020, fel short of the aggressive and concrete coordinated action that investors and economists
had been hoping for, and U.S. and European stock markets fel after the meeting.298 More had been hoping for, and U.S. and European stock markets fel after the meeting.298 More
general y, governments have been divided over the appropriate response and in some cases have general y, governments have been divided over the appropriate response and in some cases have
acted unilateral y, particularly when closing borders and imposing export restrictions on medical acted unilateral y, particularly when closing borders and imposing export restrictions on medical
equipment and medicine. Some experts argue that a large, early, and coordinated response is equipment and medicine. Some experts argue that a large, early, and coordinated response is
needed to address the economic fal out from COVID-19, but several concerns loom about the G- needed to address the economic fal out from COVID-19, but several concerns loom about the G-
20’s ability to deliver.299 Their concerns focus on the Trump Administration’s prioritization of an 20’s ability to deliver.299 Their concerns focus on the Trump Administration’s prioritization of an
“America First” foreign policy over one committed to multilateralism; the 2020 chair of the G-20, “America First” foreign policy over one committed to multilateralism; the 2020 chair of the G-20,
Saudi Arabia, is embroiled in its own domestic political issues and oil price war; and U.S.-China Saudi Arabia, is embroiled in its own domestic political issues and oil price war; and U.S.-China
tensions make G-20 consensus more difficult. tensions make G-20 consensus more difficult.
Meanwhile, international organizations including the IMF and multilateral development banks, Meanwhile, international organizations including the IMF and multilateral development banks,
have tried to forge ahead with economic support given their current resources. Additional y, the have tried to forge ahead with economic support given their current resources. Additional y, the
Financial Stability Board (FSB), an international body including the United States that monitors Financial Stability Board (FSB), an international body including the United States that monitors
the global financial system and makes regulations to ensure stability, released a statement on the global financial system and makes regulations to ensure stability, released a statement on
March 20, 2020, that its members are actively cooperating to maintain financial stability during March 20, 2020, that its members are actively cooperating to maintain financial stability during
market stress related to COVID-19.300 The FSB is encouraging governments to use flexibility market stress related to COVID-19.300 The FSB is encouraging governments to use flexibility
within existing international standards to provide continued access to funding for market within existing international standards to provide continued access to funding for market
participants and for businesses and households facing temporary difficulties from COVID-19, participants and for businesses and households facing temporary difficulties from COVID-19,
while noting that many FSB members have already taken action to release available capital and while noting that many FSB members have already taken action to release available capital and
liquidity buffers. liquidity buffers.
Estimated Effects on Other Economies
Travel bans and quarantines have had a heavy economic toll on a broad range of countries. The Travel bans and quarantines have had a heavy economic toll on a broad range of countries. The
OECD notes that production declines in China have had spil over effects around the world given OECD notes that production declines in China have had spil over effects around the world given
China’s role in producing computers, electronics, pharmaceuticals and transport equipment, and China’s role in producing computers, electronics, pharmaceuticals and transport equipment, and
as a primary source of demand for many commodities.301 Across Asia, some forecasters argue that as a primary source of demand for many commodities.301 Across Asia, some forecasters argue that
recent data indicate that Japan, South Korea, Thailand, the Philippines, Indonesia, Malaysia, and recent data indicate that Japan, South Korea, Thailand, the Philippines, Indonesia, Malaysia, and
Vietnam could experience an economic recession in 2020.302 Vietnam could experience an economic recession in 2020.302
In early January 2020, before the COVID-19 outbreak, economic growth in developing In early January 2020, before the COVID-19 outbreak, economic growth in developing
economies as a whole was projected by the International Monetary Fund (IMF) to be slightly economies as a whole was projected by the International Monetary Fund (IMF) to be slightly
more positive than in 2019. This outlook was based on progress being made in U.S.-China trade more positive than in 2019. This outlook was based on progress being made in U.S.-China trade
talks that were expected to roll back some tariffs and an increase in India’s rate of growth. talks that were expected to roll back some tariffs and an increase in India’s rate of growth.
Growth rates in Latin America and the Middle East were also projected to be positive in 2020.303 Growth rates in Latin America and the Middle East were also projected to be positive in 2020.303
These projections likely wil be revised downward due to the slowdown in global trade associated These projections likely wil be revised downward due to the slowdown in global trade associated
with COVID-19, lower energy and commodity prices, an increase in the foreign exchange value with COVID-19, lower energy and commodity prices, an increase in the foreign exchange value
of the dollar, and other secondary effects that could curtail growth. Commodity exporting of the dollar, and other secondary effects that could curtail growth. Commodity exporting

298 Jack Ewing and Jeanna Smialek, “Economic Powers Vow to Fight Crisis,” 298 Jack Ewing and Jeanna Smialek, “Economic Powers Vow to Fight Crisis,” New York Times, March 3, 2020. , March 3, 2020.
299 Matthew Goodman and Mark Sobel, “T ime to Pull the G-20 Fire Bell,” Center for Strategic and International 299 Matthew Goodman and Mark Sobel, “T ime to Pull the G-20 Fire Bell,” Center for Strategic and International
Studies, March 18, 2020. Studies, March 18, 2020.
300 “FSB Coordinates Financial Sector Work to Buttress the Economy in Response to Covid-19,” Financial Stability 300 “FSB Coordinates Financial Sector Work to Buttress the Economy in Response to Covid-19,” Financial Stability
Board, Press Release 6/2020, March 20, 2020. Board, Press Release 6/2020, March 20, 2020.
301 Ibid301 Ibid., , p. 5. p. 5.
302 Arnold, Martin Arnold and Valentina Romei, “European Factory Output Plummets as Covid-19 Shutdown Bites,” 302 Arnold, Martin Arnold and Valentina Romei, “European Factory Output Plummets as Covid-19 Shutdown Bites,”
Financial Tim es, April 1, 2020. https://www.ft.com/content/8646c0ee-8fba-4e4c-a047-cf445ff41cf6. April 1, 2020. https://www.ft.com/content/8646c0ee-8fba-4e4c-a047-cf445ff41cf6.
303 303 Tentative Stabilization, Sluggish Recovery? World Economic Outlook Update, January 20, 2020, T he International , January 20, 2020, T he International
Monetary Fund. https://www.imf.org/en/Publications/WEO/Issues/2020/01/20/weo-update-january2020. Monetary Fund. https://www.imf.org/en/Publications/WEO/Issues/2020/01/20/weo-update-january2020.
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countries, in particular, likely wil experience a greater slowdown in growth than forecasted in countries, in particular, likely wil experience a greater slowdown in growth than forecasted in
earlier projections as a result of a slowdown on trade with China and lower commodity prices. earlier projections as a result of a slowdown on trade with China and lower commodity prices.
Asian Development Bank 2021 Forecast
According to the Asian Development Bank’s (ADB) July 2021 According to the Asian Development Bank’s (ADB) July 2021 report, developing Asia GDP is projected developing Asia GDP is projected
to grow by 7.2% in 2021, after fal ing by 0.1% in 2020, reportedly the first decline in economic to grow by 7.2% in 2021, after fal ing by 0.1% in 2020, reportedly the first decline in economic
activity in the region in six decades, reflecting the slowdown in global trade and national activity in the region in six decades, reflecting the slowdown in global trade and national
quarantines.304 Similar to other groups, the ADB’s forecasts indicate progressively more quarantines.304 Similar to other groups, the ADB’s forecasts indicate progressively more ~~positive~~
positive rates of growth over the September 2020 to July 2021 period for most areas of Asia, led rates of growth over the September 2020 to July 2021 period for most areas of Asia, led by a by a
rebound in growth of 7% in India. rebound in growth of 7% in India.
ADB sub-regional forecasts indicate that South Asia, particularly India is projected grow at the ADB sub-regional forecasts indicate that South Asia, particularly India is projected grow at the
fastest rate in 2022. East Asia is similarly projected to experience an overal fastest rate in 2022. East Asia is similarly projected to experience an overal positive rate of positive rate of
growth in 2022, reflecting the dominating influence of the Chinese economy, which is projected growth in 2022, reflecting the dominating influence of the Chinese economy, which is projected
to grow by 8% in 2021 and 5% in 2022, as indicated into grow by 8% in 2021 and 5% in 2022, as indicated in Figure 24. Hong Kong, which . Hong Kong, which
experienced a slowing rate of growth in 2020 due to domestic political turmoil and trade issues experienced a slowing rate of growth in 2020 due to domestic political turmoil and trade issues
between the United States and China, was projected to experience a 6.2% rate of growth in 2021 between the United States and China, was projected to experience a 6.2% rate of growth in 2021
and a 3.5% rate in 2022. and a 3.5% rate in 2022.
South Asia, which includes India, is projected to experience a decline in its annual GDP growth South Asia, which includes India, is projected to experience a decline in its annual GDP growth
rate of 5.5% in 2020, but a positive rate of growth in 2021 of 8.9% and 7.0% in 2022, driven in rate of 5.5% in 2020, but a positive rate of growth in 2021 of 8.9% and 7.0% in 2022, driven in
part by a turn-around in India’s growth rate from -7.3 in 2020 to a positive 10.0% in 2021 and part by a turn-around in India’s growth rate from -7.3 in 2020 to a positive 10.0% in 2021 and
7.5% in 2022. Countries in the region have implemented different measures to contain the spread 7.5% in 2022. Countries in the region have implemented different measures to contain the spread
of the virus, reflecting differences in the extent of viral infections. Across governments within the of the virus, reflecting differences in the extent of viral infections. Across governments within the
region, total fiscal support totaled $3.6 tril ion by the end of August 2020, divided between region, total fiscal support totaled $3.6 tril ion by the end of August 2020, divided between
income support measures and measures intended to support liquidity. Similar to other regions and income support measures and measures intended to support liquidity. Similar to other regions and
countries, growth prospects in developing Asia depend on the length and depth of the health crisis countries, growth prospects in developing Asia depend on the length and depth of the health crisis
and the protracted nature of trade tensions between the United States and China. and the protracted nature of trade tensions between the United States and China.
Figure 24. Asian Development Bank 2020 and 2021 GDP Forecasts
In percentage change In percentage change

Source: Asian Development Outlook Supplement, Asian Development Bank, July 2021.Created by CRS. , Asian Development Bank, July 2021.Created by CRS.

304 304 Asian Development Outlook Supplement, Asian Development Bank, July 2021. , Asian Development Bank, July 2021.
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International Economic Cooperation
Initial efforts at coordinating the economic response to the COVID-19 pandemic across countries Initial efforts at coordinating the economic response to the COVID-19 pandemic across countries
were uneven. Governments were divided over the appropriate response and in some cases acted were uneven. Governments were divided over the appropriate response and in some cases acted
unilateral y, particularly when closing borders and imposing export restrictions on medical unilateral y, particularly when closing borders and imposing export restrictions on medical
equipment and medicine. An emergency meeting of G-7 (Canada, France, Germany, Italy, Japan, equipment and medicine. An emergency meeting of G-7 (Canada, France, Germany, Italy, Japan,
the United Kingdom, and the United States) finance ministers on March 3, 2020, fel short of the the United Kingdom, and the United States) finance ministers on March 3, 2020, fel short of the
aggressive and concrete coordinated action that investors and economists had hoped for, and U.S. aggressive and concrete coordinated action that investors and economists had hoped for, and U.S.
and European stock markets fel sharply after the meeting.305 However, on March 16, 2020, the and European stock markets fel sharply after the meeting.305 However, on March 16, 2020, the
leaders of the G-7 countries held an emergency summit by teleconference to discuss and leaders of the G-7 countries held an emergency summit by teleconference to discuss and
coordinate their policy responses to the economic fal out from the global spread of COVID-19. coordinate their policy responses to the economic fal out from the global spread of COVID-19.
In a joint statement released by the G-7 leaders after the emergency teleconference summit, the In a joint statement released by the G-7 leaders after the emergency teleconference summit, the
leaders stressed they were committed to doing “whatever is necessary to ensure a strong global leaders stressed they were committed to doing “whatever is necessary to ensure a strong global
response through closer cooperation and enhanced cooperation of efforts.”306 The countries response through closer cooperation and enhanced cooperation of efforts.”306 The countries
pledged to coordinate research efforts, increase the availability of medical equipment; mobilize pledged to coordinate research efforts, increase the availability of medical equipment; mobilize
“the full range” of policy instruments, including monetary and fiscal measures as wel as targeted “the full range” of policy instruments, including monetary and fiscal measures as wel as targeted
actions, to support workers, companies, and sectors most affected by the spread of COVID-19; actions, to support workers, companies, and sectors most affected by the spread of COVID-19;
tasked the finance ministers to coordinate on a weekly basis, and directed the IMF and the World tasked the finance ministers to coordinate on a weekly basis, and directed the IMF and the World
Bank Group, as wel as other international organizations, to support countries worldwide as part Bank Group, as wel as other international organizations, to support countries worldwide as part
of a coordinated global response.307 G-7 coordination was problematic however, including of a coordinated global response.307 G-7 coordination was problematic however, including
disagreement among G-7 foreign affairs ministers about how to refer to the virus (coronavirus or disagreement among G-7 foreign affairs ministers about how to refer to the virus (coronavirus or
the “Wuhan virus”) and concerns about collaboration on vaccine research.308 The United States the “Wuhan virus”) and concerns about collaboration on vaccine research.308 The United States
chaired the G-7 in 2020, but the June summit at Camp David was canceled due to concerns about chaired the G-7 in 2020, but the June summit at Camp David was canceled due to concerns about
COVID-19. COVID-19.
The G-20, which has a broader membership of major advanced and emerging-market economies The G-20, which has a broader membership of major advanced and emerging-market economies
representing 85% of world GDP, was slower to respond to the pandemic.309 Even though G-20 representing 85% of world GDP, was slower to respond to the pandemic.309 Even though G-20
coordination was widely viewed as critical in the response to the global financial crisis of 2008-coordination was widely viewed as critical in the response to the global financial crisis of 2008-
2009, several factors may have complicated G-20 coordination in the pandemic context: the 2009, several factors may have complicated G-20 coordination in the pandemic context: the
Trump Administration’s prioritization of an “America First” foreign policy over one committed to Trump Administration’s prioritization of an “America First” foreign policy over one committed to
multilateralism; the 2020 chair of the G-20, Saudi Arabia, was embroiled in its own domestic multilateralism; the 2020 chair of the G-20, Saudi Arabia, was embroiled in its own domestic
political issues and oil price war; and U.S.-China tensions make G-20 consensus more difficult.310 political issues and oil price war; and U.S.-China tensions make G-20 consensus more difficult.310
The G-20 held a summit by teleconference on March 26, 2020, but the resulting communique was The G-20 held a summit by teleconference on March 26, 2020, but the resulting communique was
criticized for failing to include concrete action items beyond what national governments were criticized for failing to include concrete action items beyond what national governments were
already doing.311 However, G-20 coordination appeared to be gaining momentum, most notably already doing.311 However, G-20 coordination appeared to be gaining momentum, most notably

305 Jack Ewing and Jeanna Smialek, “Economic Powers Vow to Fight Crisis,” 305 Jack Ewing and Jeanna Smialek, “Economic Powers Vow to Fight Crisis,” New York Times, March 3, 2020. , March 3, 2020.
306 White House, G-7 Leaders’ Statement, March 16, 2020, https://www.whitehouse.gov/briefings-statements/g7-306 White House, G-7 Leaders’ Statement, March 16, 2020, https://www.whitehouse.gov/briefings-statements/g7-
leaders-statement/. leaders-statement/.
307 Ibid. 307 Ibid.
308 “Pompeo, G-7 Foreign Ministers Spar over ‘Wuhan Virus’,” 308 “Pompeo, G-7 Foreign Ministers Spar over ‘Wuhan Virus’,” Politico, March 25, 2020; Katrin Bennhold and David , March 25, 2020; Katrin Bennhold and David
E. Sanger, “U.S. Offered ‘Large Sum’ to German Company for Access to Coronavirus Vaccine Research, German E. Sanger, “U.S. Offered ‘Large Sum’ to German Company for Access to Coronavirus Vaccine Research, German
Officials Say,” New York T imes, March 15, 2020. Officials Say,” New York T imes, March 15, 2020.
309 T he G-20 includes the G-7 countries plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, 309 T he G-20 includes the G-7 countries plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia,
Saudi Arabia, South Africa, South Korea, T urkey, and the European Union (EU). Saudi Arabia, South Africa, South Korea, T urkey, and the European Union (EU).
310 Matthew Goodman and Mark Sobel, “T ime to Pull the G-20 Fire Bell,” Center for Strategic and International 310 Matthew Goodman and Mark Sobel, “T ime to Pull the G-20 Fire Bell,” Center for Strategic and International
Studies, March 18, 2020. Studies, March 18, 2020.
311 Matthew Goodman, Stephanie Segal, and Mark Sobel, “Assessing the G20 Virtual Summit,” Center for Strategic 311 Matthew Goodman, Stephanie Segal, and Mark Sobel, “Assessing the G20 Virtual Summit,” Center for Strategic
and International Studies, March 27, 2020. and International Studies, March 27, 2020.
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link to page link to page ~~108~~109 link to page link to page ~~108~~109 Global Economic Effects of COVID-19

with the G-20 agreement on debt relief for low-income countries (see with the G-20 agreement on debt relief for low-income countries (see “Looming Debt Crises and
Debt Relief Efforts”). ).
Meanwhile, international organizations including the IMF and multilateral development banks, Meanwhile, international organizations including the IMF and multilateral development banks,
tried to forge ahead with economic support given their current resources. Additional y, the tried to forge ahead with economic support given their current resources. Additional y, the
Financial Stability Board (FSB), an international body including the United States that monitors Financial Stability Board (FSB), an international body including the United States that monitors
the global financial system and makes regulations to ensure stability, released a statement on the global financial system and makes regulations to ensure stability, released a statement on
March 20, 2020, that its members were actively cooperating to maintain financial stability during March 20, 2020, that its members were actively cooperating to maintain financial stability during
market stress related to COVID-19.312 The FSB encouraged governments to use flexibility within market stress related to COVID-19.312 The FSB encouraged governments to use flexibility within
existing international standards to provide continued access to funding for market participants and existing international standards to provide continued access to funding for market participants and
for businesses and households facing temporary difficulties from COVID-19, while noting that for businesses and households facing temporary difficulties from COVID-19, while noting that
many FSB members had taken action to release available capital and liquidity buffers. many FSB members had taken action to release available capital and liquidity buffers.
Looming Debt Crises and Debt Relief Efforts
COVID-19 could trigger a wave of defaults around the world.313 In Q3 2019—before the COVID-19 could trigger a wave of defaults around the world.313 In Q3 2019—before the
outbreak of COVID-19—global debt levels reached an al -time high of nearly $253 tril ion, about outbreak of COVID-19—global debt levels reached an al -time high of nearly $253 tril ion, about
320% of global GDP.314 About 70% of global debt is held by advanced economies and about 30% 320% of global GDP.314 About 70% of global debt is held by advanced economies and about 30%
is held by emerging markets. Global y, most debt is held by nonfinancial corporations (29%), is held by emerging markets. Global y, most debt is held by nonfinancial corporations (29%),
governments (27%) and financial corporations (24%), followed by households (19%). Debt in governments (27%) and financial corporations (24%), followed by households (19%). Debt in
emerging markets has nearly doubled since 2010, primarily driven by borrowing from state-emerging markets has nearly doubled since 2010, primarily driven by borrowing from state-
owned enterprises. owned enterprises.
High debt levels make borrowers vulnerable to shocks that disrupt revenue and inflows of new High debt levels make borrowers vulnerable to shocks that disrupt revenue and inflows of new
financing. The disruption in economic activity associated with COVID-19 is a wide-scale financing. The disruption in economic activity associated with COVID-19 is a wide-scale
exogenous shock that wil make it significantly more difficult for many private borrowers exogenous shock that wil make it significantly more difficult for many private borrowers
(corporations and households) and public borrowers (governments) around the world to repay (corporations and households) and public borrowers (governments) around the world to repay
their debts. COVID-19 has hit the revenue of corporations in a range of industries: factories are their debts. COVID-19 has hit the revenue of corporations in a range of industries: factories are
ceasing production, brick-and-mortar retail stores and restaurants are closing, commodity prices ceasing production, brick-and-mortar retail stores and restaurants are closing, commodity prices
have plunged (Bloomberg commodity price index—a basket of oil, metals, and food prices—has have plunged (Bloomberg commodity price index—a basket of oil, metals, and food prices—has
dropped 27% since the start of the year and is now at its lowest level since 1986), and overseas dropped 27% since the start of the year and is now at its lowest level since 1986), and overseas
and in some cases domestic travel is being curtailed.315 Some governments, including Argentina and in some cases domestic travel is being curtailed.315 Some governments, including Argentina
and Lebanon, were already experiencing debt pressures, which have been exacerbated by the and Lebanon, were already experiencing debt pressures, which have been exacerbated by the
pandemic. Other countries are facing new debt pressures created by the pandemic, while some pandemic. Other countries are facing new debt pressures created by the pandemic, while some
countries, such as Abu Dhabi and Egypt, have completed successful sovereign bond sales since countries, such as Abu Dhabi and Egypt, have completed successful sovereign bond sales since
the outbreak of the pandemic.316 the outbreak of the pandemic.316
Households are facing a rapid increase in unemployment and, in many developing countries, a Households are facing a rapid increase in unemployment and, in many developing countries, a
decline in remittances. With fewer resources, corporations and households may default on their decline in remittances. With fewer resources, corporations and households may default on their
debts, absent government intervention. These defaults wil result in a decline in bank assets, debts, absent government intervention. These defaults wil result in a decline in bank assets,
making it difficult for banks to extend new loans during the crisis or, more severely, creating making it difficult for banks to extend new loans during the crisis or, more severely, creating
solvency problems for banks. Meanwhile, many governments are dramatical y increasing solvency problems for banks. Meanwhile, many governments are dramatical y increasing

312 “FSB Coordinates Financial Sector Work to Buttress the Economy in Response to Covid-19,” Financial Stability 312 “FSB Coordinates Financial Sector Work to Buttress the Economy in Response to Covid-19,” Financial Stability
Board, Press Release 6/2020, March 20, 2020. Board, Press Release 6/2020, March 20, 2020.
313 John Plender, “T he Seeds of the Next Debt Crisis,” 313 John Plender, “T he Seeds of the Next Debt Crisis,” Financial Times, March 4, 2020. , March 4, 2020.
314 Emre T iftik, Khadija Mahmood, Jadranka Poljak, and Sonja Gibbs, “Global Debt Monitor: Sustainability Matters,” 314 Emre T iftik, Khadija Mahmood, Jadranka Poljak, and Sonja Gibbs, “Global Debt Monitor: Sustainability Matters,”
Institute for International Finance, January 13, 2020.This includes debt held by governments, financial institutions, Institute for International Finance, January 13, 2020.This includes debt held by governments, financial institutions,
nonfinancial institutions, and households. nonfinancial institutions, and households.
315 “Covid-19 Worsens Debt Crisis in Poor Countries,” Jubilee Debt Campaign, March 22, 2020. 315 “Covid-19 Worsens Debt Crisis in Poor Countries,” Jubilee Debt Campaign, March 22, 2020.
316 T rieu Pham, “EM Sovereign Debt Issuance: Encouraging Signs but Not Yet Back to Business as Usual,” 316 T rieu Pham, “EM Sovereign Debt Issuance: Encouraging Signs but Not Yet Back to Business as Usual,” ING, May , May
26, 2020. 26, 2020.
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spending to combat the pandemic, and are likely to face sharp reductions in revenue, putting spending to combat the pandemic, and are likely to face sharp reductions in revenue, putting
pressure on public finances and raising the likelihood of sovereign (government) defaults. Debt pressure on public finances and raising the likelihood of sovereign (government) defaults. Debt
dynamics are particularly problematic in emerging economies, where debt obligations dynamics are particularly problematic in emerging economies, where debt obligations
denominated in foreign currencies (usual y U.S. dollars). Many emerging market currencies have denominated in foreign currencies (usual y U.S. dollars). Many emerging market currencies have
depreciated since the outbreak of the pandemic, raising the value of their debts in terms of local depreciated since the outbreak of the pandemic, raising the value of their debts in terms of local
currency. currency.
Governments wil face difficult choices if there is a widespread wave of defaults. Most Governments wil face difficult choices if there is a widespread wave of defaults. Most
governments have signaled a commitment to or already implemented policies to support those governments have signaled a commitment to or already implemented policies to support those
economical y impacted by the pandemic. These governments face decisions about the type of economical y impacted by the pandemic. These governments face decisions about the type of
assistance to provide (loans versus direct payments), the amount of assistance to provide, how to assistance to provide (loans versus direct payments), the amount of assistance to provide, how to
al ocate rescue funds, and what conditions if any to attach to funds. Governments have al ocate rescue funds, and what conditions if any to attach to funds. Governments have
undertaken extraordinary fiscal and monetary measures to combat the crisis. However, undertaken extraordinary fiscal and monetary measures to combat the crisis. However,
developing countries that are constrained by limited financial resources and where health systems developing countries that are constrained by limited financial resources and where health systems
could quickly become overloaded are particularly vulnerable. could quickly become overloaded are particularly vulnerable.
In terms of defaults by governments (sovereign defaults), emergency assistance is general y In terms of defaults by governments (sovereign defaults), emergency assistance is general y
provided by the IMF, and sometimes paired with additional rescue funds from other governments provided by the IMF, and sometimes paired with additional rescue funds from other governments
on a bilateral basis. The IMF and other potential donor countries wil need to consider whether on a bilateral basis. The IMF and other potential donor countries wil need to consider whether
the IMF has adequate resources to respond to the crisis, how to al ocate funding if the demand for the IMF has adequate resources to respond to the crisis, how to al ocate funding if the demand for
funding exceeds the amount available, what conditions should be attached to rescue funding, and funding exceeds the amount available, what conditions should be attached to rescue funding, and
whether IMF programs should be paired with a restructuring of the government’s debt (“burden whether IMF programs should be paired with a restructuring of the government’s debt (“burden
sharing” with private investors). sharing” with private investors).
International efforts are underway to help the most vulnerable developing countries grapple with International efforts are underway to help the most vulnerable developing countries grapple with
debt pressures. In mid-April 2020, the IMF tapped its Catastrophe Containment and Relief Trust debt pressures. In mid-April 2020, the IMF tapped its Catastrophe Containment and Relief Trust
(CRRT), funded by donor countries, to provide grants to cover the debt payments of 25 poor and (CRRT), funded by donor countries, to provide grants to cover the debt payments of 25 poor and
vulnerable countries to the IMF for six months. The IMF hopes that additional donor vulnerable countries to the IMF for six months. The IMF hopes that additional donor
contributions wil al ow this debt service relief to be extended for two years. Additional y, the G-contributions wil al ow this debt service relief to be extended for two years. Additional y, the G-
20 finance ministers agreed to suspend debt service payments for the world’s poorest countries 20 finance ministers agreed to suspend debt service payments for the world’s poorest countries
through the end of 2020. The Institute for International Finance (IIF), which represents 450 through the end of 2020. The Institute for International Finance (IIF), which represents 450
banks, hedge funds, and other global financial funds, also announced that private creditors wil banks, hedge funds, and other global financial funds, also announced that private creditors wil
join the debt relief effort on a voluntary basis. This debt standstil wil free up more than $20 join the debt relief effort on a voluntary basis. This debt standstil wil free up more than $20
bil ion for these countries to spend on improving their health systems and fighting the bil ion for these countries to spend on improving their health systems and fighting the
pandemic.317 Private sector commitments were critical for official creditors, so that developing pandemic.317 Private sector commitments were critical for official creditors, so that developing
countries could redirect funds to improving health systems rather than repaying private creditors. countries could redirect funds to improving health systems rather than repaying private creditors.
However, the debt standstil is complicated. There is debate among creditor governments about However, the debt standstil is complicated. There is debate among creditor governments about
what debts should be included in the standstil , and how it can be enforced. On May 1, the IIF in a what debts should be included in the standstil , and how it can be enforced. On May 1, the IIF in a
letter laid out some of the obstacles facing private sector participation in the debt stil , including letter laid out some of the obstacles facing private sector participation in the debt stil , including
reliance on “voluntary” participation, each participating creditor wil need to make its own reliance on “voluntary” participation, each participating creditor wil need to make its own
assessments, the standstil could require a lengthy contract-by-contract approach, and the assessments, the standstil could require a lengthy contract-by-contract approach, and the
participating borrowing countries may face risks, such as rating downgrades and inability to participating borrowing countries may face risks, such as rating downgrades and inability to
borrow from financial markets (often referred to as “loss of market access”). Some economists borrow from financial markets (often referred to as “loss of market access”). Some economists
have characterized the letter as a list of reasons private creditors may cite as justification for their have characterized the letter as a list of reasons private creditors may cite as justification for their
refusal to participate in the debt standstil .318 Reportedly, some African countries are opting to refusal to participate in the debt standstil .318 Reportedly, some African countries are opting to

317 Davide Barbuscia, Marwa Rashad, and Andrea Shalal, “G20 Countries Agree Debt Freeze for World’s Poorest 317 Davide Barbuscia, Marwa Rashad, and Andrea Shalal, “G20 Countries Agree Debt Freeze for World’s Poorest
Countries,” Countries,” Reuters, April 15, 2020 , April 15, 2020
318 Patrick Bolton, Lee Buchheit, Pierre-Olivier Gourinchas, et. al, “Sovereign Debt Standstills: An Update” 318 Patrick Bolton, Lee Buchheit, Pierre-Olivier Gourinchas, et. al, “Sovereign Debt Standstills: An Update” VoxEU, ,
May 28, 2020. May 28, 2020.
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negotiate debt relief individual y with China and other creditor nations because of concerns they negotiate debt relief individual y with China and other creditor nations because of concerns they
wil be blocked from financial markets if they participate in the G-20 debt standstil .319 wil be blocked from financial markets if they participate in the G-20 debt standstil .319
Other Affected Sectors
Since early 2000, concerns over the spread of the virus led to self-quarantines, reductions in Since early 2000, concerns over the spread of the virus led to self-quarantines, reductions in
airline and cruise liner travel, the closing of such institutions as the Louvre, and chal enges to airline and cruise liner travel, the closing of such institutions as the Louvre, and chal enges to
existing parental leave policies.320 Work from home arrangements reportedly caused some existing parental leave policies.320 Work from home arrangements reportedly caused some
businesses to consider new approaches to managing their workforces and work methods. These businesses to consider new approaches to managing their workforces and work methods. These
techniques build on, or in some places replace, such standard techniques as self-quarantines and techniques build on, or in some places replace, such standard techniques as self-quarantines and
travel bans. Some firms adopted an open-leave policy to ensure employees receive sick pay if travel bans. Some firms adopted an open-leave policy to ensure employees receive sick pay if
they are, or suspect they are, infected. Other firms adopted paid sick leave policies to encourage they are, or suspect they are, infected. Other firms adopted paid sick leave policies to encourage
sick employees to stay home and adopting remote working policies.321 Microsoft and Amazon sick employees to stay home and adopting remote working policies.321 Microsoft and Amazon
initial y instructed al of their Seattle-based employees to work from home until the end of March initial y instructed al of their Seattle-based employees to work from home until the end of March
2020, but Microsoft indicated in October it would al ow a large share of its employees to work 2020, but Microsoft indicated in October it would al ow a large share of its employees to work
from home permanently.322 from home permanently.322
The drop in business and tourist travel caused a sharp drop in scheduled airline flights by as much The drop in business and tourist travel caused a sharp drop in scheduled airline flights by as much
as 10%; airlines estimated they lost $113 bil ion in 2020, an estimate that could prove optimistic as 10%; airlines estimated they lost $113 bil ion in 2020, an estimate that could prove optimistic
given various restrictions on flights between Europe to the United States and the growing list of given various restrictions on flights between Europe to the United States and the growing list of
countries that similarly restricted flights.323 Airports in Europe estimated they lost $4.3 bil ion in countries that similarly restricted flights.323 Airports in Europe estimated they lost $4.3 bil ion in
revenue in 2020 due to fewer flights.324 The loss of Chinese tourists was another economic blow revenue in 2020 due to fewer flights.324 The loss of Chinese tourists was another economic blow
to countries in Asia and elsewhere that benefitted from the growing market for Chinese tourists to countries in Asia and elsewhere that benefitted from the growing market for Chinese tourists
and the stimulus such tourism provided. and the stimulus such tourism provided.
The decline in industrial activity in 2020 reduced demand for energy products such as crude oil The decline in industrial activity in 2020 reduced demand for energy products such as crude oil
and caused prices to drop sharply, which negatively affected energy producers, renewable energy and caused prices to drop sharply, which negatively affected energy producers, renewable energy
producers, and electric vehicle manufacturers, but general y was positive for consumers and producers, and electric vehicle manufacturers, but general y was positive for consumers and
businesses. In March 2020, Saudi Arabia pushed other OPEC (Organization of the Petroleum businesses. In March 2020, Saudi Arabia pushed other OPEC (Organization of the Petroleum
Exporting Countries) members collectively to reduce output by 1.5 mil ion barrels a day to raise Exporting Countries) members collectively to reduce output by 1.5 mil ion barrels a day to raise
market prices. U.S. shale oil producers, who are not represented by OPEC, supported the move to market prices. U.S. shale oil producers, who are not represented by OPEC, supported the move to
raise prices.325 An unwil ingness by Russia to agree to output reductions added to other downward raise prices.325 An unwil ingness by Russia to agree to output reductions added to other downward
pressures on oil prices and caused Saudi Arabia to engage in a price war with Russia that drove pressures on oil prices and caused Saudi Arabia to engage in a price war with Russia that drove

319 Jevans Nyabiage, “All Eyes on China as Africa Spurns G20 Debt Relief Plan,” 319 Jevans Nyabiage, “All Eyes on China as Africa Spurns G20 Debt Relief Plan,” South China Morning Post, May 26, , May 26,
2020. 2020.
320 T aylor, Adam, T eo Armus, Rick Noak, “Covid-19 T urmoil Widens as U.S. Death T oll Mounts; Xi Cancels Japan 320 T aylor, Adam, T eo Armus, Rick Noak, “Covid-19 T urmoil Widens as U.S. Death T oll Mounts; Xi Cancels Japan
T rip,” T rip,” Washington Post, March 5, 2020; Strauss, Valerie, “ 1.5 Billion Children Around Globe Affected by School , March 5, 2020; Strauss, Valerie, “ 1.5 Billion Children Around Globe Affected by School
Closure. What Countries Are Doing to Keep Kids Learning During Pandemic,” Closure. What Countries Are Doing to Keep Kids Learning During Pandemic,” Washington Post, March 27, 2020. , March 27, 2020.
https://www.washingtonpost.com/education/2020/03/26/nearly-14-billion-children-around-globe-are-out-school-heres-https://www.washingtonpost.com/education/2020/03/26/nearly-14-billion-children-around-globe-are-out-school-heres-
what -countries-are-doing-keep-kids-learning-during-pandemic/. what -countries-are-doing-keep-kids-learning-during-pandemic/.
321 Hill, Andrew and Emma Jacobs, “Covid-19 May Create Lasting Workplace Change,” 321 Hill, Andrew and Emma Jacobs, “Covid-19 May Create Lasting Workplace Change,” Financial Times, February 27, , February 27,
2020. https://www.ft.com/content/5801a710-597c-11ea-abe5-8e03987b7b20. 2020. https://www.ft.com/content/5801a710-597c-11ea-abe5-8e03987b7b20.
322 Armus, T eo, “ Live Updates: Covid-19 T urmoil Widens as U.S. Death T oll Mounts; Xi Cancels Japan T rip,” 322 Armus, T eo, “ Live Updates: Covid-19 T urmoil Widens as U.S. Death T oll Mounts; Xi Cancels Japan T rip,”
Washington Post, March 5, 2020, https://www.washingtonpost.com/world/2020/03/05/Covid-19-live-updates/. , March 5, 2020, https://www.washingtonpost.com/world/2020/03/05/Covid-19-live-updates/.
323 T aylor, Adam, “Airlines Could Suffer up to $113 Billion in Lost Revenue Due to Covid-19 Crisis, IAT A Says,”323 T aylor, Adam, “Airlines Could Suffer up to $113 Billion in Lost Revenue Due to Covid-19 Crisis, IAT A Says,”
Washington Post, March 5, 2020. https://www.washingtonpost.com/world/2020/03/05/Covid-19-live-updates/. , March 5, 2020. https://www.washingtonpost.com/world/2020/03/05/Covid-19-live-updates/.
324 “Airlines Slash Flights to Cut Costs as Covid-19 Hits T ravel Demand,” 324 “Airlines Slash Flights to Cut Costs as Covid-19 Hits T ravel Demand,” Financial Times. https://www.ft.com/. https://www.ft.com/
content/c28b5790-62c6-11ea-a6cd-df28cc3c6a68. content/c28b5790-62c6-11ea-a6cd-df28cc3c6a68.
325 Brower, Derek, “ Cash-Strapped US Shale Producers Pray for OPEC Aid,” 325 Brower, Derek, “ Cash-Strapped US Shale Producers Pray for OPEC Aid,” Financial Times, March 3, 2020. , March 3, 2020.
https://www.ft.com/content/9161e62c-5cb1-11ea-b0ab-339c2307bcd4. https://www.ft.com/content/9161e62c-5cb1-11ea-b0ab-339c2307bcd4.
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oil prices below $25 per barrel at times, half the estimated $50 per barrel break-even point for oil prices below $25 per barrel at times, half the estimated $50 per barrel break-even point for
most oil producing countries.326 Rising oil supplies and fal ing demand combined to create an most oil producing countries.326 Rising oil supplies and fal ing demand combined to create an
estimated surplus of 25 mil ion barrels a day and overwhelmed storage capacity at times and estimated surplus of 25 mil ion barrels a day and overwhelmed storage capacity at times and
chal enged the viability of U.S. shale oil production.327 In 2019, low energy prices combined with chal enged the viability of U.S. shale oil production.327 In 2019, low energy prices combined with
high debt levels reportedly caused U.S. energy producers to reduce their spending on capital high debt levels reportedly caused U.S. energy producers to reduce their spending on capital
equipment, reduced their profits and, in some cases, led to bankruptcies.328 Reportedly, in late equipment, reduced their profits and, in some cases, led to bankruptcies.328 Reportedly, in late
2019 and early 2020, bond and equity investors, as wel as banks, reduced their lending to shale 2019 and early 2020, bond and equity investors, as wel as banks, reduced their lending to shale
oil producers and other energy producers that typical y use oil and gas reserves as collateral.329 As oil producers and other energy producers that typical y use oil and gas reserves as collateral.329 As
economic activity began recovering in 2021 and demand for energy increased, energy prices rose economic activity began recovering in 2021 and demand for energy increased, energy prices rose
to surpass the levels reached prior to the onset of the pandemic and put pressure on OPEC to surpass the levels reached prior to the onset of the pandemic and put pressure on OPEC
producers to increase output. producers to increase output.
Disruptions to industrial activity in China reportedly caused delays in shipments of computers, Disruptions to industrial activity in China reportedly caused delays in shipments of computers,
cel phones, toys, and medical equipment.330 Factory output in China, the United States, Japan, cel phones, toys, and medical equipment.330 Factory output in China, the United States, Japan,
and South Korea al declined in the first months of 2020.331 Reduced Chinese agricultural exports, and South Korea al declined in the first months of 2020.331 Reduced Chinese agricultural exports,
including to Japan, created shortages in some commodities. In addition, numerous auto producers including to Japan, created shortages in some commodities. In addition, numerous auto producers
faced shortages in parts and other supplies, including semiconductor chips that have been sourced faced shortages in parts and other supplies, including semiconductor chips that have been sourced
in China, leading to cal s by some producers for subsidies to restart production in the United in China, leading to cal s by some producers for subsidies to restart production in the United
States. Reductions in international trade affected ocean freight prices, causing some freight States. Reductions in international trade affected ocean freight prices, causing some freight
companies to face the prospect of shuttering businesses.332 Disruptions in the movements of companies to face the prospect of shuttering businesses.332 Disruptions in the movements of
goods and people reportedly caused some companies to reassess how international they want their goods and people reportedly caused some companies to reassess how international they want their
supply chains to be.333 According to some estimates, nearly every member of the Fortune 1000 supply chains to be.333 According to some estimates, nearly every member of the Fortune 1000
was affected by disruptions in production in China.334 was affected by disruptions in production in China.334
Issues for Congress
According to numerous indicators, significant parts of the global economy appear to have According to numerous indicators, significant parts of the global economy appear to have
weathered the worst of the economic recession that resulted from the unprecedented pandemic- weathered the worst of the economic recession that resulted from the unprecedented pandemic-
related social distancing and business lockdowns in early 2020. However, rolling epidemic related social distancing and business lockdowns in early 2020. However, rolling epidemic
hotspots and the emergence of new and virulent mutations of the COVID-19 virus continue to hotspots and the emergence of new and virulent mutations of the COVID-19 virus continue to
add to the overal economic and human costs of the pandemic and add to uncertainties about the add to the overal economic and human costs of the pandemic and add to uncertainties about the

326 Strauss, Delphine, “Why T here Are No Winners from the Oil Price Plunge T his T ime,” 326 Strauss, Delphine, “Why T here Are No Winners from the Oil Price Plunge T his T ime,” Financial Times, March 10, March 10,
2020. https://www.ft.com/content/da2b0700-622c-11ea-b3f3-fe4680ea68b5; Mufson, Steve and Will Englund, “ Oil 2020. https://www.ft.com/content/da2b0700-622c-11ea-b3f3-fe4680ea68b5; Mufson, Steve and Will Englund, “ Oil
Price War T hreatens Widespread Collateral Damage,”Price War T hreatens Widespread Collateral Damage,” Washington Post, March 10, 2020. , March 10, 2020.
https://www.washingtonpost.com/climate-environment/oil-price-war-threatens-widespread-collateral-damage/2020/03/https://www.washingtonpost.com/climate-environment/oil-price-war-threatens-widespread-collateral-damage/2020/03/
09/3e42c9e2-6207-11ea-acca-80c22bbee96f_story.html. 09/3e42c9e2-6207-11ea-acca-80c22bbee96f_story.html.
327 Sheppard, David and Derek Brower, “U.S. Crude Oil Price Drops Below $20,” 327 Sheppard, David and Derek Brower, “U.S. Crude Oil Price Drops Below $20,” Financial Times, March 29, 2020. , March 29, 2020.
https://www.ft.com/content/bc938195-82d3-43eb-b031-740028451382. https://www.ft.com/content/bc938195-82d3-43eb-b031-740028451382.
328 “T exas Oil Groups: Panhandling Ahead,” 328 “T exas Oil Groups: Panhandling Ahead,” The Financial Times, January 20, 2020. , January 20, 2020.
329 Ibid. 329 Ibid.
330 Hille, Kathrin, Alistair Gray, and Patrick McGee, “Covid-19 Delays PC and Smartphone Shipments for Weeks,” 330 Hille, Kathrin, Alistair Gray, and Patrick McGee, “Covid-19 Delays PC and Smartphone Shipments for Weeks,”
Financial Tim es, March3, 2020. https://www.ft.com/content/72742872-5c31-11ea-b0ab-339c2307bcd4. March3, 2020. https://www.ft.com/content/72742872-5c31-11ea-b0ab-339c2307bcd4.
331 Newmyer, T ory, “ The Finance 202: Stocks Stage Major Comeback, but Manufacturing Report Points to Continued 331 Newmyer, T ory, “ The Finance 202: Stocks Stage Major Comeback, but Manufacturing Report Points to Continued
Covid-19 Pain,” Covid-19 Pain,” Washington Post, March 3, 2020. https://www.washingtonpost.com/news/powerpost/paloma/the-, March 3, 2020. https://www.washingtonpost.com/news/powerpost/paloma/the-
finance-202/2020/03/03/the-finance-202-stocks-stage-major-comeback-but-manufacturing-report -points-to-continued-finance-202/2020/03/03/the-finance-202-stocks-stage-major-comeback-but-manufacturing-report -points-to-continued-
Covid-19-pain/5e5d84a6602ff10d49ac081f/?itid=hp_hp-cards_hp-card-politics%3Ahomepage%2Fcard-ans. Covid-19-pain/5e5d84a6602ff10d49ac081f/?itid=hp_hp-cards_hp-card-politics%3Ahomepage%2Fcard-ans.
332 Lynch, David J., “ Economic Fallout from China’s Covid-19 Mounts Around the World,” 332 Lynch, David J., “ Economic Fallout from China’s Covid-19 Mounts Around the World,” Washington Post,
February 13, 2020. https://www.washingtonpost.com/business/economy/economic-fallout -from-chinas-Covid-19-February 13, 2020. https://www.washingtonpost.com/business/economy/economic-fallout -from-chinas-Covid-19-
mounts-across-the-globe/2020/02/13/7bb69a12-4e8c-11ea-9b5c-eac5b16dafaa_story.html?itid=lk_inline_manual_12 mounts-across-the-globe/2020/02/13/7bb69a12-4e8c-11ea-9b5c-eac5b16dafaa_story.html?itid=lk_inline_manual_12
333 Ibid. 333 Ibid.
334 Ibid. 334 Ibid.
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timing of a sustained recovery. Over the course of the pandemic, governments adopted policies to timing of a sustained recovery. Over the course of the pandemic, governments adopted policies to
curtail the spread of the virus that inadvertently caused an economic recession and temporarily curtail the spread of the virus that inadvertently caused an economic recession and temporarily
altered the daily patterns of peoples’ lives. After a year and a half, it remains unclear how quickly altered the daily patterns of peoples’ lives. After a year and a half, it remains unclear how quickly
and to what extent people wil choose to return to their pre-pandemic patterns. and to what extent people wil choose to return to their pre-pandemic patterns.
For Members of Congress, the pandemic-related economic and social costs could influence public For Members of Congress, the pandemic-related economic and social costs could influence public
policy debates long after the crisis itself has passed. While various policy debates may emerge policy debates long after the crisis itself has passed. While various policy debates may emerge
from seemingly unlikely sources, some areas could include the following. from seemingly unlikely sources, some areas could include the following.
 During the pandemic, segments of the labor force shifted from work on-site to  During the pandemic, segments of the labor force shifted from work on-site to
work at home. After a prolonged period of working off-site, some workers work at home. After a prolonged period of working off-site, some workers
question the need to return to pre-pandemic labor arrangements. Should new question the need to return to pre-pandemic labor arrangements. Should new
labor arrangements and work patterns become embedded in the economy, it labor arrangements and work patterns become embedded in the economy, it
potential y raises questions about the impact on housing, traffic patterns, potential y raises questions about the impact on housing, traffic patterns,
including public transportation, labor force participation rates, and child care including public transportation, labor force participation rates, and child care
arrangements. What role should Congress play in assessing and addressing such arrangements. What role should Congress play in assessing and addressing such
potential changes to the economy? potential changes to the economy?
 The pandemic exposed weaknesses in supply chains and the production of certain  The pandemic exposed weaknesses in supply chains and the production of certain
types of equipment, including personal protective equipment that previously had types of equipment, including personal protective equipment that previously had
not featured prominently in national security priorities. Arguably, the pandemic not featured prominently in national security priorities. Arguably, the pandemic
raised the profile of public health as a national security issue. It also highlighted raised the profile of public health as a national security issue. It also highlighted
the importance of improving domestic health care-related supply chains and the importance of improving domestic health care-related supply chains and
potential y relocating parts of the health care supply chain from abroad. This shift potential y relocating parts of the health care supply chain from abroad. This shift
in emphasis presents Congress with questions about the manner and extent to in emphasis presents Congress with questions about the manner and extent to
which government policy should alter existing production and supplier which government policy should alter existing production and supplier
arrangements. In particular, Congress could consider the costs and benefits of arrangements. In particular, Congress could consider the costs and benefits of
adopting policies that attempt to real ocate resources within the economy toward adopting policies that attempt to real ocate resources within the economy toward
developing domestic production of goods currently being imported, potential y at developing domestic production of goods currently being imported, potential y at
the expense of other domestic economic activities. Alternatively, Congress could the expense of other domestic economic activities. Alternatively, Congress could
reinforce U.S. support for global trade arrangements and agreements, while also reinforce U.S. support for global trade arrangements and agreements, while also
supporting the global presence of U.S. firms and utilizing a greater diversity of supporting the global presence of U.S. firms and utilizing a greater diversity of
foreign suppliers. foreign suppliers.
 The pandemic emphasized the interconnected nature of the global economy.  The pandemic emphasized the interconnected nature of the global economy.
Typical y, these global connections facilitate a seamless flow of goods and Typical y, these global connections facilitate a seamless flow of goods and
services to the broadest number of people. However, during the pandemic-related services to the broadest number of people. However, during the pandemic-related
recession, these global supply channels were disrupted, exposing the recession, these global supply channels were disrupted, exposing the
vulnerabilities of such highly segmented cross-border activities. In turn, these vulnerabilities of such highly segmented cross-border activities. In turn, these
disruptions raised questions concerning the role and importance of certain disruptions raised questions concerning the role and importance of certain
industrial activities amid shifting concepts of national security and the extent to industrial activities amid shifting concepts of national security and the extent to
which domestic economic policy should attempt to sustain or subsidize certain which domestic economic policy should attempt to sustain or subsidize certain
industrial activities. Congress could consider whether and to what extent it industrial activities. Congress could consider whether and to what extent it
should engage in a direct role in real ocating resources in the economy toward should engage in a direct role in real ocating resources in the economy toward
certain activities viewed as important to national security, or whether it should certain activities viewed as important to national security, or whether it should
view this primarily as a market function? view this primarily as a market function?
 The pandemic had a disproportionate impact on various industrial sectors of the  The pandemic had a disproportionate impact on various industrial sectors of the
economy and on workers in those sectors. In particular, the disproportionate economy and on workers in those sectors. In particular, the disproportionate
effects included certain segments of the labor force, including women, minority effects included certain segments of the labor force, including women, minority
populations, and workers in less skil ed jobs. The depth and duration of the populations, and workers in less skil ed jobs. The depth and duration of the
recession chal enged the effectiveness of customary worker assistance programs. recession chal enged the effectiveness of customary worker assistance programs.
Congress may consider reviewing these programs to determine what if any Congress may consider reviewing these programs to determine what if any
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changes may be necessary to align the programs more closely with the needs of changes may be necessary to align the programs more closely with the needs of
workers experiencing similar periods of extended dislocations? workers experiencing similar periods of extended dislocations?
 Global trade activity fel sharply as a result of the global economic recession,  Global trade activity fel sharply as a result of the global economic recession,
which added to the depth and extent of the economic disruption. The impact on which added to the depth and extent of the economic disruption. The impact on
global trade raised questions concerning what actions, if any, Congress could global trade raised questions concerning what actions, if any, Congress could
take through U.S. trade policy that might strengthen the role of international trade take through U.S. trade policy that might strengthen the role of international trade
and consultative bodies such as the WTO, the IMF, and the OECD, in facilitating and consultative bodies such as the WTO, the IMF, and the OECD, in facilitating
a return to pre-crisis levels of activity during similar international crises. a return to pre-crisis levels of activity during similar international crises.
 The economic recession placed increased demands on developed and developing  The economic recession placed increased demands on developed and developing
economies to abandon traditional deficit spending guidelines to stimulate their economies to abandon traditional deficit spending guidelines to stimulate their
economies. While the fiscal spending likely lessened the impact of the crisis, it economies. While the fiscal spending likely lessened the impact of the crisis, it
sharply increased the debt burden of developing countries, in particular, that sharply increased the debt burden of developing countries, in particular, that
could wel outlast the health-related crisis. This debt burden could constrain the could wel outlast the health-related crisis. This debt burden could constrain the
ability of developing economies to provide additional fiscal stimulus should the ability of developing economies to provide additional fiscal stimulus should the
health crisis persist, which could delay a global economic recovery with spil over health crisis persist, which could delay a global economic recovery with spil over
effects on developed economies. Developing economies could face additional effects on developed economies. Developing economies could face additional
chal enges if costs rise for refinancing their accumulated debts should developed chal enges if costs rise for refinancing their accumulated debts should developed
economies begin tapering off low-interest rate monetary policies. Congress could economies begin tapering off low-interest rate monetary policies. Congress could
consider examining the performance and the adequacy of resources of consider examining the performance and the adequacy of resources of
international financial institutions in addressing the financial and debt servicing international financial institutions in addressing the financial and debt servicing
needs of developing economies. needs of developing economies.
 During the initial stages of the economic crisis, global financial markets were  During the initial stages of the economic crisis, global financial markets were
severely disrupted in ways that required central banks to take unprecedented severely disrupted in ways that required central banks to take unprecedented
actions. Following the 2008-2009 global financial crisis, central banks and other actions. Following the 2008-2009 global financial crisis, central banks and other
financial market participants adopted wide-ranging reforms to strengthen the financial market participants adopted wide-ranging reforms to strengthen the
ability of financial institutions to withstand an economic crisis. The pandemic-ability of financial institutions to withstand an economic crisis. The pandemic-
related global economic crisis presents Congress with an opportunity to assess related global economic crisis presents Congress with an opportunity to assess
the effectiveness of these reforms and to determine if they were adequate in the effectiveness of these reforms and to determine if they were adequate in
preparing financial market participants to withstand a sever disruption to the preparing financial market participants to withstand a sever disruption to the
global economy or whether additional reforms are necessary. global economy or whether additional reforms are necessary.

Author Information

James K. Jackson, Coordinator James K. Jackson, Coordinator
Rebecca M. Nelson Rebecca M. Nelson
Specialist in International Trade and Finance Specialist in International Trade and Finance
Specialist in International Trade and Finance Specialist in International Trade and Finance

Martin A. Weiss Martin A. Weiss
Karen M. Sutter Karen M. Sutter
Specialist in International Trade and Finance Specialist in International Trade and Finance
Specialist in Asian Trade and Finance Specialist in Asian Trade and Finance

Andres B. Schwarzenberg Andres B. Schwarzenberg
Michael D. Sutherland Michael D. Sutherland
Analyst in International Trade and Finance Analyst in International Trade and Finance
Analyst in International Trade and Finance Analyst in International Trade and Finance

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Acknowledgments
The authors would like to thank and acknowledge the expert assistance provided by Amber Wilhelm, The authors would like to thank and acknowledge the expert assistance provided by Amber Wilhelm,
Visual Information Specialist, CRS, in the preparation of this report. Visual Information Specialist, CRS, in the preparation of this report.

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
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than public understanding of information that has been provided by CRS to Members of Congress in than public understanding of information that has been provided by CRS to Members of Congress in
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