Global Economic Effects of COVID-19
July 2, 2020
Since the COVID-19 outbreak was first diagnosed, it has spread to over 200 countries and all
U.S. states. The pandemic is negatively affecting global economic growth beyond anything
James K. Jackson,
experienced in nearly a century. Estimates so far indicate the virus could trim global economic
Coordinator
growth by 3.0% to 6.0% in 2020, with a partial recovery in 2021, assuming there is not a second
Specialist in International
wave of infections. The economic fallout from the pandemic raises the risks of a global economic
Trade and Finance
recession with levels of unemployment not experienced since the Great Depression of the 1930s.

The human costs in terms of lives lost will permanently affect global economic growth in
Martin A. Weiss
addition to the cost of rising levels of poverty, lives upended, careers derailed, and increased
Specialist in International
social unrest. Global trade could also fall by 13% to 32%, depending on the depth and extent of
Trade and Finance
the global economic downturn, exacting an especially heavy economic toll on trade-dependent

developing and emerging economies. The full impact will not be known until the effects of the
pandemic peak. This report provides an overview of the global economic costs to date and the
Andres B. Schwarzenberg
response by governments and international institutions to address these effects.
Analyst in International
Trade and Finance

Rebecca M. Nelson
Specialist in International
Trade and Finance

Congressional Research Service

Global Economic Effects of COVID-19

Overview
The World Health Organization (WHO) first declared COVID-19 a world health emergency in
January 2020. Since then, the emergency has evolved into a global public health and economic
crisis that has affected the $90 trillion global economy beyond anything experienced in nearly a
century. Governments are attempting to balance often-competing policy objectives that include,
but are not limited to these:
 Confronting ballooning budget deficits weighed against increasing spending to
support unemployed workers and social safety nets.
 Providing financial support for national health systems that are under pressure to
develop vaccines while also funding efforts to care for and safeguard citizens.
 Implementing monetary and fiscal policies that support credit markets and
sustain economic activity, while also assisting businesses under financial distress.
Policymakers and financial and commodity market participants generally are hopeful of a global
economic recovery in the third quarter of 2020, assuming there is not a second wave of infections.
Some forecasts, however, raise the prospects that the pandemic could negatively affect global
economic growth for a considerable period of time with a slow, drawn-out recovery. Various U.S.
States reversed course in late June to impose or re-impose social distancing guidelines and close
down businesses that had begun opening as a result of a rise in new confirmed cases of COVID-
19. Differences in policy approaches between countries are threatening to inflict longer-term
damage to the global economy by impairing international political, trade, and economic relations,
particularly between countries that promote nationalism and those that argue for a coordinated
international response to the pandemic. Policy differences are also straining relations between
developed and developing economies and between northern and southern members of the
Eurozone, challenging alliances and conventional concepts of national security, and raising
questions about the future of global leadership.
In some countries, the pandemic has 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 as terrorism, cyberattacks, and proliferation of weapons of mass destruction.1 The
pandemic-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 monetary measures implemented to prevent a financial crisis and sustain
economic activity may also inadvertently be adding to income and wealth disparities. Within
some countries, the economic fallout is widening racial and socio-economic cleavages and
increasing social unrest. In speaking about these costs for Americans, Federal Reserve Chairman
Powell said on May 19, 2020,
Since the pandemic arrived in force just two months ago, more than 20 million people have
lost their jobs, reversing nearly 10 years of job gains. This precipitous drop in economic
activity has caused a level of pain that is hard to capture in words, as lives are upended
amid great uncertainty about the future.2

1 Harris, Shane and Missy Ryan, To Prepare for the Next Pandemic, the U.S. Needs to Change its National Security
Priorities, Experts Say, The Washington Post, 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/
b99807c0-aa9a-11ea-9063-e69bd6520940_story.html.
2 Powell, Jerome H. Coronavirus and CARES Act, Testimony before the Committee on Banking, Housing and Urban
Congressional Research Service

1

Global Economic Effects of COVID-19

The virus was first diagnosed in Wuhan, China, but has been detected in over 200 countries and
all U.S. states.3 In early March 2020, the focal point of infections shifted from China to Europe,
especially Italy, but by April, the focus had shifted to the United States, where the number of
infections was accelerating. The infection has sickened over 10 million people, about one-fourth
in the United States, with over 500,000 fatalities. 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 closed schools to an estimated 1.5 billion children.4
Over the fourteen-week period from mid-March to late-June, 2020, over 47 million Americans
filed for unemployment insurance.5 On May 8, 2020, the Bureau of Labor Statistics (BLS)
reported that 20 million Americans lost their jobs in April 2020, pushing the total number of
unemployed Americans to 23 million,6 out of a total civilian labor force of 158 million. The
increase pushed the national unemployment rate to 14.7% (with some caveats), the highest since
the Great Depression of the 1930s.7 On June 6, BLS reported that nonfarm employment increased
by 2.5 million in May, reducing the total number of unemployed Americans to 21 million8 and
pushing the unemployment rate down to 13.5%, again with some caveats.9 The Department of
Labor announced on July 2 that an additional 1.4 million Americans had filed for Unemployment
Insurance, raising the total to 48.7 million over the fifteen-week period from mid-March.10. On
July 2, the BLS also released data on the employment situation in June, indicating that non-farm
payroll rose by 4.8 million, lowering the unemployment rate to 11.5%.11
Preliminary data also indicate that U.S. GDP fell by 5.0% in the first quarter of 2020, the largest
quarterly decline in GDP since the fourth quarter of 2008 during the global financial crisis.12 In its

Affairs, U.S. Senate, May 19, 2020.
3 “Mapping the Spread of the COVID-19 in the U.S. and Worldwide,” Washington Post Staff, Washington Post, March
4, 2020. https://www.washingtonpost.com/world/2020/01/22/mapping-spread-new-COVID-19/?arc404=true.
4 “The Day the World Stopped: How Governments Are Still Struggling to Get Ahead of the COVID-19,” The
Economist, March 17, 2020. https://www.economist.com/international/2020/03/17/governments-are-still-struggling-to-
get-ahead-of-the-COVID-19.
5 Unemployment Insurance Weekly Claims, Department of Labor, June 25, 2020. https://www.dol.gov/; Romm, Tony
and Jeff Stein, 2,4 Million Americans Filed Jobless Claims Last Week, Bringing Nine Week Total to 38.6 Million, The
Washington Post, May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment-claims-
coronavirus/
6 This total does not include 10.9 million workers who were working part time not by choice and 9.9 million
individuals who were seeking employment.
7 The Employment Situation-April 2020, Bureau of Labor Statistics, May 8, 2020. https://www.bls.gov/.
8 This total does not include 10.6 million workers who were working part time not by choice and 9.4 million
individuals who were seeking employment.
9 The Employment Situation-May 2020, Bureau of Labor Statistics, June 5, 2020, https://www.bls.gov/. BLS indicated
that some individuals were miss-classified in April and May. Instead of being classified as unemployed, they were
miss-classified as employed, but absent from work due to coronavirus-related business closures. If such individuals had
been classified as unemployed, the unemployment rate would have been 3 percentage points higher.
10 Unemployment Insurance Weekly Claims, July 1, 2020. https://www.dol.gov/ui/data.pdf.
11 The Employment Situation-June 2020, Bureau of Labor Statistics, July 2, 2020. https://www.bls.gov/. The
unemployment number does not include 9 million workers who were working part time not by choice and 9 million
individuals seeking employment. In addition, BLS indicated that some workers had been misclassified as employed,
but should have been classified as unemployed, which would have raised the rate of unemployment by one percentage
point.
12 Gross Domestic Product, First Quarter 2020 (Second Estimate), Bureau of Economic Analysis, May 28, 2020.
https://www.bea.gov/data/gdp/gross-domestic-product.
Congressional Research Service

2

link to page 8 Global Economic Effects of COVID-19

May 27 Beige Book analysis, the Federal Reserve (Fed) reported that economic activity had
fallen sharply in each of the 12 Federal Reserve districts.13
In Europe, governments are attempting a phased reopening of businesses, but over 30 million
people in Germany, France, the UK, Spain, and Italy have applied for state support of their
wages, while first quarter 2020 data indicate the Eurozone economy contracted by 3.8% at an
annual rate, the largest quarterly decline since the series began in 1995.14 Industrial production
across the Eurozone as a whole fell by 17% in April, raising the annual decline to 28%,
surpassing the contraction experienced during the global financial crisis.15 The European
Commission’s May 6, 2020, forecast projected that EU economic growth in 2020 could contract
by 7.4% and only partially recover in 2021.16 On May 27, 2020, however, European Central Bank
(ECB) President Christine Lagarde characterized that forecast as outdated and warned that the
Eurozone economy could contact by 8% to 12% in 2020, a level of damage to the Eurozone
economy that Lagarde characterized as being unsurpassed in peacetime.17 Foreign investors have
pulled an estimated $26 billion out of developing Asian economies not including more than $16
billion out of India, increasing concerns about a major economic recession in Asia. Some
estimates indicate that 29 million people in Latin America could fall into poverty, reversing a
decade of efforts to narrow income inequality.
Economic Policy Responses
After a delayed response, central banks and monetary authorities are engaging in an ongoing
series of interventions in financial markets and national governments are announcing fiscal policy
initiatives to stimulate their economies. International organizations are also taking steps to
provide loans and other 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 responses.
As one measure of the global fiscal and monetary responses, the International Monetary Fund
(IMF) estimated that government spending and revenue measures to sustain economic activity
adopted through mid-June 2020 amounted to $5.4 trillion and that loans, equity injections and
guarantees totaled an additional $5.4 trillion, or a total of $11 trillion.18 The IMF also estimated
that the increase in borrowing by governments globally could rise from 3.7% of global gross
domestic product (GDP) in 2019 to 9.9% in 2020, as indicated in Figure 1. Other estimates

13 The Beige Book, Federal Reserve System, May 27, 2020. https://www.federalreserve.gov/monetarypolicy/beige-
book-default.htm.
14 Stott, Michael, Coronavirus Set to Push 29m Latin Americans Into Poverty, Financial Times, April 24, 2020.
https://www.ft.com/content/3bf48b80-8fba-410c-9bb8-31e33fffc3b8; Hall, Benjamin, Coronavirus Pandemic
Threatens Livelihoods of 59m European Workers, Financial Times, April 19, 2020, https://www.ft.com/content/
36239c82-84ae-4cc9-89bc-8e71e53d6649, Romei, Valentina and Martin Arnold, Eurozone Economy Shrinks by
Fastest Rate on Record, Financial Times, April 30, 2020, https://www.ft.com/content/dd6cfafa-a56d-48f3-a9fd-
aa71d17d49a8.
15 Arnold, Martin, Eurozone Industrial Production Falls by Record 17.1% in April, Financial Times, June 12, 2020.
https://www.ft.com/content/e3301cd6-27ce-35f0-829a-c6613849b378,
16 European Economic Forecast Spring 2020, European Commission, May 2020.
17 Arnold, Martin, Coronavirus Hit to Eurozone Economy Set to Dwarf Financial Crisis, Financial Times, May 27,
2020. https://www.ft.com/content/a01424e8-089d-4618-babe-72f88184ac57.
18 World Economic Outlook Update, International Monetary Fund, June 24, 2020. p. 16.
Congressional Research Service

3

Global Economic Effects of COVID-19

indicate that central banks have committed $17 trillion to support their economies to counter
pandemic-related economic effects.19
Among developed economies, the fiscal balance to GDP ratio is projected to rise from 3.0% in
2019 to 10.7% in 2020; the ratio for the United States is projected to rise from 5.8% to 15.4%, the
highest ratio for any country or region.20 According to the IMF, France, Germany, Italy, Japan,
and the United Kingdom have each announced public sector support measures that total more
than 10% of their annual GDP.21 For developing economies, the fiscal balance to GDP ratio is
projected to rise from 4.8% to 9.1%, significantly increasing their debt burden and raising
prospects of defaults or debt rescheduling.22 According to some estimates, the most fiscally
vulnerable countries are Argentina, Venezuela, Lebanon, Jordan, Iran, Zambia, Zimbabwe, and
South Africa.23
Figure 1. IMF Projected Government Fiscal Balances Relative to GDP
In percentage shares of Gross Domestic Product

Source: Fiscal Monitor, Statistical Appendix, International Monetary Fund, April 14, 2020, p. 90. Created by CRS.
Note: Data for 2020 are estimates.
Among central banks, the Federal Reserve has taken extraordinary steps not experienced since the
2008-2009 global financial crisis to address the growing economic effects of COVID-19. The
U.S. Congress also has approved historic fiscal spending packages. In other countries,
governments abandoned traditional borrowing caps to increase fiscal spending in order to sustain
economic growth. Simultaneously, central banks and monetary authorities have lowered interest
rates and reserve requirements, announced new financing facilities, relaxed capital buffers and, in

19 Wigglesworth, Robin, Long Live Jay Powell, the New Monarch of the Bond Market, Financial Times, June 23,
2020. https://www.ft.com/content/5db9d0f1-3742-49f0-a6cd-16c471875b5e.
20 Fiscal Monitor, Statistical Appendix, International Monetary Fund, April 14, 2020, p. 90.
21 Ibid, p. 2.
22 Ibid., p. 6.
23 Wheatley, Jonathan, Tommy Stubbington, Michael Stott, Andrew England, and Joseph Cotterill, Debt Relief: Which
Countries Are Most Vulnerable? Financial Times, May 6, 2020. https://www.ft.com/content/31ac88a1-9131-4531-
99be-7bfd8394e8b9.
Congressional Research Service

4

Global Economic Effects of COVID-19

some cases, countercyclical capital buffers,24 adopted after the 2008-2009 financial crisis,
potentially freeing up an estimated $5 trillion in funds.25 Capital buffers were raised after the
financial crisis to assist banks in absorbing losses and staying solvent during financial crises. In
some cases, governments have directed banks to freeze dividend payments and halt pay bonuses.
On March 11, the WHO announced that the viral outbreak was officially a pandemic, the highest
level of health emergency.26 A growing list of economic indicators makes it clear that the outbreak
is negatively affecting global economic growth on a scale not experienced since at least the global
financial crisis of 2008-2009.27 Global trade and GDP are forecast to decline sharply, at least
through the first half of 2020. The global pandemic is affecting a broad swath of international
economic and trade activities, from services generally to tourism and hospitality, medical supplies
and other global value chains, consumer electronics, and financial markets to energy,
transportation, food, and a range of social activities, to name a few. The health and economic
crises could have a particularly negative impact on the economies of developing countries that are
constrained by limited financial resources and where health systems could quickly become
overloaded.
Without a clear understanding of when the global health and economic effects may peak and a
greater understanding of the impact on economies, forecasts must necessarily be considered
preliminary. Similarly, estimates of when any recovery might begin and the speed of the recovery
are speculative. Forecasts have been updated several times during the first half of 2020 to
incorporate additional data, often reflecting worsening global and national economic growth
estimates. Efforts to reduce social interaction to contain the spread of the virus are disrupting the
daily lives of most Americans and adding to the economic costs. Increasing rates of
unemployment are raising the prospects of widespread social unrest and demonstrations in
developed economies where lost incomes and health insurance are threatening living standards
and in developing economies where populations reportedly are growing concerned over access to
basic necessities and the prospects of rising levels of poverty.28 U.N. Secretary General Antonio
Guterres argued in a video conference before the U.N. Security Council on April 10, 2020, that
[T]he pandemic also poses a significant threat to the maintenance of international peace
and security—potentially leading to an increase in social unrest and violence that would
greatly undermine our ability to fight the disease.29

24 Countercyclical capital buffers require banks to increase their capital buffers during periods of rapid growth in assets
(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/.
25 Arnold, Martin, “Regulators Free up $500bn Capital for Lenders to Fight Virus Storm,” Financial Times, April 7,
2020. https://www.ft.com/content/9a677506-a44e-4f69-b852-4f34018bc45f.
26 Bill Chappell, “COVID-19: COVID-19 Is Now Officially a Pandemic, WHO Says,” National Public Radio, March
11, 2020, https://www.npr.org/sections/goatsandsoda/2020/03/11/814474930/COVID-19-COVID-19-is-now-officially-
a-pandemic-who-says.
27 Mapping the Spread of the COVID-19.
28 Sly, Liz, Stirrings of Unrest Around the World Could Portend Turmoil as Economies Collapse, The Washington
Post, April 19, 2020; Ingraham, Christopher, Coronavirus Recession Could Plunge Tens of Millions Into Poverty, New
Report Warns, The Washington Post, April 20, 2020. https://www.washingtonpost.com/business/2020/04/20/
coronavirus-recession-could-plunge-tens-millions-into-poverty-new-report-warns/.
29 Secretary-General’s Remarks to the Security Council on the COVID-19 Pandemic, United Nations, April 9, 2020.
https://www.un.org/sg/en/content/sg/statement/2020-04-09/secretary-generals-remarks-the-security-council-the-covid-
19-pandemic-delivered.
Congressional Research Service

5

Global Economic Effects of COVID-19

Economic Forecasts
Global Growth
The economic situation, remains highly fluid globally and for most countries and regions.
Uncertainty about the length and depth of the health crisis-related economic effects are fueling
perceptions of risk and volatility in 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 second wave of infections are adding to market volatility. In a
growing number of cases, corporations are postponing investment decisions, laying off workers
who previously had been furloughed, and in some cases filing for bankruptcy. Compounding the
economic situation has been a historic drop in the price of crude oil that reflects the global decline
in economic activity and prospects for disinflation, while also contributing to the decline of the
global economy through various channels. On April 29, 2020, Federal Reserve Chairman Jerome
Powell stated that the Federal Reserve would use its “full range of tools” to support economic
activity as the U.S. economic growth rate dropped by 5.0% at an annual rate in the first quarter of
2020. In assessing the state of the U.S. economy, the Federal Open Market Committee released a
statement indicating that, “The ongoing public health crisis will weigh heavily on economic
activity, employment, and inflation in the near term, and poses considerable risks to the economic
outlook over the medium term.”30
Before the COVID-19 outbreak, the global economy was struggling to regain a broad-based
recovery as a result of the lingering impact of growing trade protectionism, trade disputes among
major trading partners, falling commodity and energy prices, and economic uncertainties in
Europe over the impact of the UK withdrawal from the European Union. Individually, each of
these issues presented a solvable challenge for the global economy. Collectively, however, the
issues weakened the global economy and reduced the available policy flexibility of many national
leaders, especially among the leading developed economies. In this environment, COVID-19
could have an outsized impact. While the level of economic effects is becoming clearer, the
response to the pandemic could have a significant and enduring impact on the way businesses
organize their work forces, on global supply chains, and how governments respond to a global
health crisis.31 As a 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 especially
challenging.
As indicated in Table 1, the International Monetary Fund (IMF), the Organization for Economic
Cooperation and Development (OECD), and The World Bank all revised their forecasts
downward between late 2019 and mid-20, reflecting the rapidly deteriorating state of the global
economy and the marked decline in the projected rate of growth. Between October 2019 and June
2020, for instance, the IMF lowered its global economic growth forecast from 3.4% to a negative
4.9%. Similarly, the OECD lowered its forecast from 2.9% in November 2019 to -6.0% to -7.6%
in June 2020, depending on a single or double wave of infections. Between January 2019 and
June 2020, the World Bank also lowered its forecast of global growth from 2.9% to a negative

30 Federal Reserve Issues FOMC Statement, Board of Governors of the Federal Reserve System, April 29, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200429a.htm.
31 Rowland, Christopher and Peter Whoriskey, “U.S. Health System is Showing Why It’s Not Ready for a COVID-19
Pandemic,” Washington Post, 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-
9db42f7803a7_story.html.
Congressional Research Service

6

link to page 13 Global Economic Effects of COVID-19

5.2%. In most forecasts, advanced economies are projected to experience the steepest declines in
economic growth from 2019 to mid-June 2020.
Table 1. Major Economic Forecasts, Differing Assessments
Percent changes at annual rates
Advanced
Developing
United
World
economies
economies
States

2020
2021
2020
2021
2020
2021
2020
2021

IMF October 2019
3.4%
3.6%
1.7%
1.6%
4.6%
4.8%
-5.9%
4.7%
IMF April 2020
–3.0
5.8
–6.1
4.5
–1.0
6.6
–5.9
4.7
IMF June 2020
-4.9
5.4
-8.0
4.8
-3.0
5.9
-8.0
4.5
OECD Nov 2019
2.9
3.0
1.6
1.7
4.0
4.0
2.0
2.0
OECD March 2020
2.4
3.3
0.8
1.2
NA
NA
1.9
2.1
OECD June 2020 single
-6.0
5.2
-7.5
4.8
-4.6
5.6
-7.3
4.1
OECD June 2020 double
-7.6
2.8
-9.3
2.2
-6.1
3.2
-8.5
1.9
World Bank January 2020
2.5
2.6
1.4
1.5
4.1
4.3
1.8
1.7
World Bank June 2020
-5.2
4.2
-7.0
3.9
-2.5
4.6
-6.1
4.0
Source: World Economic Outlook, various issues, International Monetary Fund; OECD Economic Outlook, various
issues, Organization for Economic Cooperation and Development; Global Economic Prospects, various issues,
World Bank.
The OECD Forecast
The Organization for Economic Cooperation and Development (OECD) on June 10, 2020,
released an updated forecast that projects global economic growth will decline by 6.0% to 7.6%
in 2020, depending on whether there is a second wave of infections. This forecast reflects the
OECD’s a high level of uncertainty about the course of the global economy over the remainder of
2020, because the pandemic is “a global public health crisis without precedent in living memory.”
The OECD also concluded that, “The global economy is now experiencing the deepest recession
since the Great Depression of the 1930s.” In addition, the OECD argued that the 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 basis.
As a result of uncertainty concerning the course of the global economy over the remainder of
2020, the OECD produced two “equally likely scenarios:” one that assumes the current
containment measures are successful in curtailing infections, and another that assumes there is a
second wave of rapid contagion.32 Under both scenarios, the OECD estimates that the global
economic recovery will be slow and gradual.33 The OECD also estimates that the average
unemployment rate among OECD countries is projected to rise to 9.2% under a single wave
scenario and 10.0% under the second wave scenario. Global trade is also projected to contract by
9.5% or 11.4% in 2020 under the single or second wave scenarios, respectively. The OECD
projections in Table 2 reflect the single wave scenario.34 According to this scenario, global

32 OECD Economic Outlook, Organization for Economic Cooperation and Development. June 10, 2020; p. 12.
http://www.oecd.org/economic-outlook/#resources.
33 Ibid., p. 23.
34 Ibid., p. 13.
Congressional Research Service

7

Global Economic Effects of COVID-19

economic growth is projected to fall by 6.0% in 2020, but rise by 5.2% in 2021. In contrast, the
OECD’s second wave scenario projects a global economic contraction of 7.6% in 2020 and a
growth rate of 2.8% in 2021, delaying a return to full recovery until 2022, as indicated in Figure
2.
The OECD forecast also indicates that economic growth among developed economies will be
particularly weak in Europe, where the growth rate is projected to fall by 9.0% and 11.5% in
2020, reflecting the one and two-wave scenarios, respectively. Similarly, U.S. economic growth is
projected to contract in 2020 by 7.3%, but rebound by 4.1% in 2021. Under the second wave
scenario, however, U.S. economic growth is projected to fall by 8.5% in 2020, but rise by 1.9% in
2021. The UK is projected to experience a contraction in GDP growth in 2020 of 11.5%, or 14%
under the second wave scenario, the largest estimated annual decline in economic growth of any
OECD country in 2020.
Figure 2. Major Economic Forecasts

Sources: OECD Economic Outlook, Organization for Economic Cooperation and Development. June 10, 2020;
World Economic Outlook Update, International Monetary Fund, June 24, 2020; Global Economic Prospects, World
Bank Group, June 2020, Created by CRS.
Note: The OECD has 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
estimates the effect of a two-wave scenario.
Congressional Research Service

8

Global Economic Effects of COVID-19

Table 2. OECD, IMF and World Bank Economic Forecasts
Percentage change in Real GDP Growth
World
OECD June
IMF June
Bank June
2020
2020
2020

Projections

Projections

Projections
2019
2020 2021
2019
2020
2021
2019
2020
2021

World
2.7%
-6.0%
5.2% World
2.9%
–4.9
5.4 World
2.4% -5.2%
4.2%
Adv.
Adv.

Adv.
Economies
1.7
-7.5
4.8 Economies
1.7
–8.0
4.8 Economies
1.6
-7.0
3.9
United

United
Australia
1.8
-5.0
4.1 States
2.3
–8.0
4.5 States
2.3
-6.1
4.0
Canada
1.7
-8.0
3.9 Euro Area
1.2
–10.2
6.0 Euro Area
1.2
-9.1
4.5
Euro area
1.3
-9.1
6.5 Germany
0.6
–7.8
5.4 Japan
0.7
-6.1
2.5
Germany
0.6
-6.6
5.8 France
1.3
–12.5
7.3 Emerging
3.5
-2.5
4.6
France
1.5
-11.4
7.4 Italy
0.3
–12.8
6.3 E. Asia
5.9
0.5
6.6
Italy
0.3
-11.3
7.7 Spain
2.0
–12.8
6.3 China
6.1
1.0
6.9
Japan
0.7
-6.0
2.1 Japan
0.7
–5.8
2.4 Indonesia
5.0
0.0
4.8
United

Korea
2.0
-1.2
3.1 Kingdom
1.4
–10.2
6.3 Thailand
2.4
-5.0
4.1
Mexico
-0.1
-7.5
3.0 Canada
1.6
–8.4
4.9 Cen. Asia
2.2
-4.7
3.6
Turkey
0.9
-4.8
4.3 China
6.1
1.0
8.2 Russia
1.3
-6.0
2.7
United

Kingdom
1.4
-11.5
9.0 India
4.2
–4.5
6.0 Turkey
0.9
-3.8
5.0
United

States
2.3
-7.3
4.1 Russia
1.3
–6.6
4.1 Poland
4.1
-4.2
2.8
Latin

Argentina
-2.2
-8.3
4.1 America
0.1
–9.4
3.7 Brazil
1.1
-8.0
2.2
Brazil
1.1
-7.4
4.2 Brazil
1.1
–9.1
3.6 Mexico
-0.3
-7.5
3.0
China
6.1
-2.6
6.8 Mexico
–0.1
–10.5
3.3 Argentina
-2.2
-7.3
2.1
India
4.2
-3.7
7.9 Mid. East
1.2
–4.7
3.3 Mid. East
-0.2
-4.2
2.3
Saudi

Saudi
Indonesia
5.0
-2.8
5.2 Arabia
0.3
–6.8
3.1 Arabia
0.3
-3.8
2.5
S. Africa
0.2
-7.5
2.5 Africa
3.1
–3.2
3.4 Iran
-8.2
-5.3
2.1
Nigeria
2.2
–5.4
2.6 Egypt
5.6
3.0
2.1

S. Africa
0.2
–8.0
3.5 S. Asia
4.7
-2.7
2.8

World
Trade

Volume
0.9
–11.9
8.0 India
4.2
-3.2
3.1

Oil prices

($)
–10.2
–41.1
3.8 Pakistan
1.9
-2.6
-0.2

Congressional Research Service

9

Global Economic Effects of COVID-19

World
OECD June
IMF June
Bank June
2020
2020
2020

Projections

Projections

Projections
2019
2020 2021
2019
2020
2021
2019
2020
2021

Bangladesh
8.2
1.6
1.0

Africa
2.2
-2.8
3.1

Nigeria
2.2
-3.2
1.7

S. Africa
0.2
-7.1
2.9

Angola
-0.9
-4.0
3.1
Sources: OECD Economic Outlook, Organization for Economic Cooperation and Development. June 10, 2020; p.
12.; World Economic Outlook Update, International Monetary Fund, June 24, 2020, p. ix; Global Economic Prospects,
World Bank Group, June 2020, p. 4.
Note: The OECD forecast includes a single-wave scenario and a double-wave scenario in which the pandemic
remains under control and recedes and another in which there is a second wave of the pandemic, The OECD
forecast numbers is this table reflect the single-wave scenario.
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
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
currencies and tighter financial conditions.
The OECD also concluded that
 Real per capita income in 2020 is projected to decline by 8% and 9.5%,
respectively, depending on a one- or two-wave contagion, with substantial
declines in all economies. Even with an economic recovery in 2021, real per
capita income is projected to rise to only that of 2013.
 Unemployment is projected to rise to its highest level in more than 25 years,
while the average unemployment rate is projected to rise to 9.2% and 10%,
respectively under a single or second-wave scenario and fall by only one
percentage point through 2021. The OECD concludes that, “scarring effects from
job losses are likely to be felt particularly by younger workers and lower-skilled
workers, with attendant risks of many people becoming trapped in joblessness for
an extended period.”
 Net productive investment (business and government) was weak prior to the
pandemic, falling behind the average rate of investment during the previous
decade. Investment was forecast to contract by half as a percent of real GDP,
falling 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 growth.
Investment is also expected to be negatively affected by bankruptcies and
insolvencies among corporations and financial institutions.35
The OECD estimated in its March 2020 forecast that increased direct and indirect 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 developments for other

35 Ibid., p. 31.
Congressional Research Service

10

link to page 13 Global Economic Effects of COVID-19

countries (non-OECD) are significant.”36 Global trade, measured by trade 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 affecting economic activity
in various sectors, including airlines, hospitality, ports, and the shipping industry.37
According to the OECD’s forecast
 The greatest impact of the containment restrictions will be on retail and
wholesale trade, and in professional and real estate services, although there are
notable differences between countries.
 Business closures could reduce economic output in advanced and major
emerging economies by 15% or more; other emerging economies could
experience a decline in output of 25%.
 Countries dependent on tourism could be affected more severely, while countries
with large agricultural and mining sectors could experience less severe effects.
 Economic effects likely will vary across countries reflecting differences in the
timing and degree of containment measures.38
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
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
quarantines and restrictions on labor mobility and travel.39 China’s global economic role and
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: (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 overall in economic activity,
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
negatively affected trade and economic activity of exporters.
The IMF Forecast
Labeling the projected decline in global economic activity as the “Great Lockdown,” the IMF
released an updated forecast on June 24, 2020. The IMF concluded that the global economy
would experience its “worst recession since the Great Depression, surpassing that seen during the
global financial crisis a decade ago.”40 In addition, the IMF estimated in its baseline projection
that the global economy could decline by 4.9% in 2020, down from its April projection of a
negative 3.0%, before growing by 5.4% in 2021; global trade was projected to fall in 2020 by
11.9% and oil prices were projected to fall by 41%, also shown in Table 2.41 In contrast, the

36 OECD Interim Economic Assessment: COVID-19: The World Economy at Risk, Organization for Economic
Cooperation and Development. March 2, 2020, p. 2.
37 Ibid., p. 4.
38 Evaluating the Initial Impact of COVID Containment Measures on Activity, Organization for Economic Cooperation
and Development, March 27, 2020.
39 Goldin, Ian, “COVID-19 Shows How Globalization Spreads Contagion of All Kinds,” Financial Times, March 2,
2020. https://www.ft.com/content/70300682-5d33-11ea-ac5e-df00963c20e6.
40 World Economic Outlook Update, International Monetary Fund, June 24, 2020.
41 The IMF database indicates that global GDP fell by 0.075% in 2009 during the height of the global financial crisis.
Congressional Research Service

11

Global Economic Effects of COVID-19

OECD’s single-wave scenario projects a global economic contraction of 7.6% in 2020 and a
growth rate of 2.8% in 2021, delaying a return to full recovery until 2022
The forecast reflects a larger impact on the U.S. economy in the first half of 2020 than had been
assumed in the IMF’s April forecast and a slower recovery in the second half of 2020. Also, the
IMF forecast reflects an estimated larger decline in consumption than previously assumed as
consumers curtail spending to increase their savings and the effects on economic activity of social
distancing. The IMF also stated that many countries were facing a multi-layered crisis that
included a health crisis, a domestic economic crisis, falling external demand, capital outflows,
and a collapse in commodity prices. In combination, these various effects were interacting in
ways that made forecasting difficult. As a result, the IMF indicated that the forecast depends on a
number of factors, including:
 The length of the pandemic and required lockdowns.
 Voluntary social distancing, which affects consumer spending.
 The ability of displaced workers to secure employment, possibly in different
sectors.
 The long-term impact of firm closures and unemployed workers leaving the
workforce, compounding the ability of the economy to recover.
 The impact of changes to strengthen workplace safety—such as staggered work
shifts, enhanced hygiene and cleaning between shifts, new workplace practices
relating to proximity of personnel on production lines—which incur business
costs.
 Global supply chain reconfigurations that affect productivity as companies try to
enhance their resilience to supply disruptions.
 The extent of cross-border spillovers from weaker external demand as well as
funding shortfalls.
 A resolution of the current disconnect between rising asset values, as reflected in
market indices, and forecasts of a synchronized downturn in global economic
activity.
Advanced economies as a group were forecast to experience an economic contraction in 2020 of
8.0% of GDP, with the U.S. economy also projected by the IMF to decline by 8.0%, about four
times the rate of decline experienced in 2009 during the financial crisis, as indicated in Figure 3.
The rate of economic growth in the Euro area was projected to decline by 10.2% of GDP. Most
developing and emerging economies were projected to experience a decline in the rate of
economic growth of 3.0%, reflecting tightening global financial conditions and falling global
trade and commodity prices. In contrast, China, and Indonesia were projected to experience
small, but positive rates of economic growth in 2020, while India’s rate of growth was projected
to decline by 4.5%. The IMF also argued that recovery of the 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 firms and households.42

42 World Economic Outlook, p. 9.
Congressional Research Service

12

Global Economic Effects of COVID-19

Figure 3. IMF Forecast, Gross Domestic Product, Percentage Change

Source: World Economic Outlook Update, International Monetary Fund, June 24, 2020. Created by CRS.
As a result of the various challenges, the IMF qualified its forecast by arguing that
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
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
developing economies are even more severely hit, tight financial conditions persist, or if
widespread scarring effects emerge due to firm closures and extended unemployment.43
The World Bank Forecast
On June 8, the World Bank released its forecast for global economic growth that estimated the
economic recession in 2020 would be 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 Great Depression.44 The World Bank’s baseline
estimate indicates that global economic growth could decline by 5.2% in 2020 and only partially
recover in 2021 with a 4.2% rate of growth, assuming that the global economy can begin
recovering in the second half of 2020.45 In contrast, the IMF forecasted a 4.9% rate of decline in
2020 and a recovery of growth to 5.4% in 2021. Similar to the OECD and the IMF forecasts, the
World Bank argues that the economic impact of the global recession will fall most heavily on
developing and emerging 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 developing economies could experience rates of growth in 2020 that are the
lowest overall since the 1960s, with 90% of such economies expected to experience contractions
in per capita incomes and many millions of people falling back into poverty. The World Bank also
forecasts that economic growth in advanced economies will decline by 7.0% in 2020 and recover

43 Ibid., p. v.
44 Global Economic Prospects, World Bank Group, June 8, 2020, p. 15.
45 Ibid., p. 5.
Congressional Research Service

13

link to page 19 Global Economic Effects of COVID-19

to 3.8% in 2021. The United States, the Euro area and Japan are all estimated to experience a
slower rate of growth in 2020 and rise at a smaller rate in 2021 than the IMF forecast.
The global economic recession is projected to affect all regions in a type of synchronous
downturn, with some regions faring worse than others. Differences in the magnitude of regional
growth rates are attributed to the “scale of the domestic outbreak, vulnerability of the economy to
spillovers from global economic and financial stress the severity of pre-existing challenges such
as widespread poverty, and the degree to which debt levels constrain the fiscal response.”46
According to the Bank’s baseline scenario, the projected economic recovery is expected to be
slow, reflecting shifts in consumption and work patterns as consumers attempt to rebuild savings
and businesses strengthen balance sheets. The World Bank also issued a downside and an upside
scenario in which government lockdown policies are required to remain in effect 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 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 rebounds
quickly in the third quarter of 2020.47
The Bank also concludes that global value chains (GVCs) have been important conduits through
which macroeconomic developments associated with the pandemic have been transmitted across
national borders. The economic effects of the pandemic have been spread through trade linkages
but also amplified through quarantines, production shutdowns and border closures.48 Estimates by
the World Bank indicate that national policies adopted to blunt the spread of the virus affect 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 shock
through a sharp contraction in international tourism, and a services shock. The magnitude of the
shocks varies by country depending on various factors, including the composition of output,
reliance on trade, and the level of GVC integration.
Global Trade
According to a June 23 forecast update, the World Trade Organization (WTO) estimated that
global trade volumes could fall by 18.5% in 2020 and then recover in 2021.49 This forecast
reflects a downward revision from the WTO’s April 8, 2020 more optimistic forecast that global
trade volumes could decline between 13% and 32% in 2020 as a result of the economic impact of
COVID-19, as indicated in Table 3. Concerning this updated forecast, WTO Director-General
Azevêdo indicated that, “The fall in trade we are now seeing is historically large – in fact, it
would be the steepest on record. But there is an important silver lining here: it could have been
much worse.”50 Data in the table will be updated when they are published by the WTO. The WTO
argues that the wide range in the forecast represents the high degree of uncertainty concerning the
length and economic impact of the pandemic. According to the WTO, the more optimistic
scenario assumes that trade volumes recover quickly in the second half of 2020 to their pre-
pandemic trend, or that the global economy experiences a V-shaped recovery. In comparison, the

46 Ibid., p. 115.
47 Ibid., p. 33.
48 Ibid., p. 118.
49 Trade Falls Steeply in First Half of 2020, World Trade Organization, June 23, 2020.
50 Ibid, p, 1.
Congressional Research Service

14

Global Economic Effects of COVID-19

more pessimistic scenario assumes there is a partial recovery in global trade that lasts into 2021,
or that global economic activity experiences a U-shaped recovery. The updated forecast reflects
the WTO’s estimate that global trade volumes in 2020 will not fall by as much as it had projected
under its pessimistic scenario. The WTO concludes, however, that the impact on global trade
volumes could exceed the drop in global trade during the height of the 2008-2009 financial
crisis.51
Table 3. WTO April Forecast: Merchandise Trade Volume and Real GDP 2018-2021
Annual percentage change
Optimistic
Pessimistic
Historical
scenario
scenario

2018
2019
2020
2021
2020
2021

Volume of world merchandise trade
2.9%
-0.1%
-12.9%
21.3%
-31.9%
24.0%
Exports

North America
3.8
1.0
-17.1
23.7
-40.9
19.3
South and Central America
0.1
-2.2
-12.9
18.6
-31.3
14.3
Europe
2.0
0.1
-12.2
20.5
-32.8
22.7
Asia
3.7
0.9
-13.5
24.9
-36.2
36.1
Other regions
0.7
-2.9
-8.0
8.6
-8.0
9.3
Imports

North America
5.2
-0.4
-14.5
27.3
-33.8
29.5
South and Central America
5.3
-2.1
-22.2
23.2
-43.8
19.5
Europe
1.5
0.5
-10.3
19.9
-28.9
24.5
Asia
4.9
-0.6
-11.8
23.1
-31.5
25.1
Other regions
0.3
1.5
-10
13.6
-22.6
18.0
Real GDP at market exchange rates
2.9
2.3
-2.5
7.4
-8.8
5.9
North America
2.8
2.2
-3.3
7.2
-9.0
5.1
South and Central America
0.6
0.1
-4.3
6.5
-11
4.8
Europe
2.1
1.3
-3.5
6.6
-10.8
5.4
Asia
4.2
3.9
-0.7
8.7
-7.1
7.4
Other regions
2.1
1.7
-1.5
6.0
-6.7
5.2
Source: Trade Set to Plunge as COVID-19 Pandemic Upends Global Economy, World Trade Organization, April 8,
2020.
Note: Data for 2020 and 2021 are projections; GDP projections are based on scenarios simulated with the
WTO Global Trade Model.
The estimates indicate that all geographic regions will experience a double-digit drop in trade
volumes, except for “other regions,” which consists of Africa, the Middle East, and the
Commonwealth of Independent States. North America and Asia could experience the steepest
declines in export volumes. The forecast also projects that sectors with extensive value chains,
such as automobile products and electronics, could experience the steepest declines. Although

51 Trade Set to Plunge as COVID-19 Pandemic Upends Global Economy, World Trade Organization, April 8, 2020.
https://www.wto.org/english/news_e/pres20_e/pr855_e.htm.
Congressional Research Service

15

Global Economic Effects of COVID-19

services are not included in the WTO forecast, this segment 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 technology, however, are growing to
satisfy the demand of employees who are working from home.
The pandemic is also raising questions about the costs and benefits of the global supply chains
businesses 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 the
crisis. In some cases, businesses are reassessing their exposure to the risks posed by extensive
supply chains that potentially are vulnerable to numerous points of disruption. Also, some
governments are assessing the risks supply chains pose to national supplies of items considered to
be important to national security as a result of firms shifting production offshore. For
multinational businesses, changing suppliers and shifting production locations can be especially
costly for some firms and can introduce additional risks.52 In addition, businesses may be
reluctant to relocate from production locations, such as China, that not only serve as production
platforms, but are also important markets for their output. For instance, the 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 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 such sales are shipped to the U.S.
parent, while 82% is sold in China and another 12% is shipped to other foreign countries.53
Economic Policy Challenges
The challenge for policymakers has been one of implementing targeted policies that address what
had been expected to be short-term problems without creating distortions in economies that can
outlast the impact of the virus itself. Policymakers, however, are being overwhelmed by the
quickly changing nature of the global health crisis that appears to be turning into a global trade
and economic crisis whose effects on the global economy are escalating. As the economic effects
of the pandemic grow, policymakers are giving more weight to policies that address the
immediate economic effects at the expense of longer-term considerations such as debt
accumulation. During the early stages of the crisis, many 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 synchronized slowdown in global economic
growth, especially in manufacturing and trade, that had developed prior to the viral outbreak. The
pandemic is also affecting global politics as world leaders are cancelling international meetings,54
competing for medical supplies, and some nations reportedly are stoking conspiracy theories that
shift blame to other countries.55

52 Beattie, Alan, Will Coronavirus Pandemic Finally Kill Off Global Supply Chains?, Financial Times, May 28, 2020.
https://www.ft.com/content/4ee0817a-809f-11ea-b0fb-13524ae1056b.
53 Activities of U.S. Multinational Enterprises: U.S. Parent Companies and Their Foreign Affiliates, Preliminary 2017
Statistics, Bureau of Economic Analysis, August 23, 2019, Table II.E.2. https://www.bea.gov/news/2019/activities-us-
multinational-enterprises-2017.
54 Taylor, Adam, Teo Armus, and Rick Noak, “Live updates: COVID-19 Turmoil Widens as U.S. Death Toll Mounts;
Xi Cancels Japan Trip, Washington Post, March 5, 2020, https://www.washingtonpost.com/world/2020/03/05/COVID-
19-live-updates/.
55 Shih, Gerry, “China Is Subtly Stoking COVID-19 Conspiracy Theories That Blame the U.S. for Outbreak,”
Washington Post, March 5, 2020. https://www.washingtonpost.com/world/2020/03/05/COVID-19-live-updates/.
Congressional Research Service

16

Global Economic Effects of COVID-19

Initially, the economic effects of the virus were expected to be short-term supply issues as factory
output fell because workers were quarantined to reduce the spread of the virus through social
interaction. The drop in economic activity, initially in China, has had international repercussions
as firms experienced delays in supplies of intermediate and finished goods through supply chains.
Concerns are growing, however, that virus-related supply shocks have created more prolonged
and wide-ranging demand shocks as reduced activity by consumers and businesses leads to a
lower rate of economic growth. As demand shocks unfold, businesses experience reduced activity
and profits and potentially escalating and binding credit and liquidity constraints. While
manufacturing firms experience supply chain shocks, reduced consumer activity through social
distancing affects the services sector of the economy, which accounts for two-thirds of annual
U.S. economic output. In this environment, manufacturing and services firms initially tended to
hoard cash, which affects market liquidity. In response, central banks lowered interest rates where
possible and expanded lending facilities to provide liquidity to financial markets and to firms
potentially facing insolvency.
The longer the economic effects persist, the greater the economic impacts are likely to be as the
effects are spread through trade and financial linkages to an ever-broadening group of countries,
firms and households. These growing economic effects potentially increase liquidity constraints
and credit market tightening in global financial markets as firms hoard cash, with negative fallout
effects on economic growth. At the same time, financial markets are factoring in an increase in
government bond issuance in the United States, Europe, and elsewhere as government debt levels
are set to rise 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 crisis, reduced
demand by consumers, labor market issues, and a reduced level of activity among businesses,
rather than risky trading by global banks, has led to corporate credit issues and potential
insolvency. These market dynamics have led some observers to question if these events mark the
beginning of a full-scale global financial crisis.56
Liquidity and credit market issues present policymakers with a different set of challenges than
addressing supply-side constraints. As a result, the focus of government policy expanded from a
health crisis to macroeconomic and financial market issues that are addressed through a
combination of monetary, fiscal, and other policies, including border closures, quarantines, and
restrictions on social interactions. Essentially, while businesses have attempted to address worker
and 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 face
financial strains, and central bankers adjust monetary policies to address mounting credit market
issues.
In the initial stages of the health crisis, households did not experience the same kind of wealth
losses they saw during the 2008-2009 financial crisis when the value of their primary residence
dropped sharply. However, with unemployment numbers rising rapidly, job losses could result in
defaults on mortgages and delinquencies on rent payments, unless financial institutions provide
loan forbearance or there is a mechanism to provide financial assistance. In turn, mortgage
defaults could negatively affect the market for mortgage-backed securities, the availability of
funds for mortgages, and negatively affect the overall rate of economic growth. Losses in the
value of most equity markets in the U.S., Asia, and Europe could also affect household wealth,
especially that of retirees living on a fixed income and others who own equities. Investors that
trade in mortgage-backed securities reportedly reduced their holdings while the Federal Reserve

56 Foroohar, Rana, “How COVID-19 Became a Corporate Credit Run,” Financial Times, March 15, 2020.
https://www.ft.com/content/f1ea5096-6531-11ea-a6cd-df28cc3c6a68.
Congressional Research Service

17

Global Economic Effects of COVID-19

attempted to support the market.57 In the current environment, even traditional policy tools, such
as monetary accommodation, apparently have not always been processed by markets in a
traditional manner, with equity market indices displaying heightened, rather than lower, levels of
uncertainty following the Federal Reserve’s cut in interest rates. Such volatility is adding to
uncertainties about what governments can do to address weaknesses in the global economy.
Major Economic Developments
Between late February and late June, 2020, financial markets from the United States to Asia and
Europe have been 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
indicate how prolonged and extensive the economic effects may be.58 Investors have 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 3, 2020.59 In response to concerns that
the global economy was in a freefall, the Federal Reserve 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 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 making about $50 billion available
through emergency financing facilities for low-income and emerging market countries and
through funds available in its Catastrophe Containment and Relief Trust (CCRT).60
Reflecting investors’ uncertainties, the Dow Jones Industrial Average (DJIA) lost about one-third
of its value between February 14, 2020, and March 23, 2020, as indicated in Figure 4.
Expectations that the U.S. Congress would adopt a $2.0 trillion 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 half. Since then, the DJIA has trended upward, but
moved erratically at times as investors have weighed 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 index valued lost during the February to March decline. For
some policymakers, the drop in equity prices raised concerns that foreign investors might attempt
to exploit the situation by increasing their purchases of firms in sectors considered important to
national security. For instance, Ursula von der Leyen, president of the European Commission,
urged EU members to better screen foreign investments, especially in areas such as health,
medical research, and critical infrastructure.61
Similar to the 2008-2009 global financial crisis, central banks have implemented a series of
monetary operations to provide liquidity to their economies. These actions, however, initially

57 Armstrong, Robert, “Mortgage Investment Funds Become ‘Epicenter’ of Crisis,” Financial Times, March 24, 2020.
https://www.ft.com/content/18909cda-6d40-11ea-89df-41bea055720b.
58 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.
59 The price and yield of a bond are inversely related; increased demand for Treasury securities raises their price, which
lowers their yield. Levisohn, Ben, “The 10-Year Treasury Yield Fell Below 1% for the First Time Ever. What That
Means,” Barrons, 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.
60 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-
epidemic-what-we-know-and-what-we-can-do/.
61 Chazan, Guy and Jim Brunsden, “COVID-19 Crisis Pushes Europe into Nationalist Economic Turn,” Financial
Times, March 26, 2020. https://www.ft.com/content/79c0ae80-6df1-11ea-89df-41bea055720b.
Congressional Research Service

18

Global Economic Effects of COVID-19

were not viewed entirely positively by all financial market participants who questioned the use of
policy tools by central banks that are similar to those employed during the 2008-2009 financial
crisis, despite the fact that the current and previous crisis are fundamentally different in origin.
During the previous financial crisis, central banks intervened to restart credit and spending by
banks that had engaged in risky assets. In the current environment, central banks are attempting to
address financial market volatility and prevent large-scale corporate insolvencies that reflect the
underlying economic uncertainty caused by the pandemic.
Figure 4. Dow Jones Industrial Average Index
February 14, 2020, to July 1, 2020

Source: Financial Times. Created by CRS.
Similar to conditions during the 2008-2009 financial crisis, the dollar has emerged as the
preferred currency by investors, reinforcing its role as the dominant global reserve currency. As
indicated in Figure 5, 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. Since the highs reached on March 23, the dollar has given up some of its
value against other currencies, but has remained about 10% higher than it was at the beginning of
the year. Between mid-May and mid-June, the dollar lost about 3% of its value relative to the
currencies of other major trading partners and was equal to its value in mid-March. Since mid-
June, the dollar has regained about 1.5% of its value against the currencies of major trading
partners and is about where it was in mid-March.
Congressional Research Service

19

Global Economic Effects of COVID-19

Figure 5. U.S. Dollar Trade-Weighted Broad Index, Goods and Services
January 2, 2020, through June 26, 2020

Source: St. Louis Federal Reserve Bank. Created by CRS.
Notes: January 2006 = 100.
The role of the dollar as a dominant global currency was emphasized in a recent survey by the
Bank for International Settlements (BIS).62 According to the BIS triennial survey, the 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 international trade,
as indicated in Figure 6. It also accounts for two-thirds 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 market.63 In comparison, the United States
accounts for about one-fourth of global GDP and about one-fifth of global trade (exports plus
imports).
As a result of the role of the dollar as the dominant global reserve currency, disruptions in the
smooth functioning of the global dollar market can have wide-ranging repercussions on
international trade and financial transactions. A June 2020 report by the Bank for International
Settlements stresses the central role of the dollar in the global economy. The report concludes that
dollar funding activities are highly complex, geographically 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 easily be transmitted across different financial markets and
across regions.64
The international role of the dollar also increases pressure on the Federal Reserve essentially to
assume the lead role as the global lender of last resort. Reminiscent of the financial crisis, the
global economy has 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

62 Foreign Exchange Turnover in April 2019, Bank for International Settlements, September 16, 2019.
https://www.bis.org/statistics/rpfx19_fx.htm.
63 See CRS In Focus IF10112, Introduction to Financial Services: The International Foreign Exchange Market.
64 Bank for International Settlements, U.S, Dollar Funding: An International Perspective, CGFS Papers, No. 65, June
2020, p. 52. https://www.bis.org/publ/cgfs65.htm.
Congressional Research Service

20

Global Economic Effects of COVID-19

activating existing currency swap arrangements, establishing such arrangements with additional
central banks, and creating new financial facilities to provide liquidity to central banks and
monetary authorities.65 Typically, 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
own currency. Consequently, a bank can become illiquid in a panic, meaning it cannot borrow in
private markets to meet short-term cash flow needs. Swap lines are designed to allow foreign
central banks the funds necessary to provide needed liquidity to their country’s banks in dollars.
Figure 6. International Role of the Dollar

Source: U.S. Dollar Funding: An International Perspective, CGFS Papers No. 65, Bank for International Settlements,
June 2020. Created by CRS.
Notes: (1) Data refer to 2019. (2) Data refer to 2019. (3) US dol ar-denominated cross-border loans by banks
to counterparties in all countries; data refer to Q4 2019 (excluding interoffice claims but including interbank
claims on account of loans and deposits); loans comprise non-negotiable debt instruments that are loaned by
creditors directly to a debtor or represented by evidence of a deposit. (4) US dol ar denominated international
debt securities by all issuers; data refer to Q4 2019; these securities are issued outside the local market of the
country where the borrower resides, and capture issues conventionally known as eurobonds and foreign bonds
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
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
Markets; BIS locational banking statistics (LBS).
March 2020
The yield on U.S. Treasury securities dropped to historic levels on March 6, 2020, and March 9,
2020, as investors continued to move 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 have on economic growth and expectations the Federal Reserve and other
central banks would lower short-term interest rates.66 On March 5, the U.S. Congress passed an
$8 billion spending bill to provide assistance for health care, sick leave, small business loans, and

65 Politi, James, Brendan Greeley, and Colby Smith, “Fed Sets Up Scheme to Meet Booming Foreign Demand for
Dollars,” Financial Times, March 31, 2020. https://www.ft.com/content/6c976586-a6ea-42ec-a369-9353186c05bb.
66 Smith, Colby, Richard Henderson, Philip Georgiadis, and Hudson Lockett, “Stocks Tumble and Government Bonds
Hit Highs on Virus Fears,” Financial Times, March 6, 2020. https://www.ft.com/content/9f94d6f8-5f51-11ea-b0ab-
339c2307bcd4.
Congressional Research Service

21

Global Economic Effects of COVID-19

international 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 global demand for commodities, including crude oil.
The drop in some commodity prices raised concerns about corporate profits and led some
investors to sell 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
lower), triggering automatic circuit breakers designed to halt trading if the indexes rise or fall by
more than 5% when markets are closed and 7% when markets are open.67 By early April, the
global mining industry had reduced production by an estimated 20% in response to falling
demand and labor quarantines and as a strategy for raising prices.68
Ahead of a March 12, 2020, scheduled meeting of the European Central Bank (ECB), the German
central bank (Deutsche Bundesbank) announced a package of measures to provide liquidity
support to German businesses and financial support for public infrastructure projects.69 At the
same time, the Fed announced that it was expanding its repo market transactions (in the
repurchase market, investors borrow cash for short periods in exchange for high-quality collateral
like Treasury securities) after stock market indexes fell sharply, government bond yields fell to
record lows (reflecting increased demand), and demand for corporate bonds fell. Together these
developments raised concerns for some analysts that instability in stock markets could threaten
global financial conditions.70
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.
European Central Bank (ECB) President Christine Lagarde in a conference call to EU leaders
warned that without coordinated action, Europe could face a recession similar to the 2008-2009
financial crisis.71 The Bank of England lowered its key interest rate, reduced capital buffers for
UK banks, and provided a funding program for small and medium businesses. The UK
Chancellor of the Exchequer also proposed a budget that would appropriate £30 billion (about
$35 billion) for fiscal stimulus spending, including funds for sick pay for workers, guarantees for
loans to small businesses, and cuts in business taxes. The European Commission announced a €25
billion (about $28 billion) 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 financial markets.
President Trump imposed restrictions on travel from Europe to the United States on March 12,
2020, surprising European leaders and adding to financial market volatility.72 At its March 12

67 Georgiadis, Philip, Adam Samson, and Hudson Lockett, “Stocks Plummet as Oil Crash Shakes Financial Markets,”
Financial Times, March 9, 2020. https://www.ft.com/content/8273a32a-61e4-11ea-a6cd-df28cc3c6a68.
68 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.
69 Chazan, Guy, David Keohane, and Martin Arnold, “Europe’s Policymakers Search for Answers to Virus Crisis,”
Financial Times, March 9, 2020. https://www.ft.com/content/d46467da-61e1-11ea-b3f3-fe4680ea68b5.
70 Smith, Colby and Brendan Greeley, “Fed Pumps Extra Liquidity Into Overnight Lending Markets,” Financial Times,
March 9, 2020. https://www.ft.com/content/e8c7b5f0-6200-11ea-a6cd-df28cc3c6a68.
71 O’Brien, Fergal, “ECB’s Lagarde Warns of 2008-Style Crisis Unless Europe Acts,” Washington Post, March 11,
2020. https://www.bloomberg.com/news/articles/2020-03-11/ecb-s-lagarde-warns-of-2008-style-crisis-without-urgent-
action.
72 McAuley, James and Michael Birnbaum, “Europe Blindsided by Trump’s Travel Restrictions, with Many Seeing
Political Motive,” Washington Post, 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-
Congressional Research Service

22

Global Economic Effects of COVID-19

meeting, the ECB announced €27 billion (about $30 billion) in stimulus funding, combining
measures to expand low-cost loans to Eurozone banks and small and medium-sized businesses
and implement an asset purchase program to provide liquidity to firms. Germany indicated that it
would provide tax breaks for businesses and “unlimited” loans to affected businesses. The ECB’s
Largarde roiled markets by stating that it was not the ECB’s job to “close the spread” between
Italian and German government bond yields (a key risk indicator for Italy), a comment reportedly
interpreted as an indicator the ECB was preparing to abandon its support for Italy, a notion that
was denied by the ECB.73 The Fed also announced that it would further increase its lending in the
repo market and its purchases of Treasury securities to provide liquidity. As a result of tight
market conditions for corporate bonds, firms turned to their revolving lines of credit with banks to
build up their cash reserves. The price of bank shares fell, reflecting sales by investors who
reportedly had grown concerned that banks would experience a rise in loan defaults.74 Despite the
various actions, the DJIA fell by nearly 10% on March 12, recording the worst one-day drop since
1987. Between February 14 and March 12, the DJIA fell by more than 8,000 points, or 28% of its
value. Credit rating agencies began reassessing corporate credit risk, including the risk of firms
that had been considered stable.75
On March 13, President Trump declared a national emergency, potentially releasing $50 billion in
disaster relief funds to state and local governments. The announcement moved financial markets
sharply higher, with the DJIA rising 10%.76 Financial markets also reportedly moved higher on
expectations the Fed would lower interest rates. House Democrats and President Trump agreed to
a $2 trillion spending package to provide paid sick leave, unemployment insurance, food stamps,
support for small businesses, and other measures.77 The EU indicated that it would relax budget
rules that restrict deficit spending by EU members. In other actions, the People’s Bank of China
cut its reserve requirements for Chinese banks, potentially easing borrowing costs for firms and
adding $79 billion in funds to stimulate the Chinese economy; Norway’s central bank reduced its
key interest rate; the Bank of Japan acquired billions of dollars of government securities (thereby
increasing liquidity); and the Reserve Bank of Australia injected nearly $6 billion into its
financial system.78 The Bank of Canada also lowered its overnight bank lending rate.
The Federal Reserve lowered its key interest rate to near zero on March 15, 2020, arguing that the
pandemic had “harmed communities and disrupted economic activity in many countries,

5c5336b32760_story.html.
73 Arnold, Martin, “ECB Enters Damage-Limitation Mode with Pledge of More Action,” Financial Times, March 13,
2020. https://www.ft.com/content/f1cbd4f8-650f-11ea-b3f3-fe4680ea68b5.
74 Morris, Stephen, Laura Noonan, Henny Sender, and Olaf Storbeck, “Banks Scramble as Companies Rush to Tap
Back-up Credit Lines,” Financial Times, March 12, 2020. https://www.ft.com/content/a3513a54-6486-11ea-b3f3-
fe4680ea68b5.
75 Edgecliffe-Johnson, Andrew, Peggy Hollinger, Joe Rennison, and Robert Smith, “Will the COVID-19 Trigger a
Corporate Debt Crisis?” Financial Times, March 12, 2020. https://www.ft.com/content/4455735a-63bc-11ea-b3f3-
fe4680ea68b5. Sectors most exposed to debt financing issues include automotive, insurance, capital goods, utilities, oil
and gas, technology, aerospace and defense, real estate, telecoms, consumer products, metals, mining and steel,
healthcare, retail/restaurants, chemicals, packaging, transportation, media and entertainment, and forest products.
76 Fritz, Angela and Meryl Kornfield, “President Trump Declares a National Emergency, Freeing $50 Billion in
Funding,” Washington Post, March 13, 2020. https://www.washingtonpost.com/world/2020/03/13/COVID-19-latest-
news.
77 Werner, Erica, Mike DeBonis, Paul Kane, Jeff Stein, “White House, House Democrats Reach Deal on COVID-19
Economic Relief Package, Pelosi Announces,” Washington Post, March 13, 2020. https://www.washingtonpost.com/
us-policy/2020/03/13/paid-leave-democrats-trump-deal-COVID-19/.
78 Georgiadis, Philip, Hudson Lockett, and Leo Lewis, “European Stocks and US Futures Soar After Historic Rout,”
Financial Times, March 13, 2020. https://www.ft.com/content/3bab76ac-64cd-11ea-a6cd-df28cc3c6a68.
Congressional Research Service

23

Global Economic Effects of COVID-19

including the United States” and that it was prepared to use its “full range of tools.”79 It also
announced an additional $700 billion in asset purchases, including Treasury securities and
mortgage-backed securities, expanded repurchase operations, activated dollar swap lines with
Canada, Japan, Europe, the UK, and Switzerland, opened its discount window to commercial
banks to ease household and business lending, and urged banks to use their capital and liquidity
buffers to support lending.80
Despite the Fed’s actions the previous day to lower interest rates, interest rates in the U.S.
commercial paper market, where corporations raise cash by selling short-term debt, rose on
March 16, 2020, to their highest levels since the 2008-2009 financial crisis, prompting investors
to call on the Fed to intervene.81 The DJIA dropped nearly 3,000 points, or about 13%. Most
automobile manufacturers announced major declines in sales and production;82 similarly, most
airlines reported they faced major cutbacks in flights and employee layoffs due to diminished
economic activity.83 Economic data from China indicated the economy would slow markedly in
the first quarter of 2020, potentially greater than that experienced during the global financial
crisis.84 The Bank of Japan announced that it would double its purchases of exchange traded
funds and the G-7 countries85 issued a joint statement promising “a strongly coordinated
international approach,” although no specific actions were mentioned. The IMF issued a
statement indicating its support for additional fiscal and monetary actions by governments and
that the IMF “stands ready to mobilize its $1 trillion lending capacity to help its membership.”
The World Bank also promised an additional $14 billion to assist governments and companies
address the pandemic.86
Following the drop in equity market indexes the previous day, the Federal Reserve unveiled a
number of facilities on March 17, 2020, in some cases reviving actions it had not taken since the
financial crisis. It announced that it would allow the 24 primary dealers in Treasury securities to
borrow cash collateralized against some stocks, municipal debt, and higher-rated corporate bonds;
revive a facility to buy commercial paper; and provide additional funding for the overnight repo
market.87 The UK government proposed government-backed loans to support business; a three-

79 Federal Reserve Releases FOMC Statement, Board of Governors of the Federal Reserve System, March 15, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm.
80 Greeley, Brendan, Colby Smith, Adam Samson, Joe Rennison, Katie Martin, and Jennifer Ablan, “Fed Cuts Rates to
Zero as Part of Sweeping Crisis Measures,” Financial Times, March 15, 2020. https://www.ft.com/content/a9a28bc0-
66fb-11ea-a3c9-1fe6fedcca75.
81 Rennison, Joe Rennison and Colby Smith, “Investors Call for Fed Help in ‘Frozen’ Commercial Paper Market,”
Financial Times, March 16, 2020. https://www.ft.com/content/34213560-677b-11ea-a3c9-1fe6fedcca75.
82 Campbell, Peter, Joe Miller, and David Keohane, “European Car Plants Close as Industry Crisis Deepens,” Financial
Times, March 16, 2020. https://www.ft.com/content/dd76d42a-678b-11ea-a3c9-1fe6fedcca75.
83 Smyth, Jamie Smyth, Andrew Edgecliffe-Johnson, Peggy Hollinger, Myles McCormick, David Keohane, and
Richard Milne, “Most Airlines Face Bankruptcy by End of May, Industry Body Warns,” Financial Times, March 16,
2020. https://www.ft.com/content/30a3a26e-674f-11ea-800d-da70cff6e4d3.
84 Weinland, Don and Xinning Liu, “Chinese Economy Suffers Record Blow from COVID-19,” Financial Times,
March 16, 2020. https://www.ft.com/content/318ae26c-6733-11ea-800d-da70cff6e4d3.
85 The G-7 is comprised of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
86 Wheatley, Jonathan, “Surging Dollar, Coronavirus and Oil Slump Hit Emerging Economies,” Financial Times,
March 18, 2020. https://www.ft.com/content/69fc6e2a-69d3-11ea-a3c9-1fe6fedcca75.
87 Politi, James, Brendan Greeley, Colby Smith, and Joe Rennison, “Fed to Lend Against Stocks and Bonds in Bid to
Stabilize Markets,” Financial Times, March 17, 2020. https://www.ft.com/content/cf485398-689d-11ea-800d-
da70cff6e4d3.
Congressional Research Service

24

Global Economic Effects of COVID-19

month moratorium on mortgage payments for homeowners; a new lending facility with the Bank
of England to provide low-cost commercial paper to support lending; and loans for businesses.
In an emergency session on March 18, the ECB announced a temporary, non-standard asset
purchase program, the Pandemic Emergency Purchase Program (PEPP), to acquire an additional
€750 billion (over $820 billion) in public and private sector bonds to counter the risks posed by
the pandemic crisis (as of May 5, the ECB had purchased about $180 billion in securities).88 The
ECB also broadened the types of assets it would accept as collateral to include non-financial
commercial paper, eased collateral standards for banks, and waived restrictions on acquiring
Greek government debt.89 The program was expected to end no later than yearend 2020.
The Federal Reserve broadened its central bank dollar swap lines to include Brazil, Mexico,
Australia, Denmark, Norway, and Sweden. Automobile manufacturers announced they were
suspending production at an estimated 100 plants across North America, following similar plant
closures in Europe.90 Major U.S. banks announced a moratorium on share repurchases, or stock
buy-backs, denying equity markets a major source of support and potentially amplifying market
volatility.91 During the week, more than 22 central banks in emerging economies, including
Brazil, Turkey, and Vietnam, lowered their key interest rates.
By March 19, 2020, investors were selling sovereign and other bonds as firms and other financial
institutions attempted to increase their cash holdings, although actions central banks took during
the week appeared to calm financial markets. Compared to previous financial market dislocations
in which stock market values declined while bond prices rose, stock and bond values fell at the
same time in March 2020 as investors reportedly adopted a “sell everything” mentality to build
up cash reserves.92 Senate Republicans introduced the Coronavirus Aid, Relief, and Economic
Security Act to provide $2 trillion in spending to support the U.S. economy.
By the close of trading on March 20, the DJIA index had fallen by 17% from March 13. At the
same time, the dollar continued to gain in value against other major currencies and the price of
Brent crude oil dropped close to $20 per barrel on March 20, as indicated in Figure 7. The
Federal Reserve announced that it would expand a facility to support the municipal bond market.
Britain’s Finance Minister announced an “unprecedented” fiscal package to pay up to 80% of an
employee’s wages and deferring value added taxes by businesses.93 The ECB’s Largarde justified
actions by the Bank during the week to provide liquidity by arguing that the “coronavirus
pandemic is a public health emergency unprecedented in recent history.” Market indexes fell
again on March 23 as the Senate debated the parameters of a new spending bill to support the
economy. Oil prices also continued to fall as oil producers appeared to be in a standoff over cuts
to production.

88 “ECB Announces €750 Billion Pandemic Emergency Purchase Program (PEPP),” European Central Bank, March
18, 2020. https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200318_1~3949d6f266.en.html.
89 Arnold, Martin, “ECB to Launch €750 Billion Purchase Program in Response to Coronavirus,” Financial Times,
March 18, 2020. https://www.ft.com/content/5919c6fb-1f5f-315d-8353-94f04afcf340.
90 Campbell, Peter and Claire Bushey, “Ford, General Motors and Fiat Chrysler Agree Widespread Shutdown,”
Financial Times, March 18, 2020. https://www.ft.com/content/feae3808-6949-11ea-800d-da70cff6e4d3.
91 Henderson, Richard, “Bank-Led Freeze on Stock Buybacks Could Spread Across US Market,” Financial Times,
March 18, 2020. https://www.ft.com/content/b1fa1688-68f6-11ea-a3c9-1fe6fedcca75.
92 Stubbington, Tommy and Colby Smith, “Investment Veterans Try to Get to Grips With ‘Broken’ Markets,”
Financial Times, March 20, 2020. https://www.ft.com/content/97186440-6aa0-11ea-800d-da70cff6e4d3.
93 Parker, George Parker, Chris Giles, and Sebastian Payne, “Sunak Turns on Financial Firepower to Help Workers,”
Financial Times, March 20, 2020, https://www.ft.com/content/826d465a-6ac3-11ea-a3c9-1fe6fedcca75.
Congressional Research Service

25

Global Economic Effects of COVID-19

Figure 7. Brent Crude Oil Price per Barrel in Dollars
January 9, 2020, to July 1, 2020

Source: Markets Insider. Created by CRS.
Financial markets continued to fall on March 23, 2020, as market indexes reached their lowest
point since the start of the pandemic crisis. The Federal Reserve announced a number of new
facilities to provide an unlimited expansion in bond buying programs. The measures included
additional purchases of Treasury and mortgage-backed securities; additional funding for
employers, consumers, and businesses; establishing the Primary Market Corporate Credit Facility
(PMCCF) to support issuing new bonds and loans and the Secondary Market Corporate Credit
Facility (SMCCF) to provide liquidity for outstanding corporate bonds; establishing the Term
Asset-Backed Securities Loan Facility (TALF), to support credit to consumers and businesses;
expanding the Money Market Mutual Fund Liquidity Facility (MMLF) to provide credit to
municipalities; and expanding the Commercial Paper Funding Facility (CPFF) to facilitate the
flow of credit to municipalities.94 The OECD released a statement encouraging its members to
support “immediate, large-scale and coordinated actions.” These actions included (1) more
international cooperation to address the health crisis; (2) coordinated government actions to
increase spending to support health care, individuals, and firms; (3) coordinated central bank
action to supervise and regulate financial markets; and (4) policies directed at restoring
confidence.95
Reacting to the Fed’s announcement, the DJIA closed up 11% on March 24, marking one of the
sharpest reversals in the market index since February 2020. European markets, however, did not
follow U.S. market indexes as various indicators signaled a decline in business activity in the
Eurozone that was greater than that during the financial crisis and indicated the growing potential
for a severe economic recession.96 U.S. financial markets were buoyed on March 25 and 26 over
passage in Congress of a $2.2 trillion economic stimulus package.

94 Federal Reserve Announces Extensive New Measures to Support the Economy, Board of Governors of the Federal
Reserve System, March 23, 2020. https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm.
95 Gurria, Angel, COVID-19: Joint Actions to Win the War, Organization for Economic Cooperation and Development,
March 23, 2020. https://www.oecd.org/coronavirus/#op-ed.
96 Arnold, Martin Arnold and Valentina Romei, “Business Activity Crashes to Record Low in Eurozone,” Financial
Times, March 24, 2020. https://www.ft.com/content/f5ebabd4-6dad-11ea-89df-41bea055720b.
Congressional Research Service

26

Global Economic Effects of COVID-19

On March 27, leaders of the G-20 countries announced through a video conference they had
agreed to inject $5 trillion into the global economy and to do “whatever it takes to overcome the
pandemic.” Also at the meeting, the OECD offered an updated forecast of the viral infection,
which projected that the global economy could shrink by as much as 2% a month. Nine Eurozone
countries, including France, Italy, and Spain called on the ECB to consider issuing
“coronabonds,” a common European debt instrument to assist Eurozone countries in fighting
COVID-19.97 The ECB announced that it was removing self-imposed limits that it had followed
in previous asset purchase programs that restricted its purchases of any one country’s bonds.98
Japan announced that it would adopt an emergency spending package worth $238 billion, or
equivalent to 10% of the country’s annual GDP.99 Despite the various actions, global financial
markets turned down March 27 (the DJIA dropped by 900 points) reportedly over volatility in oil
markets and concerns that the economic effects of the COVID-19 pandemic were worsening.100
By March 30, central banks in developing countries from Poland, Columbia, South Africa, the
Philippines, Brazil, and the Czech Republic reportedly had begun adopting monetary policies
similar to that of the Federal Reserve to stimulate their economies.101 In commodity markets,
Brent crude oil prices continued to fall, reaching a low of $22.76. Strong global demand for
dollars continued to put upward pressure on the international value of the dollar. In response, the
Federal Reserve introduced a new temporary facility that would work with its swap lines to allow
central banks and international monetary authorities to enter into repurchase agreements with the
Fed.102 From mid-March to mid-April, U.S. workers’ claims for unemployment benefits reached
over 17 million as firms faced a collapse in demand and requirements for employees to self-
quarantine caused them to begin furloughing or laying off employees. Financial markets began to
recover somewhat in early April in response to the accumulated monetary and fiscal policy
initiatives, but remained volatile as a result of uncertainty over efforts to reach an output
agreement among oil producers and the continued impact of the viral health effects.
April 2020
The Federal Reserve announced on April 8 that it was establishing a facility to fund small
businesses through the Paycheck Protection Program. Japan also announced that it was preparing
to declare areas around Tokyo to be in a state of emergency and that it would adopt a $989 billion
funding package.103

97 Dombrey, Daniel, Guy Chazan, and Jim Brunsden, “Nine Eurozone Countries Issue Call for ‘Coronabonds,’”
Financial Times, March 26, 2020. https://www.ft.com/content/258308f6-6e94-11ea-89df-41bea055720b.
98 Arnold, Martin and Tommy Stubbington, “ECB Shakes Off Limits on New €750bn Bond-Buying Plan,” Financial
Times, March 27, 2020. https://www.ft.com/content/d775a99e-13b2-444e-8de5-fd2ec6caf4bf.
99 Kajimoto, Tetsushi, Izumi Nakagawa, “Japan Plans Huge Stimulus Package to Cushion Blow from Coronavirus,”
Reuters, March 27, 2020, https://www.reuters.com/article/us-health-coronavirus-japan-stimulus/japan-plans-huge-
stimulus-package-to-cushion-blow-from-coronavirus-idUSKBN21E0UW.
100 Georgiadis, Philip, Hudson Lockett, and Leo Lewis, “Global Stocks Falter After Two Days of Big Gains,” Financial
Times, March 27, 2020. https://www.ft.com/content/bc33c31c-f019-4ef8-85df-0014a5406ac1.
101 Wheatley, Jonathan, “Emerging Market Central Banks Embark on Radical Stimulus Policies,” Financial Times,
March 30, 2020. https://www.ft.com/content/70398316-3fd5-4428-88ab-6f898ee42fd5.
102 Politi, James, Brendan Greeley, and Colby Smith, “Fed Sets Up Scheme to Meet Booming Foreign Demand for
Dollars,” Financial Times, March 31, 2020. https://www.ft.com/content/6c976586-a6ea-42ec-a369-9353186c05bb.
103 Takeo, Yuko and Yoshiaki Nohara, “Japan’s Virus Stimulus Package to Come in Two Phases,” Bloomberg, April 5,
2020. https://www.bloomberg.com/news/articles/2020-04-06/japan-s-virus-stimulus-package-to-come-in-two-phases-
documents-k8nuj552.
Congressional Research Service

27

Global Economic Effects of COVID-19

On April 9, OPEC and Russia agreed to cut oil production by 10 million barrels per day.104 On
April 15, G-20 finance ministers and central bank governors announced their support for the
proposed agreement by Saudi Arabia and Russia to reduce oil production.105 They also announced
an agreement to freeze government loan payments until the end of the year to help low-income
developing countries address the pandemic and asked international financial institutions to do
likewise.106 G-7 finance ministers and central bank governors agreed to support the G-20 proposal
to suspend debt payments by developing countries.107 Eurozone finance ministers announced a
€500 billion (about $550 billion) emergency spending package to support governments,
businesses, and workers. Reportedly, the measure will provide funds to the European Stability
Mechanism, the European Investment Bank, and for unemployment insurance.108
In other policy areas, the IMF announced that it was doubling its emergency lending capability to
$100 billion, in response to requests from more than 100 countries for assistance.109 The Bank of
England announced that it would take the unprecedented move of temporarily directly financing
UK government emergency spending needs through monetary measures rather than through the
typical method of issuing securities to fight the effects of COVID-19.110 Secretary-General of the
United Nations Guterres declared on April 9, 2020, before the United Nations Security Council
that the pandemic posed a significant threat to the maintenance of international peace and security
and outlined eight specific risks, including the erosion of trust in public institutions, increased
risks from terrorism and bioterrorism, and worsening existing human rights abuses.111
Federal Reserve Chairman Jerome Powell, stating that the U.S. economy was deteriorating “with
alarming speed,” announced on April 10 that the Fed would provide an additional $2.3 trillion in
loans, including a new financial facility to assist firms by acquiring shares in exchange traded
funds that own the debt of lower-rated, riskier firms that are among the most exposed to
deteriorating economic conditions associated with COVID-19 and low oil prices.112 On April 16,
the U.S. Labor Department reported that 5.2 million Americans filed for unemployment insurance

104 Sheppard, David, Anjli Raval, Derek Brower, and Henry Foy, “G20 Ministers Meet to Endorse OPEC-Russia Deal
to Slash Oil Production,” Financial Times, April 10, 2020. https://www.ft.com/content/c7a1e2e6-8c17-48d5-8c16-
edce911b5cbb.
105 Sheppard, David, Anjli Raval, Derek Brower. and Henry Foy, G20 Backs Largest Oil Supply Agreement in History,
Financial Times, April 15, 2020. https://www.ft.com/content/16ac91d8-42bf-4190-88de-f3d89b2b36f4.
106 England, Andrew, Jonathan Wheatley and James Politi, G20 Agrees Debt Relief for Low Income Nations, Financial
Times, April 15, 2020. https://www.ft.com/content/5f296d54-d29e-4e87-ae7d-95ca6c0598d5.
107 Politi, James and Jonathan Wheatley, G7 Countries Back Debt Relief For Poorest Nations, Financial Times, April
14, 2020. https://www.ft.com/content/c384ed59-1ca3-476f-9b89-eaf5cf31e42c.
108 Fleming, Sam and Mehreen Khan, “Eurozone Countries Strike Emergency Deal on Coronavirus Rescue,” Financial
Times, April 9, 2020. https://www.ft.com/content/b984101a-42b8-40db-9a92-6786aec2ba5c.
109 Politi, James, “IMF Boosts Emergency Lending Capacity to $100bn,” Financial Times, April 9, 2020.
https://www.ft.com/content/e46faadc-456b-4cf8-a2fd-2017702747ab.
110 Giles, Chris and Philip Georgiadis, “Bank of England to Directly Finance UK Government’s Extra Spending,”
Financial Times, April 9, 2020. https://www.ft.com/content/664c575b-0f54-44e5-ab78-2fd30ef213cb.
111 Secretary-General’s Remarks to the Security Council on the COVID-19 Pandemic [as delivered], United Nations,
April 9, 2020. https://www.un.org/sg/en/content/sg/statement/2020-04-09/secretary-generals-remarks-the-security-
council-the-covid-19-pandemic-delivered.
112 Rennison, Joe, Robin Wigglesworth, and Colby Smith, “Federal Reserve Enters New Territory with Support for
Risky Debt,” Financial Times, April 10, 2020. https://www.ft.com/content/c0b78bc9-0ea8-461c-a5a2-89067ca94ea4.
Heather Long, “Fed Chair Powell Says U.S. Economy Deteriorating ‘With Alarming Speed,’” Washington Post, April
9, 2020. https://www.washingtonpost.com/business/2020/04/09/federal-reserve-unveils-over-2-trillion-new-lending-
small-businesses-city-governments-big-firms/.
Congressional Research Service

28

Global Economic Effects of COVID-19

during the previous week, raising the total claims since mid-March to over 22 million.113
According to Chinese official statistics, the Chinese economy shrank by 6.8% on an annual basis
during the first quarter of 2020, reportedly the first such contraction in 40 years.114
Financial market indicators rose on April 17, reportedly on an upbeat sentiment that actions taken
by the Federal Reserve and other central banks would stabilize conditions in the corporate credit
market.115 The price of futures contracts for oil delivery in May 2020 for the U.S. West Texas
Intermediate (WTI) fell to $18 per barrel, the lowest it had been since 2002, reportedly reflecting
rising inventories and low global demand.116 Leaders of emerging economies in Latin America
and Africa argued that the G-20 call for suspension of interest payments fell short of what is
needed. National leaders from Columbia, Brazil, Mexico, and Chile encouraged the World Bank,
the InterAmerican Development Bank, and the IMF to double their net lending to Latin America,
arguing that, “The Covid-19 pandemic is a shock of unprecedented magnitude, uncertain duration
and catastrophic consequences that, if not properly addressed, could lead to one of the most tragic
episodes in the history of Latin America and the Caribbean.”117
The price of oil fell to its lowest level in two decades on April 19, reportedly reflecting a
significant drop in global demand for energy and rising inventories.118 Some Eurozone members
reportedly argued for the ECB to create a Eurozone “bad bank” to remove billions of euros in
non-performing debts from banks’ balance sheets to provide more capacity for Eurozone banks at
a potentially critical time when banks could see an increase in non-performing loans.119 The
World Bank confirmed that its “pandemic bonds” would pay out $133 billion to the poorest
countries affected by the pandemic.120
On April 21, Agricultural Ministers of the G-20 countries released a joint statement that supported
measures to “ensure the health, safety, welfare, and mobility of workers in agriculture and
throughout the food supply chain.” The joint statement also indicated that the G-20 countries
would adopt measures that are “targeted, proportionate, transparent, and temporary, and that they
do not create unnecessary barriers to trade or disruption to global food supply chains.” The
statement also indicated that the G-20 would, “guard against any unjustified restrictive measures
that could lead to excessive food price volatility in international markets and threaten the food
security and nutrition of large proportions of the world population, especially the most vulnerable
living in environments of low food security.”121

113 Unemployment Insurance Weekly Claims, Department of Labor, April 16, 2020. https://www.dol.gov/ui/data.pdf.
114 Hale, Thomas, Xinning Liu, and Yuan Yang, China’s Economy Shrinks for First Time in Four Decades, Financial
Times, April 17, 2020. https://www.ft.com/content/8f941520-67ad-471a-815a-d6ba649d22ed.
115 Smith, Colby, Myles McCormick, Tommy Stubbington, and Hudson Lockett, US Stocks Extend Rally With Central
Bank Safety Net, Financial Times, April 17, 2020. https://www.ft.com/content/5ebbc2d8-ade3-4d5c-86f5-
49b9478fe03d.
116 Sheppard, David, US Crude Tumbles to 18-year Low as Supply Overwhelms Demand, Financial Times, April 17,
2020. https://www.ft.com/content/d0a0cfc3-765c-4b55-ada7-11e0d378d406.
117 Wheatley, Jonathan, Michael Stott, and David Pilling, Emerging Economies Call for More Financial Help After G20
Deal, Financial Times, April 17, 2020. https://www.ft.com/content/203ed8f5-6bb2-4016-80a9-dd99269bfa26.
118 Lockett, Hudson Lockett and David Sheppard, US Oil Price Plunges to 20-year Low as Coronavirus Hits Demand,
Financial Times, April 19, 2020. https://www.ft.com/content/a5292644-958d-4065-92e8-ace55d766654.
119 Arnold, Martin and Javier Espinoza, ECB Pushes for Eurozone Bad Bank to Clean up Soured Loans, Financial
Times, April 19, 2020. https://www.ft.com/content/15d17d1d-8e1b-4f84-97b4-b62e6ae8f962.
120 Gross, Anna, World Bank Pandemic Bonds to Pay $133m to Poorest Virus-hit Nations, Financial Times, April 19,
2020. https://www.ft.com/content/c8556c9f-72f7-48b4-91bf-c9e32ddab6ff.
121 G20 Extraordinary Agriculture Ministers Meeting: Statement on COVID-19, G-20, April 21, 2020. https://g20.org/
Congressional Research Service

29

Global Economic Effects of COVID-19

On April 23, the House passed H.R. 266 (P.L. 116-139), the Paycheck Protection Program and
Health Care Enhancement Act, following similar actions by the Senate the previous day. The
measure will provide $484 billion for small business loans, health care providers, and COVID-19
testing. The U.S. Labor Department reported that 4.4 million Americans filed for unemployment
insurance in the previous week, raising the total that have applied to over 26 million.122 Indicators
of manufacturing and services activity in Europe dropped to their lowest level since 1990,
reflecting the impact of the pandemic on the European economy.123 The Bank of England
indicated that it would quadruple its borrowing over the second quarter of 2020, reflecting a
contraction in the UK economy, lower tax revenues, and increased financial demands to support
fiscal policy measures to fight the pandemic.124 The Saudi Presidency of the G-20 called on
international organizations on April 24 to fund an emergency response to the pandemic. The Bank
of Japan announced on April 27 that it would purchase unlimited amounts of government bonds
and quadruple its purchases of corporate debt to keep interest rates low and stimulate the
Japanese economy.125
At its April 29 scheduled meeting, the U.S. Federal Open Market Committee left its main interest
rates unchanged, but reiterated its commitment to use “its full range of tools to support the U.S.
economy.” The policy statement concluded that, “The ongoing public health crisis will weigh
heavily on economic activity, employment, and inflation in the near term, and poses considerable
risks to the economic outlook over the medium term.”126 The Federal Reserve also announced a
change in its eligibility requirements for a $500 billion lending program for municipalities. The
statement followed the release of the preliminary estimate of U.S. first quarter GDP, which
indicated that the economy had contracted by an annualized rate of 4.8% (revised to 5.0%).127
On April 30, the Department of Labor released its weekly data on applications for unemployment
insurance, which indicated that an additional 3.8 million people had filed for unemployment
insurance during the week, raising the total number who had applied to 30 million.128 The Federal
Reserve also announced an expansion in its medium-size business loan program by allowing
firms with up to 15,000 employees or with revenues up to $5 billion to access a new $600 billion
program. In addition, the Fed lowered the minimum loan amount for small businesses and
announced a loan program to assist riskier businesses.129 At the same time, the ECB expanded a
record low-interest rate loan program for Eurozone banks to support economic activity, while
warning that the Eurozone economy could contract between 5% and 12% in 2020 as it faces, “an
economic contraction of a magnitude and speed that are unprecedented in peacetime.”130 The

en/media/Pages/pressroom.aspx.
122 Unemployment Insurance Weekly Claims, April 23, 2020. https://www.dol.gov/ui/data.pdf.
123 Arnold, Martin and Valentina Romei, European Business Activity Crashes Under Coronavirus Lockdowns,
Financial Times, April 23, 2020. https://www.ft.com/content/8520895f-3249-4a8b-b0e5-881a64e77971.
124 Giles, Chris, and Tommy Stubbington, UK Treasury to Quadruple Borrowing to £180bn Over Next Quarter,
Financial Times, April 23, 2020. https://www.ft.com/content/8886e002-c260-4daa-8b7b-509b3f7e6edb.
125 Harding, Robin, Bank of Japan Steps up Coronavirus Stimulus With Bond-buying Pledge, Financial Times, April
27, 2020. https://www.ft.com/content/7ba5c507-df9e-4107-87eb-73afa2c13e91.
126 Federal Reserve Issues FOMC Statement, Board of Governors of the Federal Reserve System, April 29, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200429a.htm.
127 Gross Domestic Product, First Quarter 2020 (Advance Estimate), Bureau of Economic Analysis, April 29, 2020.
https://www.bea.gov/.
128 Unemployment Insurance Weekly Claims, April 30, 2020. https://www.dol.gov/ui/data.pdf.
129 Politi, James, Colby Smith and Robert Armstrong, Federal Reserve Extends $600bn Main Street Lending Program.
Financial Times, April 30, 2020. https://www.ft.com/content/46fdc853-1d7d-49af-93e8-f12e0d006fc2.
130 Introductory Statement, European Central Bank, April 29, 2020. https://www.ecb.europa.eu/press/pressconf/2020/
Congressional Research Service

30

Global Economic Effects of COVID-19

ECB also announced a new non-targeted low-interest rate pandemic emergency longer-term
refinancing operation (PELTROs) to complement its Pandemic Emergency Refinance Operations
announced in March.131 House Speaker Pelosi stated that House Democrats were considering a $1
trillion spending bill to support state and local governments.132 In a development that seemed
incongruous with the broader economic situation, between April 1, 2020, and April 30, 2020, the
DJIA rose more than 3,400 points, or 16%, marking the strongest monthly increase since 1987.133
May 2020
On May 5, Germany’s Constitutional court issued a ruling that could prevent the German central
bank, the Bundesbank, from making additional bond purchases under the Pandemic Emergency
Purchase Program (PEPP). The ECB’s program is intended to ease borrowing costs across the
Eurozone to stimulate economic growth.
The U.S. Census Bureau reported on May 5 that U.S. exports and imports fell in March; exports
fell by a greater amount than imports, thereby increasing the monthly U.S. goods and services
trade deficit. The trade balance for March was -$44.5 billion, an increase of about $4.6 billion
over the trade deficit in February. The decline in export and import values reflected lower imports
and exports of both goods and services.
On May 6, the European Commission released its economic forecast, which indicated that
economic activity in the EU would decline by 7.4% in 2020 as a result of measures to contain the
pandemic. The Commission forecast that economic growth would advance by 6.0% in 2021,
assuming the containment measures can be lifted gradually, the viral effects remain contained,
and that the fiscal and monetary measures implemented by the EU members are effective in
blunting the negative effects on economies.134 On May 7, the Labor Department announced that
2.7 million Americans had filed for unemployment insurance during the week, raising the total
that had filed over the previous seven weeks to 33 million.135
On May 8, the U.S. Department of Labor announced that 20.5 million Americans had lost their
jobs in April, pushing the national unemployment rate to 14.5%. Despite the rise in the
unemployment rate, the DJIA rose by 2.0%, reportedly based on optimism that the monetary
policy actions the Federal Reserve, the ECB, and the Bank of Japan had taken to support financial
markets would stabilize and stimulate the markets and optimism that the health crisis is ebbing.136
On May 12, House Democrats introduced H.R. 6800, the Heroes Act, to provide a $3 trillion
supplemental spending bill for additional financial resources to state and local governments and

html/ecb.is200430~ab3058e07f.en.html.
131 Arnold, Martin and Tommy Stubbington, ECB Launches Fresh Push to Lend to Banks at Ultra-low Rates, Financial
Times, April 30, 2020. https://www.ft.com/content/cef090d0-97dc-4e75-a4b1-deebfd4afacf.
132 Werner, Erica, Pelosi Points to $1 Trillion Need for State and Local Governments in Next Coronavirus Bill, The
Washington Post, April 30, 2020. https://www.washingtonpost.com/us-policy/2020/04/30/congress-coronavirus-
economy/.
133 Henderson, Richard Henderson, Robin Wigglesworth, and Katie Martin, U.S. Stocks Close Out Best Month Since
1987 in Global Rebound, Financial Times, April 30, 2020. https://www.ft.com/content/88e57ec9-42d4-455d-a045-
293a6a54837d.
134 European Economic Forecast Spring 2020, European Commission, May 2020. https://ec.europa.eu/commission/
presscorner/detail/en/ip_20_799.
135 Unemployment Insurance Weekly Claims, May 5, 2020. https://www.dol.gov/ui/data.pdf.
136 Platt, Eric, Colby Smith, Adam Samson, and Hudson Lockett, Wall Street closes higher despite dire US jobs data,
Financial Times, May 8, 2020. https://www.ft.com/content/a9999ef1-1373-41b7-8d55-d780fd06825d.
Congressional Research Service

31

Global Economic Effects of COVID-19

for other purposes. The measure passed the House on May 15 and was sent to the Senate for
consideration. On May 13, the UK Office of National Statistics reported that UK GDP contracted
by 2.0% in the first quarter, the largest decline in the UK’s GDP since 2008 with all major
economic sector affected.137 On May 14, the U.S. Department of Labor announced that an
additional 2.4 million Americans had filed for unemployment insurance during the previous
week, increasing the total number filing for unemployment insurance over the previous eight
weeks to 36 million.138
On May 18, German Chancellor Angela Merkel and French President Emmanuel Macron
proposed a €500 billion (about $620 billion) EU recovery fund in an effort to gain a coordinated
EU fiscal response to the pandemic.139
The Department of Labor announced on May 21 that an additional 2.4 million Americans had
filed for Unemployment Insurance, raising the total to 38.4 million over the previous nine
weeks.140
On May 27, European Commission President Ursula von der Leyen proposed a €750 billion
(about $825 billion) coronavirus recovery plan to provide loans and grants to the hardest hit EU
economies and changes to the EU budget. The Japanese Cabinet proposed a second supplemental
appropriation measure that includes $296 billion in spending and a total value of about $1.1
trillion in loans and guarantees, funded through new bonds.141
On May 28, the Department of Labor announced that an additional 1.9 million (revised)
Americans filed for Unemployment Insurance, raising the ten-week total to 42.6 million.142
June 2020
On June 4, the U.S. Census Bureau reported that U.S. imports fell by 13.7% and exports fell by
20.5% in April, increasing the monthly current account deficit and registering the largest decline
in U.S. trade since the global financial crisis.143 In addition, the Labor Department announced that
an additional 1.9 million Americans filed for unemployment insurance, increasing the 11-week
total to 44 million.144 The European Central Bank announced that it would double to $1.5 trillion
its Pandemic Emergency Purchase Program to stimulate the European economy.145 The DJIA rose
by more than 800 points on June 5 as a positive jobs report, apparently signaling to some that the
U.S. economy would recover quickly from the pandemic-driven economic downturn.146 OPEC

137 GDP Monthly Estimate, UK: March 2020, Office for National Statistics, May 13, 2020. https://www.ons.gov.uk/
economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/march2020.
138 Unemployment Insurance Weekly Claims, May 14, 2020. https://www.dol.gov/ui/data.pdf.
139 Fleming, Sam, Victor Mallet, and Guy Chazan, Germany and France Unite in Call for €500 Billion Europe
Recovery Fund, Financial Times, May 18, 2020. https://www.ft.com/content/c23ebc5e-cbf3-4ad8-85aa-032b574d0562.
140 Unemployment Insurance Weekly Claims, May 21, 2020. https://www.dol.gov/ui/data.pdf.
141 Harding, Robin, Japan’s Cabinet Approves Extra $1.1 Trillion Budget to Counter Recession, Financial Times, May
27, 2020. https://www.ft.com/content/ce7f3564-c997-339c-ad3d-c6d092fb7f1e.
142 Unemployment Insurance Weekly Claims, May 29, 2020. https://www.dol.gov/ui/data.pdf.
143 Monthly U.S. International Trade in Goods and Services in April 2020, Census Bureau, June 4, 2020.
https://www.census.gov/foreign-trade/data/index.html
144 Unemployment Insurance Weekly Claims, June 4, 2020. https://www.dol.gov/ui/data.pdf.
145 Arnold, Martin, ECB Boosts Bond-Buying Stimulus Package by €600, Financial Times, June 4, 2020.
https://www.ft.com/content/c59ab92d-e614-4284-a028-46ee3bcf92f9.
146 Telford, Taylor, and Thomas Heath, Dow Soars 1,000 Points as Wall Street Closes in on Pre-Pandemic Levels, The
Washington Post, June 5, 2020. https://www.washingtonpost.com/business/2020/06/05/stocks-market-today-
Congressional Research Service

32

Global Economic Effects of COVID-19

and Russia reportedly agreed on June 7 to maintain their cuts in oil production for one additional
month in an effort to raise international oil prices.147
On June 8, the DJIA rose nearly 2% reportedly on positive jobs data, extending gains in the value
of the index and rising to its highest level since late February.148 Most foreign markets indices
similarly rose. The World Bank forecasted that emerging and developing economies would
contract in 2020 for the first time in 60 years.149
On June 11, the DJIA fell by more than 1,800 points, or 6.9% reportedly on fears that a spike in
new coronavirus cases signaled the pandemic was not contained and over concerns about U.S.
economic growth as a result of projections by the Federal Reserve that were interpreted as
gloomy.150 The Labor Department reported that an additional 1.57 million Americans filed for
unemployment insurance during the previous week, raising the twelve-week total from mid-
March to 44 million Americans.151 According to a report by Eurostat on June 12, industrial
production in the Eurozone fell by 17.1% in April, reportedly the largest decline in production
recorded since records began in 1991. The decline reflects lower levels of economic activity in
manufacturing and construction throughout the Eurozone.152 The Federal Reserve released its
semi-annual Monetary Policy Report.153
The Institute of International Finance reported on June 15, that capital outflows from developing
economies had reversed with funds flowing back into developing economies, primarily by bond
issuance through the international bond market, rather than by refinancing existing debt.154
In testimony before the Senate Banking Committee on June 17, Federal Reserve Chairman
Powell stressed that although there were positive signs that U.S. economic growth was beginning
to rebound, there was “significant uncertainty” about the timing and strength of the recovery.155
On June 17, the Bank of Japan announced that it was maintaining its low interest rates even as it
increased its coronavirus lending facility to $1 trillion.156 The U.S. Energy Information
Administration reported that U.S. crude oil production fell to its lowest point since March 2018,
while stockpiles reached record highs. The price of Brent crude reached $41 per barrel,

coronavirus-economy/.
147 Sheppard, David, Anjli Raval, and Derek Brower, OPEC and Russia Agree to Extend Record Oil Supply Cuts,
Financial Times, June 7, 2020. https://www.ft.com/content/88747416-0fc4-4808-999f-753793589ca7.
148 Dempsey, Harry, Bryce Elder, and Hudson Lockett, U.S. Stocks Erase Losses for the Year, Financial Times, June 8,
2020. https://www.ft.com/content/1dfaeb58-6d65-4f17-b710-b1ebc6622649.
149 Politi, James, Emerging Economies Forecast to Shrink for First Time in 60 Years, Financial Times, June 8, 2020.
https://www.ft.com/content/47998ee3-b2d3-4066-a914-edbf60b797b5.
150 Seigel, Rachel and Thomas Heath, Dow Slides More Than 1,800 Points on Fears of Coronavirus Resurgence, More
Economic Pain, The Washington Post, June 11, 2020. https://www.washingtonpost.com/business/2020/06/11/markets-
today-fed-coronavirus/.
151 Unemployment Insurance Weekly Claims, Department of Labor, June 11, 2020. https://www.dol.gov/ui/data.pdf.
152 Arnold, Martin, Eurozone Industrial Production Falls by Record 17.1% in April, Financial Times, June 12, 2020.
https://www.ft.com/content/e3301cd6-27ce-35f0-829a-c6613849b378.
153 Board of Governors of the Federal Reserve System, Monetary Policy Report, June 12, 2020.
https://www.federalreserve.gov/monetarypolicy/2020-06-mpr-summary.htm
154 Wheatley, Jonathan, Developing Economies Borrow More Despite Debt Relief Initiative, Financial Times, June 15,
2020. https://www.ft.com/content/54c545aa-01b5-4e95-8adc-e680f5d82be1.
155 Powell, Jerome H., Semiannual Monetary Report to the Congress, June 16, 2020. https://www.federalreserve.gov/
newsevents/testimony/powell20200616a.htm.
156 Harding, Robin, Bank of Japan Pledges $1 Trillion in Coronavirus Lending, Financial Times, June 17, 2020.
https://www.ft.com/content/5d8e5df2-dfb6-44f1-a434-ab8a745d37ba.
Congressional Research Service

33

Global Economic Effects of COVID-19

encouraging some U.S. producers to consider restarting wells that were closed when prices
dropped to around $20 per barrel.157
On June 18, the Department of Labor announced that an additional 1.54 million Americans filed
for unemployment during the week, raising the thirteen-week total to 45.7 million Americans.158
During May, U.S. retail sales increased by 17.7% as some businesses began reopening and
increasing optimism in financial markets that economic activity was on course for a quick
recovery. Concerns over trade disputes and a rise in new coronavirus cases, however, reportedly
overcame the optimism of increased sales and were factors in DJIA losses on June 24 of more
than 700 points. In addition, the IMF issued its updated economic outlook, forecasting that global
economic growth would contract by 4.9% in 2020, compared with an April forecast of a decline
of 3.0%.159
On June 25, the ECB and the German government announced they had reached a tentative accord
to end the conflict over the ECB’s bond-buying program.160 Elsewhere, the Labor Department
reported that an additional 1.48 million Americans filed for unemployment insurance, raising the
fourteen-week total from mid-March to over 47 million.161 Between June 1 and June 26, the DJIA
posted thirteen days with gains and seven days of declines, with the DJIA value at the end of the
period nearly the same as it was in early March 2020. On June 24 and 26, the DJIA index fell by
more than 700 points, reportedly over investors’ concerns over a spike in new coronavirus cases
in various U.S. States.162Also on June 25, the Federal Reserve announced the result of stress tests
on 33 U.S. banks under three scenarios163 to ascertain their capital sufficiency given the strains to
the financial system caused by COVID-19.164 The Fed reported that all large U.S. banks are
“sufficiently capitalized” to survive the three scenarios.165 Both the IMF and the WTO released
forecasts indicating that global trade had declined sharply in the first quarter of 2020 and was
projected to post similarly sharp declines for the year. By the end of June, the international price
of crude had risen slightly above $40 per barrel, regaining about half the value it had lost during
the first quarter of 2020.
July 2020
The Department of Labor announced on July 2 that an additional 1.4 million Americans had filed
for Unemployment Insurance, raising the total to 48.7 million over the fifteen-week period from
mid-March.166 The insured seasonally adjusted unemployment rate in June was estimated at
13.2%, unchanged from the revised rate in the previous week. On July 2, the BLS also released

157 Brower, Derek, U.S. Oil Production Drops to Lowest Point Since 2018, Financial Times, June 17, 2020.
https://www.ft.com/content/6b877160-28e4-4ddf-8959-2a7cd0acd4ba.
158 Unemployment Insurance Weekly Claims, Department of Labor, June 18, 2020. https://www.dol.gov/ui/data.pdf.
159 World Economic Outlook Update, p. 5.
160 Arnold, Martin, Berlin and ECB Signal End to Legal Impasse to Bond-Buying, Financial Times, June 22, 2020.
https://www.ft.com/content/5f000a25-3d54-4610-8579-cab9b21759ee.
161 Unemployment Insurance Weekly Claims, Department of Labor, June 25, 2020. https://www.dol.gov/ui/data.pdf.
162 Elder, Bryce, Sarah Provan, and Hudson Lockett, U.S. Stocks End Lower as States Roll Back Reopening Measures,
Financial Times, June 26, 2020. https://www.ft.com/content/5013d097-c1bf-4ed9-979a-842749e5956a.
163 The three scenarios include: (1) a rapid, or “V”-shaped recovery; (2) a slower, or “U”-shaped recovery; and (3) a
“W”-shaped or double-dip recession with a short-lived recovery followed by a severe drop in activity later this year due
to a second COVID event. Assessment of Bank Capital During the Recent Coronavirus Event, Board of Governors of
the Federal Reserve System, June 2020, p. 2.
164 Ibid.
165 Ibid, p. 1-2.
166 Unemployment Insurance Weekly Claims, July 1, 2020. https://www.dol.gov/ui/data.pdf.
Congressional Research Service

34

Global Economic Effects of COVID-19

data on the employment situation in June, indicating that non-farm payroll rose by 4.8 million,
lowering the unemployment rate to 11.5%.

Comparing the Current Crisis and the 2008 Crisis
Sharp declines in the stock market and broader financial sector turbulence; interest rate cuts and large-scale
Federal Reserve intervention; and discussions of massive government stimulus packages have led some observers
to compare the current market reaction to that experienced a little over a decade ago. There are similarities and
important differences between the current economic crisis and the global financial crisis of 2008/2009. Foremost,
the earlier crisis was rooted in structural weakness in the U.S. financial sector. Fol owing the col apse of the U.S.
housing bubble, it became impossible for firms to identify demand and hold inventories across many sectors
(construction, retail, etc.). This led to massive oversupply and sharp retail losses which extended to other sectors
of the U.S. economy and eventual y the global economy. Moreover, financial markets across countries were linked
together by credit default swaps. As the crisis unfolded, large numbers of banks and other financial institutions
were negatively affected, raising questions about capital sufficiency and reserves. The crisis then quickly engulfed
credit-rating agencies, mortgage lending companies, and the real estate industry broadly. Market resolution came
gradually with a range of monetary and fiscal policy measures that were closely coordinated at the global level.
These were focused on putting a floor under the falling markets, stabilizing banks, and shoring up investor
confidence to get spending started again. Starting in September 2007, the Federal Reserve cut interest rates from
over 5% in September 2007 to between 0 and 0.25% before the end of the 2008. Once interest rates approached
zero, the Fed turned to other so-called “unconventional measures,” including targeted assistance to financial
institutions, encouraging Congress to pass the Troubled Asset Relief Program (TARP) to prevent the col apse of
the financial sector and boost consumer spending. Other measures included swap arrangements between the
Federal Reserve and the European Central Bank and smaller central banks, and so-called “quantitative easing” to
boost the money supply. On a global level, the United States and other countries tripled the resources of the IMF
(from $250 bil ion to $750 bil ion) and coordinated domestic stimulus efforts.
Unlike the 2008 crisis, the current crisis began as a supply shock. As the global economy has become more
interdependent in recent decades, most products are produced as part of a global value chain (GVC), where an
item such as a car or mobile device consists of parts manufactured all over the world, and involving multiple
border crossings before final assembly. The earliest implications of the current crisis came in January as plant
closures in China and other parts of Asia led to interruptions in the supply chain and concerns about dwindling
inventories. As the virus spread from Asia to Europe, the crisis switched from supply concerns to a broader
demand crisis as the measures being introduced to contain the spread of the virus (social distancing, travel
restrictions, cancelling sporting events, closing shops and restaurants, and mandatory quarantine measures)
prevent most forms of economic activity from occurring. Thus, unlike the 2008 crisis response, which involved
liquidity and solvency-related policy measures to get people spending again, the current crisis did not start as a
financial crisis, but could evolve into one if a recovery in economic activity is delayed. While larger firms may have
sufficient capital to wait out a crisis, many aspects of the economy (such as restaurants or retail operations)
operate on very tight margins and would likely not be able to pay employees after closures lasting more than a few
days. Many people wil also need to balance child care and work during quarantine or social distancing measures.
During this type of crisis, while monetary policy measures play a part—and the Federal Reserve has once again cut
rates to near zero—they cannot compensate for the physical interaction that the global economy is dependent
upon. As a result, fiscal stimulus wil likely play a relatively larger role in this crisis in order to prevent personal and
corporate bankruptcies during the peak crisis period. Efforts to coordinate U.S. and foreign economic policy
measures wil also have an important role in mitigating the scale and length of any global economic downtown.
Policy Responses
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, indicating they will “use all
appropriate policy tools” to sustain economic growth.167 The Finance Ministers also pledged

167 Statement of G-7 Finance Ministers and Central Bank Governors, 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 They Don’t
Congressional Research Service

35

link to page 72 Global Economic Effects of COVID-19

fiscal support to ensure health systems can sustain efforts to fight the outbreak.168 In most cases,
however, countries have pursued their own divergent strategies, in some 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 1.0% to 1.25% due to
concerns about the “evolving risks to economic activity of the COVID-19.”169 At the time, the cut
was the largest one-time reduction in the interest rate by the Fed since the global financial crisis.
After a delayed response, other central banks have begun to follow the actions of the G-7
countries. Most central banks have lowered interest rates and acted to increase liquidity in their
financial systems through a combination of measures, including lowering capital buffers and
reserve requirements, creating temporary lending facilities for banks and businesses, and easing
loan terms. In addition, national governments have adopted various fiscal measures to sustain
economic activity. In general, these measures include making payments directly to households,
temporarily deferring tax payments, extending unemployment insurance, and increasing
guarantees and loans to businesses.
See the Appendix to this report for detailed information about the policy actions by individual
governments.170
The United States
Recognizing the growing impact the pandemic is having on financial markets and economic
growth, the Federal Reserve (Fed) has taken 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
actions are intended to stimulate economic activity by reducing interest rates and others are
intended to provide liquidity to financial markets so that firms have access to needed funding. 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.
Global financial conditions have also been significantly affected.171” On March 31, 2020, the
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.172
On April 29, the Bureau of Economic Analysis released first quarter U.S. GDP data indicating
that the U.S. economy had contracted by 4.8% at an annual rate, as indicated in Figure 8. A
decline in economic activity of 30% or more was recorded in motor vehicles and parts, recreation,
food services and accommodation and transportation sectors, reflecting the quarantine measures
adopted across the country. In contrast to the other sectors of the economy, food and beverage
consumption increased by 25% as a result of the switch by individuals from eating at restaurants
and other commercial food service establishments to preparing and eating food at home.

Announce Any New Action,” Washington Post, March 3, 2020. https://www.washingtonpost.com/business/2020/03/
03/economy-COVID-19-rate-cuts/.
168 Giles, et al., “Finance Ministers Ready to Take Action.”
169 Federal Reserve Releases FOMC Statement, March 3, 2020, https://www.federalreserve.gov/newsevents/
pressreleases/monetary20200303a.htm.
170 Stage Three Proposal, U.S. Department of the Treasury, March 17, 2020. https://www.washingtonpost.com/context/
department-of-treasury-proposal-for-COVID-19-response/6c2d2ed5-a18b-43d2-8124-28d394fa51ff/?itid=
lk_inline_manual_3.
171 Federal Reserve Issues FOMC Statement, March 15, 2020. https://www.federalreserve.gov/newsevents/
pressreleases/monetary20200315a.htm.
172 Politi, James and Aime Williams, “Trump to Suspend Some Tariffs for 90 Days,” Financial Times, March 31, 2020.
https://www.ft.com/content/46add447-2048-4348-bd34-2088ad0e3bc8.
Congressional Research Service

36

Global Economic Effects of COVID-19

Figure 8. U.S. GDP, Percent Change From Preceding Quarter, 1st Quarter 2020

Source: Bureau of Economic Analysis. Created by CRS.
On May 5, the U.S. Census Bureau reported an increase in the overall U.S. trade deficit on a
month-to-month basis of $4.5 billion, reflecting lower amounts of exports and imports of both
goods and services. Exports and imports of both goods and services fell from the previous month,
although the deficit in goods trade imports increased from $61 billion in February to $65.6 billion
in March; the surplus in services trade fell from $21.23 billion to $21.18 billion.
On May 8, the Department of Labor reported that the U.S. non-farm unemployment rate in April
increased by 20 million, raising the total number of unemployed Americans 23 million, or an
unemployment rate of 14% of a total civilian labor force of 156 million. The unemployment rate
does not include approximately 10 million workers who are involuntarily working part-time and
another 9 million individuals seeking employment. As indicated in Figure 9, the number of
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
employment losses were widely spread across the economy, affecting every non-farm sector and
all labor groups.
Congressional Research Service

37

Global Economic Effects of COVID-19

Figure 9. Change in U.S. Employment by Major Industrial Sector

Source: The Employment Situation, Bureau of Labor Statistics, April, May, June 2020. Created by CRS.
In a speech on May 13, Federal Reserve Chairman Jerome Powell stated that the Federal
Reserve’s analysis indicated that of individuals working in February, “almost 40 percent of those
in households making less than $40,000 a year had lost a job in March.”173 Chairman Powell also
indicated that given the extraordinary nature of the current economic downturn that the Fed
would, “continue to use our tools to their fullest until the crisis has passed and the economic
recovery is well under way.” In characterizing the current situation, Chairman Powell said,
The overall policy response to date has provided a measure of relief and stability, and will
provide some support to the recovery when it comes. But the coronavirus crisis raises
longer-term concerns as well. The record shows that deeper and longer recessions can leave
behind lasting damage to the productive capacity of the economy. Avoidable household
and business insolvencies can weigh on growth for years to come. Long stretches of
unemployment can damage or end workers’ careers as their skills lose value and
professional networks dry up, and leave families in greater debt. The loss of thousands of
small- and medium-sized businesses across the country would destroy the life’s work and
family legacy of many business and community leaders and limit the strength of the
recovery when it comes. These businesses are a principal source of job creation—
something we will sorely need as people seek to return to work. A prolonged recession and
weak recovery could also discourage business investment and expansion, further limiting
the resurgence of jobs as well as the growth of capital stock and the pace of technological
advancement. The result could be an extended period of low productivity growth and
stagnant incomes.174

173 Current Economic Issues; Speech at the Peterson Institute for International Economics, Jerome H. Powell, May 13,
2020.
174 Ibid.
Congressional Research Service

38

Global Economic Effects of COVID-19

Monetary Policy175
Forward Guidance
Forward guidance 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
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
“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.”
Quantitative Easing
Large-scale asset purchases, popularly referred to as quantitative easing or QE, were also used
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
trillion.
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
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
unprecedented rate of up to $125 billion 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 trillion. One
notable difference from previous rounds of QE is that the Fed is purchasing securities of different
maturities, so the effect likely will 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
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
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
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
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
announced it would offer a three-month repo of $500 billion and a one-month repo of $500
billion 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
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 allows

175 This section was prepared by Marc Labonte, Specialist in Macroeconomic Policy, Government and Finance
Division, CRS. CRS Insight IN11259, Federal Reserve: Recent Actions in Response to COVID-19, by Marc Labonte.
Congressional Research Service

39

Global Economic Effects of COVID-19

foreign central banks to convert their U.S. Treasury holdings into U.S. dollars on an overnight
basis. The Fed will charge a (typically) 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
swap lines to provide additional dollars to meet global demand and is available to a broader group
of central banks than the swap lines.
Discount Window
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
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.
Foreign Central Bank Swap Lines
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
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
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
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
global demand. The new facility allows central banks and international monetary authorities to
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.176
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
financial system. This extended the Fed’s traditional role as lender of last resort from the banking
system to the overall 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
Reserve Act). To date, the Fed has created six facilities—some new, and some reviving 2008
facilities—in response to COVID-19.
 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
financial firms, nonfinancial firms, and asset-backed securities (ABS).
 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
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
window, it provides short-term, fully collateralized loans to primary dealers.
 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 makes loans to financial institutions to purchase assets that money
market funds are selling to meet redemptions.

176 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.
Congressional Research Service

40

Global Economic Effects of COVID-19

 On March 23, the Fed created two facilities to support corporate bond markets—
the Primary Market Corporate Credit Facility to purchase newly issued corporate
debt and the Secondary Market Corporate Credit Facility to purchase existing
corporate debt on secondary markets.
 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
nonmortgage consumer loans.
 On April 6, the Fed announced the Payroll Protection Program Lending Facility
(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.
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.
The PPP provides low-cost loans to small businesses to pay employees. These
loans do not pose credit risk to the Fed because they are guaranteed by the Small
Business Administration.
 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
employees or up to $2.5 billion in revenues. The loans to businesses would defer
principal and interest repayment for one year, and the businesses would have to
make a “reasonable effort” to retain employees.
 On April 9, the Fed announced the Municipal Liquidity Facility (MLF) to
purchase state and municipal debt in response to higher yields and reduced
liquidity in that market. The facility will only purchase debt of larger counties
and cities.
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
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.
Fiscal Policy
In terms of a fiscal stimulus, Congress adopted H.R. 6074 on March 5, 2020 (P.L. 116-123), to
appropriate $8.3 billion 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.
6201 (P.L. 116-127), the Families First COVID-19 Response Act, that provides paid sick leave
and free COVID-19 testing, expands food assistance and unemployment benefits, and requires
employers to provide additional protections for health care workers. Other countries have
indicated they will also provide assistance to workers and to some businesses. Congress also is
considering 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
payroll tax,177 and extended of the tax filing deadline.178 President Trump has taken additional
actions, including

177 Armus, Theo, “Federal, State Officials Attempt to Fight Virus Through Social Distancing, Stimulus Package,”
Washington Post, March 11, 2020. https://www.washingtonpost.com/world/2020/03/11/Covid-19-live-updates/.
178 Sevastopulo, Demetri, “US Treasury Considers Tax Filing Extension to Ease Virus Impact,” Financial Times,
March 11, 2020. https://www.ft.com/content/c65a6e40-639f-11ea-b3f3-fe4680ea68b5.
Congressional Research Service

41

Global Economic Effects of COVID-19

 Announcing on March 11, 2020, restrictions on all travel from Europe to the
United States for 30 days, directing the Small Business Administration (SBA) to
offer low-interest loans to small businesses, and directing the Treasury
Department to defer tax payments penalty-free for affected businesses.179
 Declaring on March 13, a state of emergency that frees up disaster relief funding
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
individuals identify symptoms, increased oil purchases for the Strategic Oil
Reserve, and a waiver on interest payments on student loans.180
 Invoking on March 18, 2020, the Defense Production Act (DPA) that gives him
the authority to require some U.S. businesses to increase production of medical
equipment and supplies that are in short supply.181
On March 25, 2020, the Senate adopted the COVID-19 Aid, Relief, and Economic Security Act
(S. 3548) to formally implement President Trump’s proposal by providing direct payments to
taxpayers, loans and guarantees to airlines and other industries, and assistance for small
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
March 27. The law
 Provides funding for $1,200 tax rebates to individuals, with additional $500
payments per qualifying child. The rebate begins phasing out when incomes
exceed $75,000 (or $150,000 for joint filers).
 Assists small businesses by providing funding for, forgivable bridge loans; and
additional funding for grants and technical assistance; authorizes emergency
loans to distressed businesses, including air carriers, and suspends certain
aviation excise taxes.
 Creates a $367 billion loan program for small businesses, establishes a $500
billion lending fund for industries, cities and states, a $150 billion for state and
local stimulus funds, and $130 billion for hospitals.
 Increases unemployment insurance benefits, expands eligibility and offer workers
an additional $600 a week for four month, in addition to state unemployment
programs.182
 Establishes special rules for certain tax-favored withdrawals from retirement
plans; delays due dates for employer payroll taxes and estimated tax payments

179 McAuley, James, and Michael Birnbaum, “Europe Blindsided by Trump’s Travel Restrictions, with Many Seeing
Political Motive,” Washington Post, 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-
5c5336b32760_story.html.
180 Fritz, Angela and Meryl Kornfield, “President Trump Declares a National Emergency, Freeing $50 Billion in
Funding,” Washington Post, March 13, 2020. https://www.washingtonpost.com/world/2020/03/13/Covid-19-latest-
news/.
181 Hellmann, Jessie, “Trump Invokes Defense Production Act as Covid-19 Response,” The Hill, March 18, 2020.
https://thehill.com/policy/healthcare/488226-trump-invokes-defense-production-act-as-Covid-19-response.
182 For additional information about unemployment and sick leave provisions, see CRS Insight IN11249, H.R. 6201:
Paid Leave and Unemployment Insurance Responses to COVID-19, by Sarah A. Donovan, Katelin P. Isaacs, and Julie
M. Whittaker, and CRS In Focus IF11487, The Families First Coronavirus Response Act Leave Provisions, by Sarah
A. Donovan and Jon O. Shimabukuro.
Congressional Research Service

42

Global Economic Effects of COVID-19

for corporations; and revises other provisions, including those related to losses,
charitable deductions, and business interest.
 Provides additional funding for the prevention, diagnosis, and treatment of
COVID-19; limits liability for volunteer health care professionals; prioritizes
Food and Drug Administration (FDA) review of certain drugs; allows emergency
use of certain diagnostic tests that are not approved by the FDA; expands health-
insurance coverage for diagnostic testing and requires coverage for preventative
services and vaccines; and revises other provisions, including those regarding the
medical supply chain, the national stockpile, the health care workforce, the
Healthy Start program, telehealth services, nutrition services, Medicare, and
Medicaid.
 Temporarily suspends payments for federal student loans and revises provisions
related to campus-based aid, supplemental educational-opportunity grants,
federal work-study, subsidized loans, Pell grants, and foreign institutions.
 Authorizes the Department of the Treasury temporarily to guarantee money-
market funds.
On April 23, 2020, the House passed H.R. 266 (P.L. 116-139), the Paycheck Protection Program
and Health Care Enhancement Act, following similar actions by the Senate the previous day. The
measure provides $484 billion for small business loans, health care providers, and COVID-19
testing. In particular, the law
 Provides additional lending authority for certain Small Business Administration
(SBA) programs in response to COVID-19 increases the authority for (1) the
Paycheck Protection Program, under which the SBA may guarantee certain loans
to small businesses during the COVID-19 pandemic; and (2) advances on
emergency economic injury disaster loans made in response to COVID-19. The
division also expands eligibility for such disaster loans and advances to include
agricultural enterprises.
 Provides $100 billion in FY2020 supplemental appropriations to HHS for the
Public Health and Social Services Emergency Fund, including $75 billion to
reimburse health care providers for health care related expenses or lost revenues
that are attributable to the coronavirus outbreak; and $25 billion for expenses to
research, develop, validate, manufacture, purchase, administer, and expand
capacity for COVID-19 tests to effectively monitor and suppress COVID-19.
 Allocates specified portions of the $25 billion for COVID-19 testing to states,
localities, territories, and tribes; the Centers for Diseases Control and Prevention;
the National Institutes of Health; the Biomedical Advanced Research and
Development Authority; the Food and Drug Administration; community health
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 trillion
supplemental spending bill 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
provisions, the bill would
 Appropriate $200 billion in hazard pay to essential workers.
 Extend additional payments to individuals, for nutrition and housing assistance,
and provide funding for additional testing and contact tracing.
 Restore the tax deduction for state and local taxes.
Congressional Research Service

43

Global Economic Effects of COVID-19

 Provide FY2020 emergency supplemental appropriations to federal agencies.
 Provide payments and other assistance to state, local, tribal, and territorial
governments.
 Provide additional direct payments of up to $1,200 per individual.
 Expand paid sick days, family and medical leave, unemployment compensation,
nutrition and food assistance programs, housing assistance, and payments to
farmers.
 Modify and expand the Paycheck Protection Program, which provides loans and
grants to small businesses and nonprofit organizations.
 Expand several tax credits and deductions.
 Provide funding and establish requirements for COVID-19 testing and contact
tracing.
 Eliminate cost-sharing for COVID-19 treatments;
 Extend and expand the moratorium on certain evictions and foreclosures; and
 Require employers to develop and implement infectious disease exposure control
plans.
On May 27, the Federal Reserve released its “Beige Book”- a mostly qualitative assessment of
the U.S. economy produced eight 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
assessment indicated that economic activity to mid-May had fallen sharply in each of the
districts.183 The Bureau of Economic Analysis (BEA) reported on May 29 that U.S. personal
income rose by 10.5% in April, primarily reflecting an 88% increase in government payments to
individuals from federal economic recovery programs, as indicated in Figure 10. During the
same period, personal consumption fell by more than 13% as consumers curtailed spending. The
lower level of spending combined with income transfers, which households apparently deposited
into saving accounts, raising the personal savings rate to 33% in April at an annual rate, compared
to an annual rate of 8.2% in February. In May, BEA reported that personal income fell by 4.2%
compared with the previous month as government transfer payments fell by 17.2% from $6.4
trillion in April to $ 5.3 trillion in May. Also, personal consumption recovered somewhat, rising
by 8.2% in May as some businesses began opening. As a result of the increase in spending, the
personal savings rate fell to 23.2%, still high by historical standards. During May, the price of
Brent crude oil increased by 33.5%, rising from $26.44 per barrel to $35.31 per barrel.

183 The Beige Book: Summary of Commentary on Current Economic Conditions by Federal Reserve District, May 17,
2020, the Federal Reserve System.
Congressional Research Service

44

Global Economic Effects of COVID-19

Figure 10. U.S. Personal Income, Consumption, and Saving
Change from preceding month, unless otherwise indicated

Source: Personal Income and Outlays, May 2020, Bureau of Economic Analysis, June 26, 2020
On June 1, the Congressional Budget Office (CBO) issued a revised estimate of the effects of the
pandemic on the U.S. economy. In the revised forecast, U.S. GDP in the second quarter of 2020
was estimated to have declined by 14.2% compared with their January 2020 forecast. The CBO
also estimated that over the 2020-2030 period, cumulative real output could be 3.0% lower than
the cumulative amount estimated in January 2020.184
On June 10, the Federal Open Market Committee released a statement indicating that the
pandemic “poses considerable risks to the economic outlook over the medium term.”185 Similarly,
in testimony before the Senate Banking Committee on June 17, Federal Reserve Chairman Powell
stressed that although there were positive signs that U.S. economic growth was beginning to
rebound, there was “significant uncertainty” about the timing and strength of the recovery.186 He
indicated that the source of the uncertainty was the path of the virus and the effectiveness of the
measures used to contain the disease. The accompanying Monetary Policy Report indicated the
pandemic was posing acute risks to small businesses as a result of insolvencies and that real

184 Congressional Budget Office, Letter to Charles A. Schumer, June 1, 2020.
185 Federal Reserve Issues FOMC Statement, Board of Governors of the Federal Reserve System, June 10, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200610a.htm.
186 Powell, Semiannual Monetary Report to the Congress.
Congressional Research Service

45

Global Economic Effects of COVID-19

economic growth in the second quarter of 2020 would decline at a rapid pace.187 In its forecast,
the Federal Open Market Committee made three projections for such major economic variables as
GDP, the unemployment rate, and the personal consumption expenditure (PCE) measure of
inflation compared with its December 2019 projections of the same variables, as indicated in
Table 4. The three measures include: (1) the median 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. According to the median forecast, U.S. GDP could
fall by 6.5%, the unemployment rate could rise to 9.3%, the rate of inflation could rise by 0.8%,
compared with projections made in December 2018 of a rise in GDP of 2.0%, an unemployment
rate of 3.5%, and an inflation rate of 1.9, respectively. The possible range for GDP, however
could vary between -10.2$ and -4.2% in 2020, with a possible rate of unemployment between
7.0% and 14.0%.
According to the FOMC assessment, the range of estimates was necessary to represent 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 “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 pessimistic
projection was judged to be no less pessimistic than the baseline scenario (median). The
assessment also indicated the possibility of a second wave of the viral outbreak later in 2020 with
the attendant restrictions on social activities and business operations.188
Table 4. Economic Projections of Federal Reserve, June 2020
Percent change, fourth quarter over previous year fourth quarter
Variable
Median1
Central Tendency2
Range3

2020
2021 2022
2020
2021
2022
2020
2021
2022
Change in real
GDP
-6.5
5.0
3.5
-7.6– -5.5
4.5–6.0
3.0–4.5
-10.0– -4.2
-1.0–7.0
2.0–6.0
December
projection
2.0
1.9
1.8
2.0–2.2
1.8–2.0
1.8–2.0
1.8–2.3
1.7–2.2
1.5–2.2
Unemployment
rate
9.3
6.5
5.5
9.0–10.0
5.9–7.5
4.8–6.1
7.0–14.0
4.5–12.0
4.0–8.0
December
projection
3.5
3.6
3.7
3.5–3.7
3.5–3.9
3.5–4.0
3.3–3.8
3.3–4.0
3.3–4.1
PCE inflation
0.8
1.6
1.7
0.6–1.0
1.4–1.7
1.6–1.8
0.5–1.2
1.1–2.0
1.4–2.2
December
projection
1.9
2.0
2.0
1.8–1.9
2.0–2.1
2.0–2.2
1.7–2.1
1.8–2.3
1.8–2.2
Source: Chairman’s Federal Open Market Committee Projections Materials, June 10, 2020.
Notes: (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
each year. (3) The range for a variable in a given year includes all participants’ projections, from lowest to
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.

187 Board of Governors of the Federal Reserve System, Monetary Policy Report, June 12, 2020, p. 1.
https://www.federalreserve.gov/monetarypolicy/mpr_default.htm.
188 Chairman’s Federal Open Market Committee Projections Materials, June 10, 2020, p. 9.
Congressional Research Service

46

Global Economic Effects of COVID-19

On June 25, the Federal Reserve (Fed) announced the result of stress tests on 33 U.S. banks under
three scenarios189 to ascertain their capital sufficiency given the strains to the financial system
caused by COVID-19.190 The Fed reported that all large U.S. banks were “sufficiently
capitalized” to survive the three scenarios, but it determined that there is “material uncertainty”
about the trajectory for the economic recovery and corresponding uncertainty related to its effects
on the financial health of banking organizations. In addition, the Fed concluded that under the
first and second scenarios, all of the banks would remain well above their minimum capital ratios,
but under the third scenario (a double-dip recession), several banks would approach their
minimum capital ratios.191 As a result, the Fed announced that it will:
 Suspend share repurchases;
 Cap the growth of dividends and impose a limit that does not exceed recent
income;
 Require banks to re-assess their capital needs and resubmit their capital plans
later this year; and
 Conduct additional stress analyses later this year as data from banks become
available and economic conditions evolve.192
The Department of Labor announced on July 2 that an additional 1.4 million Americans had filed
for Unemployment Insurance, raising the total to 48.7 million over the fifteen-week period from
mid-March.193 The insured seasonally adjusted unemployment rate in June was estimated at
13.2%, unchanged from the revised rate in the previous week. On July 2, the BLS also released
data on the employment situation in June, indicating that non-farm payroll rose by 4.8 million,
lowering the unemployment rate to 11.5%. The unemployment number does not include 9 million
individuals working part time who would prefer to work full time and

For additional information about the impact of COVID-19 on the U.S. economy see CRS Insight
IN11235, COVID-19: Potential Economic Effects.194
Europe
To date, European countries have not displayed a synchronized policy response similar to the one
they developed during the 2008-2009 global financial crisis. Instead, they have used a
combination of national fiscal policies and bond buying by the ECB to address the economic
impact of the pandemic. Individual countries have adopted quarantines 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. The European
Commission has advocated for greater coordination among the EU members in developing and
implementing monetary and fiscal policies to address the economic fallout from the viral

189 The three scenarios include: (1) a rapid, or “V”-shaped recovery; (2) a slower, or “U”-shaped recovery; and (3) a
“W”-shaped or double-dip recession with a short-lived recovery followed by a severe drop in activity later this year due
to a second COVID event. Assessment of Bank Capital During the Recent Coronavirus Event, Board of Governors of
the Federal Reserve System, June 2020, p. 2.
190 Ibid.
191 Ibid, p. 2.
192 Ibid, p. 1-2.
193 Unemployment Insurance Weekly Claims, July 1, 2020. https://www.dol.gov/ui/data.pdf.
194 CRS Insight IN11235, COVID-19: Potential Economic Effects, by Marc Labonte.
Congressional Research Service

47

Global Economic Effects of COVID-19

pandemic. Various EU and ECB officials are attempting to negotiate a coordinated fiscal response
by the Eurozone and broader EU.
In its May 2020 economic forecast, the European Commission forecasted that EU GDP in 2020
would fall by 7.4% and the unemployment rate would rise to 9.0%, as indicated in Table 3. The
Commission stated that, “Given the severity of this unprecedented worldwide shock, it is now
quite clear that the EU has entered the deepest economic recession in its history.” In addition, the
Commission forecasted that EU GDP would rise rapidly in 2021, although not fast enough to
erase all the 2020 decline, but would exhibit a distinct “V” shaped recession and recovery.
Greece, Spain, France, and Italy are forecasted to experience the largest declines in GDP in 2020
as a result of their dependence on tourism, which is expected to experience a slow economic
recovery. Germany and other Northern European countries are 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.195 To address the crisis, the Commission
argued that, “[t]he risk … is that the crisis will 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 the stability of the Economic and Monetary Union.”196
Table 5. European Commission Economic Forecast May 2020
Percentage change
Real GDP
Unemployment rate

2019
2020
2021
2019
2020
2021

EU
1.5
-7.4
6.1
6.7
9.0
7.9
Euro area
1.2
-7.7
6.3
7.5
9.6
8.6
Belgium
1.4
-7.2
6.7
5.4
7.0
6.6
Germany
0.6
-6.5
5.9
3.2
4.0
3.5
Ireland
5.5
-7.9
6.1
5.0
7.4
7.0
Greece
1.9
-9.7
7.9
17.3
19.9
16.8
Spain
2.0
-9.4
7.0
14.1
18.9
17.0
France
1.3
-8.2
7.4
8.5
10.1
9.7
Italy
0.3
-9.5
6.5
10.0
11.8
10.7
Luxembourg
2.3
-5.4
5.7
5.6
6.4
6.1
Malta
4.4
-5.8
6.0
3.4
5.9
4.4
Netherlands
1.8
-6.8
5.0
3.4
5.9
5.3
Austria
1.6
-5.5
5.0
4.5
5.8
4.9
Portugal
2.2
-6.8
5.8
6.5
9.7
7.4
Finland
1.0
-6.3
3.7
6.7
8.3
7.7
Denmark
2.4
-5.9
5.1
5.0
6.4
5.7
Sweden
1.2
-6.1
4.3
6.8
9.7
9.3

195 Birnbaum, Michael, European Union Says That Pandemic Recession Will be Worst in its History, The Washington
Post, 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.
196 European Economic Forecast spring 2020, European Commission, May 5, 2020.
Congressional Research Service

48

Global Economic Effects of COVID-19

Real GDP
Unemployment rate

2019
2020
2021
2019
2020
2021

United Kingdom
1.4
-8.3
6.0
3.8
6.7
6.0
Source: European Economic Forecast Spring 2020, European Commission, May 6. 2020,
Pandemic-related economic effects reportedly are having a significant impact on business activity
in Europe, with some indexes falling farther then they had during the height of the financial crisis
and others indicating that Europe may well experience a deep economic recession in 2020.197
France, Germany, Italy, Spain, and the UK reported steep drops in industrial activity in March
2020. EU countries have issued travel warnings, banning all but essential travel across borders,
raising concerns that even much-needed medical supplies could stall at borders affected by traffic
backups.198 The travel bans and border closures reportedly are causing shortages of farm laborers
in Germany, the UK, and Spain, which has caused growers to attempt to recruit students and
workers laid off because of the pandemic.199
In previous actions, the European Commission had announced that it was relaxing rules on
government debt to allow 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
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
Eurozone-wide debt instrument have been opposed by Germany and the Netherland, among other
Eurozone members.200 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 lowering
its deposit rate further into negative territory in an attempt to shore up the Euro’s exchange
rate.201 ECB President-designate Christine Lagarde called on EU leaders to take more 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 billion investment fund to address
COVID-19 issues.202 In other actions
 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
liquidity; (2) extend targeted longer-term refinance operations (TLTRO) to
provide loans at below-market rates to businesses, especially small and medium-
sized businesses, directly affected by COVID-19; (3) provide an additional €120

197 Arnold, Martin and Valentina Romei, “Business Activity Crashes to Record Low in Eurozone,” Financial Times,
March 24, 2020. https://www.ft.com/content/f5ebabd4-6dad-11ea-89df-41bea055720b.
198 Birnbaum, Michael, “Europe Is Closing Borders amid Covid-19 Outbreak. They May be Hard to Reopen,”
Washington Post, March 17, 2020. https://www.washingtonpost.com/world/europe/europe-closing-borders-Covid-19/
2020/03/17/131a6f56-67c8-11ea-b199-3a9799c54512_story.html.
199 Evans, Judith Evans, Emiko Terazono, and Leila Abboud, “Farmers Warn over Food Supply with Harvest Workers
Shut Out,” Financial Times, March 27, 2020. https://www.ft.com/content/e27a9395-db47-4e7b-b054-3ec6ba4cbba3.
200 Dombey, Daniel Dombey, Guy Chazan, and Jim Brunsden, “Nine Eurozone Countries Issue Call for
‘Coronabonds,’” Financial Times, March 26, 2020. https://www.ft.com/content/258308f6-6e94-11ea-89df-
41bea055720b.
201 “US Fed’s Covid-19 Rate Cut Is First Move in a Dance with Markets,” Financial Times, March 4, 2020.
https://www.ft.com/content/83c07594-5e3a-11ea-b0ab-339c2307bcd4. Giles, Chris, Martin Arnold, Sam Jones, and
Jamie Smyth, “Finance Ministers ‘Ready to Take Action’ on Covid-19,” Financial Times, March 3, 2020.
https://www.ft.com/content/b86f7d92-5d38-11ea-b0ab-339c2307bcd4.
202 Arnold, Martin and Guy Chazan, “Christine Lagarde Calls on EU Leaders to Ramp up Covid-19 Response,”
Financial Times, March 11, 2020. https://www.ft.com/content/44eac1f2-6386-11ea-a6cd-df28cc3c6a68.
Congressional Research Service

49

Global Economic Effects of COVID-19

billion (about $130 billion) for the Bank’s asset purchase program to provide
liquidity to firms that was in addition to €20 billion a month it previously had
committed to purchasing.203
 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
indexes on March 12, 2020.204 In addition, the ECB announced that it would do
more to assist financial markets in distress, including altering self-imposed rules
on purchases of sovereign debt.205
 Germany’s Economic Minister announced on March 13, 2020, that Germany
would provide unlimited loans to businesses experiencing negative economic
activity (initially providing $555 billion), tax breaks for businesses,206 and export
credits and guarantees.207
 On March 18, the ECB indicated that it would: create a €750 billion (about $800
billion) Pandemic Emergency Purchase Program to purchase public and private
securities; expand the securities it will purchase to include nonfinancial
commercial paper; and ease some collateral standards.208 In announcing the
program, President-designate Lagarde indicated that the ECB would, “do
everything necessary.” In creating the program, the ECB removed or significantly
loosened almost all constraints that applied to previous asset-purchase programs,
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.
 The ECB also indicated that it would make available up to €3 trillion in liquidity
through refinancing operations.209 Britain ($400 billion) and France ($50 billion)
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
push the Eurozone into an economic recession in 2020.210
 On March 23, 2020, Germany announced that it would adopt a €750 billion (over
$800 billion) package in economic stimulus funding.
 On April 15, Eurozone finance ministers announced a €500 billion (about $550
billion) emergency spending package to support governments, businesses, and

203 Monetary Policy Decisions, The European Central Bank, March 12, 2020. https://www.ecb.europa.eu/press/pr/date/
2020/html/ecb.mp200312~8d3aec3ff2.en.htm.
204 Stafford, Philip and Adam Samson, “European Regulators Intervene in Bid to Stabilize Stock and Bond Prices,”
Financial Times, March 13, 2020. https://www.ft.com/content/77f57d4c-6509-11ea-a6cd-df28cc3c6a68.
205 Arnold, Martin, “ECB Enters Damage-Limitation Mode with Pledge of More Action,” Financial Times, March 13,
2020. https://www.ft.com/content/f1cbd4f8-650f-11ea-b3f3-fe4680ea68b5.
206 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/.
207 Arnold, Martin, Guy Chazan, Victor Mallet, Miles Johnson, and Daniel Dombey, “How European Economies Are
Trying to Mitigate the Covid-19 Shock,” Financial Times, March 17, 2020. https://www.ft.com/content/26af5520-
6793-11ea-800d-da70cff6e4d3.
208 ECB Announces €759 Billion Pandemic Emergency Purchase Program, the European Central Bank, March 18,
2020. https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200318_1~3949d6f266.en.html.
209 Lagarde, Christine, “The ECB Will Do Everything Necessary to Counter the Virus,” Financial Times, March 20,
2020. https://www.ft.com/content/281d600c-69f8-11ea-a6ac-9122541af204.
210 “Lagarde to Confront Covid-19 Crisis at ECB Policy Meeting,” Financial Times, March 8, 2020.
https://www.ft.com/content/79a280c6-5fb5-11ea-b0ab-339c2307bcd4.
Congressional Research Service

50

Global Economic Effects of COVID-19

workers and will provide funds to the European Stability Mechanism, the
European Investment Bank, and for unemployment insurance.211
On May 5, 2020, Germany’s Constitutional Court issued a ruling challenging the legality of a
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
ECB about various aspects of the PSPP program that the court argued might exceed the ECB’s
legal mandate. The German government has not yet indicated how it will formally respond to the
ruling, but many analysts contend that the ruling—and the challenge to the authority of the ECB
and the European Court of Justice—could have far-reaching implications for future ECB
activities. This could potentially include challenges to the ECB’s Pandemic Emergency Purchase
Program (PEPP) initiated in March. The PEPP is a temporary program that authorizes the ECB to
acquire up to €750 billion (about $820 billion) in private and public sector securities to address
the economic effects of the pandemic crisis.
The German court’s ruling has heightened tensions between the court and the European Court of
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 financially strapped
Eurozone governments and to sustain financial liquidity in Eurozone banks. Those programs
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
Purchase Program (CBPP3). The programs operated from 2014 to 2018; the PSPP was restarted
in November 2019. As of May 8, the PSPP program held €2.2 trillion (about $2.5 trillion) with
another €600 billion (about $700 billion) held under other asset purchase programs.212 Various
groups in Germany challenged the legality of the ECB bond-buying programs before the German
Constitutional Court arguing that 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 December 2019
that the ECB’s actions were fully within the ECB’s authority.
In the German Constitutional Court’s May 5 ruling, the German judges characterized the ECJ’s
ruling as “incomprehensible,” and directly challenged the ECB and the European Court of Justice
and the primacy of the European Court of Justice ruling over national law. The German justices
argued that 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
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
members increased risks for national governments that back up the ECB, and it challenged 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
court with the Bank’s analysis of the economic and fiscal policy impact of the ECB bond-buying
programs. The ECB reportedly will also provide the unpublished full minutes of the central
bank’s governing council monetary policy meetings, including the ECB’s discussions in March
2015 of its purchases of sovereign bonds.213

211 Fleming, Sam and Mehreen Khan, “Eurozone Countries Strike Emergency Deal on Coronavirus Rescue,” Financial
Times, April 9, 2020. https://www.ft.com/content/b984101a-42b8-40db-9a92-6786aec2ba5c.
212 European Central Bank. https://www.ecb.europa.eu/mopo/implement/pepp/html/pepp-qa.en.html.
213 Arnold, Martin, Berlin and ECB Signal End to Legal Impasse Over Bond-Buying, Financial Times, June 25, 2020.
https://www.ft.com/content/5f000a25-3d54-4610-8579-cab9b21759ee.
Congressional Research Service

51

Global Economic Effects of COVID-19

On May 18, German Chancellor Angela Merkel and French President Emmanuel Macron
proposed a €500 billion (about $620 billion) EU recovery fund in an effort to gain a coordinated
EU fiscal response to the pandemic.214 Reportedly, the funds would be raised by the 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
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.
On May 27, ECB President Lagarde indicated that the Bank 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
called for a €500 billion (about $620 billion) stimulus package.215 In addition, European
Commission President Ursula von der Leyen proposed a €750 billion (about $820 billion) EU
recovery fund, termed the “Next Generation Fund,” that would provide €500 billion ($550
billion) in grants in a Recovery and Resilience Facility and €250 billion ($270 billion) in loans.
The proposal would take the unprecedented step of allowing the EU to issues bonds
independently from the other EU central banks.216 Questions remain over the source and
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
competitiveness, shifting away from declining heavy industry, supporting a green economy, and
building the digital economy.217 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
fund, von der Leyen proposed a revised EC seven-year budget, the Multiannual Financial
Framework (MFF), of €1.1trillion for 2021 to 2027.
On May 28, several key political groups within the EU Parliament voiced their support for new
rules that would allow the EU to retaliate in such trade areas as services and intellectual property
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,
because the United States had blocked the appointment of judges to the WTO’s appellate body.218
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
positioning itself to limit Hong Kong’s autonomy granted by the “one country two systems”
principle after the end of British rule in 1997.219
The European Central Bank announced on June 4 that it would double to $1.5 trillion its
Pandemic Emergency Purchase Program to stimulate the European economy; it also extended the
program to at least June 2021.220 At the same time, the German government announced a package

214 Fleming, Sam, Victor Mallet, and Guy Chazan, Germany and France Unite in Call for €500 Billion Europe
Recovery Fund, Financial Times, May 18, 2020. https://www.ft.com/content/c23ebc5e-cbf3-4ad8-85aa-032b574d0562.
215 Arnold, Martin, Coronavirus Hit to Eurozone Economy Set to Dwarf Financial Crisis, Financial Times, May 27,
2020. https://www.ft.com/content/a01424e8-089d-4618-babe-72f88184ac57.
216 Birnbaum, Michael, and Loveday Morris, E.U. Proposes $825 Billion Coronavirus Rescue Plan Giving Brussels
Power to Raise Money for First Time, The Washington Post, May 27, 2020. https://www.washingtonpost.com/world/
europe/angela-merkel-economic-rescue/2020/05/27/9d21b998-9f7c-11ea-be06-af5514ee0385_story.html.
217 Brunsden, Jim and Sam Fleming, How Would Ursula von der Leyen’s Coronavirus Recovery Fund Work?,
Financial Times, May 27, 2020. https://www.ft.com/content/ebaa7dcd-b6f7-418f-802b-7a8dbc9668f1.
218 Vela, Jakob Hanke, Trade Bazooka Gets Backing From Main Political Groups in EU Parliament, Politico Pro, May
28, 2020; Draft Report, 2019/10273(COD), European Parliament, Committee on International Trade, May 6, 2020.
219 Lau, Stuart Lau, Jakob Hanke Vela, Jacopo Barigazzi, and Finbarr Bermingham, EU Won't Follow Trump Into a
Trade War Over Hong Kong, Politico Pro, May 28, 2020.
220 Arnold, Martin, ECB Boosts Bond-Buying Stimulus Package by €600, Financial Times, June 4, 2020.
Congressional Research Service

52

Global Economic Effects of COVID-19

of fiscal measures, including tax cuts, aid to small businesses, cash payments to parent, and other
measures totaling €135 billion (about $150 billion). Austria, Denmark, the Netherland, and
Sweden have resisted payouts in grants instead of loans that require repayment. The German plan
reportedly would give households $336 per child, reduce value added taxes on daily items, and
reduce households’ utility bills. The plan also includes about $6 billion for the social security
system, $11 billion to assist cities cover housing and other costs, about $2 billion for cultural
institutions and nonprofit groups and incentives for purchases of electric vehicles.221
On June 25, Germany’s Minister for Economic Affairs and Energy announced that the German
government would provide more than €300 million (about $330 million), to acquire a 25% stake
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
supplies of a potential vaccine. Germany has in place legal restrictions on foreign investments in
critical industries such as energy and telecoms, but the German Parliament amended Germany’s
Foreign Trade Act, set to become law in 2020, that broadens the scope of transactions that must
be approved by the Federal government to include “critical” technologies, including robotics,
biotech, and quantum computing.222
The United Kingdom
The United Kingdom has taken a number of steps to support economic activity. These steps are
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
sharply in the second half of the year, exhibiting a “V” shaped recovery. The Bank of England has
announced a number of policy initiatives including
 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
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 Small
and Medium-sized Enterprises (TFSME) that provides banks with over $110
billion for loans at low interest rates; a lowering of banks’ countercyclical capital
buffer from 1% to zero, which is estimated to support over $200 billion of bank
lending to businesses; and a freeze in banks’ dividend payments.223
 On March 15, the BOE reinstituted U.S. dollar swap lines with the Federal
Reserve.
 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
Covid-19-related disruptions to their cash flow.
 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

https://www.ft.com/content/c59ab92d-e614-4284-a028-46ee3bcf92f9.
221 Ewing, Jack, and Melissa Eddy, ‘Europe Finally Got the Message’: Leaders Act Together on Message, The New
York Times, June 4, 2020. https://www.nytimes.com/2020/06/04/business/europe-coronavirus-economic-support.html?
action=click&module=Top%20Stories&pgtype=Homepage.
222 Miller, Joe, Germany Flexes its Muscles on Foreign Investment, Financial Times, June 25, 2020.
https://www.ft.com/content/54f92ca5-5380-466b-95f8-3e98b40ebc82.
223 Romei, Valentina, “Covid-19 Fallout: Bank of England Launches 4 Key Measures,” Financial Times.
https://www.ft.com/content/4e60c08e-6380-11ea-b3f3-fe4680ea68b5.
Congressional Research Service

53

Global Economic Effects of COVID-19

increased the stock of asset purchases by £200 billion to a total of £645 billion
financed by issuing UK government bonds and some additional non-financial
investment-grade corporate bonds.224
 On March 20, the BOE participated in an internationally coordinated central bank
expansion of liquidity through U.S. standing dollar liquidity swap line
arrangements.
 On March, the BOE activated the Contingent Term Repo Facility (CTRF).
 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
over the second quarter of 2020, reflecting a contraction in the UK economy,
lower tax revenues, and increased financial demands to support fiscal policy
measures.225
In terms of fiscal policy, UK Chancellor of the Exchequer Rishi Sunak proposed a national
budget on March 11, 2020, that included nearly $3.5 billion in fiscal spending to counter adverse
economic effects of the pandemic and increased in statutory sick leave by about $2.5 billion in
funds to small and medium businesses to provide up to 14 days of sick leave for affected
employees. The plan provides affected workers up to 80% of their salary, or up to £2,500 a month
(about $2,800) if they are laid off. Some estimates indicate that UK spending to support its
economy could rise to about $60 billion in 2020.226 Identified as the Coronavirus Job Retention
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
announced that all pubs, cafés, restaurants, theatres, cinemas, nightclubs, gyms and leisure centers
would be closed.227 Part of the fiscal spending package includes open-ended funding for the
National Health Service (NHS), $6 billion in emergency funds to the NHS, $600 million hardship
fund to assist vulnerable people, and tax cuts and tax holidays for small businesses in certain
affected sectors.228
Japan
The Bank of Japan, with already-low interest rates, injected $4.6 billion in liquidity into Japanese
banks to provide short-term loans for purchases 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 parents forced to take time off due to
school closures.229 On March 24, 2020, Japan announced that the Summer Olympics set to take
place in Tokyo would be postponed by a year, delaying an expected boost to the Japanese

224 Johnson, Miles, Chris Giles, Martin Arnold, and James Politi, “Italy’s PM Urges Brussels to Unleash €500bn
Rescue Fund,” Financial Times, March 18, 2020. https://www.ft.com/content/5b8205ac-6a06-11ea-800d-
da70cff6e4d3.
225 Giles, Chris, and Tommy Stubbington, UK Treasury to Quadruple Borrowing to £180bn Over Next Quarter,
Financial Times, April 23, 2020. https://www.ft.com/content/8886e002-c260-4daa-8b7b-509b3f7e6edb.
226 Parker, George Parker, Chris Giles, and Sebastian Payne, “Sunak Turns on Financial Firepower to Help Workers,”
Financial Times, March 20, 2020. https://www.ft.com/content/826d465a-6ac3-11ea-a3c9-1fe6fedcca75.
227 Ibid.
228 Payne, Sebastian and Chris Giles, “Budget 2020: Sunak Unveils £30bn Stimulus to Counter UK Covid-19 Shock,”
Financial Times. https://www.ft.com/content/f7b27264-6384-11ea-a6cd-df28cc3c6a68.
229 Harding, Robin and Hudson Lockett, “BoJ Spurs Asia Markets Rebound with Vow to Fight Covid-19,” Financial
Times, March 2, 2020. https://www.ft.com/content/9fa91e06-5c3b-11ea-b0ab-339c2307bcd4.
Congressional Research Service

54

Global Economic Effects of COVID-19

economy that was expected from the event. Japan reportedly is considering an emergency fiscal
package of about $515 billion, roughly equivalent to 10% of Japan’s annual 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 to keep interest rates
low and stimulate the Japanese economy.230
The Japanese Cabinet proposed a second supplemental appropriation measure that includes $296
billion in spending and a total value of about $1.1 trillion in loans and guarantees, funded through
new bonds. This and a previous set of spending measures reportedly are comparable to 40% of
Japan’s GDP and include grants for businesses to pay rents through the Development Bank of
Japan and funds to small and medium-sized businesses through the 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 Corporation.231
On June 17, the Bank of Japan (BOJ) announced that it was maintaining its low interest rates of -
0.1%, even as it increased its coronavirus lending facility from $76 trillion to $1 trillion and
would continue to purchase exchange traded funds at the rate of $12 trillion a year.232 The
COVID-19 lending facility assists banks in providing zero interest rate loans to businesses. In a
separate program, the BOJ is providing about $110 trillion to buy commercial paper and
corporate bonds.
China
According to a recent CRS In Focus,233 China’s economic growth could go negative in the first
quarter of 2020 and fall below 5% for the year, with more serious effects if the outbreak
continues. In early February, China’s central bank pumped $57 billion into the banking system,
capped banks’ interest rates on loans for major firms, and extended deadlines for banks to curb
shadow lending. The central bank has been setting the reference rate for China’s currency
stronger than its official close rate to keep it stable. On March 13, 2020, The People’s Bank of
China announced that it would provide $78.8 billion in funding, primarily to small businesses, by
reducing bank’s reserve requirements.234
The International Monetary Fund (IMF) is providing funding to poor and emerging market
economies that are short on financial resources.235 If the economic effects of the virus 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.

230 Harding, Robin, Bank of Japan Steps up Coronavirus Stimulus With Bond-buying Pledge, Financial Times, April
27, 2020. https://www.ft.com/content/7ba5c507-df9e-4107-87eb-73afa2c13e91.
231 Harding, Robin, Japan’s Cabinet Approves Extra $1.1 Trillion Budget to Counter Recession, Financial Times, May
27, 2020. https://www.ft.com/content/ce7f3564-c997-339c-ad3d-c6d092fb7f1e.
232 Harding, Bank of Japan Pledges $1 trillion in Coronavirus Lending.
233 For additional information about China’s response, see CRS In Focus IF11434, COVID-19: U.S.-China Economic
Considerations, by Karen M. Sutter and Michael D. Sutherland.
234 Weinland, Don, “China’s Central Bank Launches $79bn Stimulus for Virus-Hit Companies,” Financial Times,
March 13, 2020. https://www.ft.com/content/deb56f86-6515-11ea-b3f3-fe4680ea68b5.
235 Politi, James, “IMF Sets Aside $50bn for Covid-19-Hit Countries,” Financial Times, March 4, 2020,
https://www.ft.com/content/83c07594-5e3a-11ea-b0ab-339c2307bcd4.
Congressional Research Service

55

Global Economic Effects of COVID-19

Multilateral Response236
International Monetary Fund
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
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
189 member countries have requested IMF programs,237 and IMF Managing Director Kristalina
Georgieva has stated that the IMF stands ready to deploy the entirety of its current lending
capacity—approximately $1 trillion—in response to the pandemic and resulting economic
crises.238 The IMF has already approved several COVID-related programs, including for Bolivia,
Chad, the Democratic Republic of Congo, Kyrgyz Republic, Nigeria, Niger, Rwanda,
Madagascar, Mozambique, Pakistan, and Togo, among others, and additional programs are
expected.239
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
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.240 It is a
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
buffers. The IMF also adopted proposals to accelerate Board consideration of member financing
requests for emergency financing and doubled (to about $100 billion) access to IMF emergency
assistance.
For FY2021, the Administration had requested authorization for about $38 billion for a
supplemental fund at the IMF (the New Arrangements to Borrow [NAB]). In March 2020,
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
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 selling a portion of its
gold holdings, and whether the IMF should enact policies to buffer member state reserves,
through a process called an SDR allocation.
World Bank and Regional Development Banks
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

236 For more information, see CRS Report R46342, COVID-19: Role of the International Financial Institutions, by
Rebecca M. Nelson and Martin A. Weiss.
237 Remarks by IMF Managing Director Kristalina Georgieva During the G20 Finance Ministers and Central Bank
Governors Meeting, International Monetary Fund, April 15, 2020.
238 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 lending capacity is about $787
billion.
239 IMF Lending Tracker, https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker.
240 “IMF Adds Liquidity Line to Strengthen COVID-19 Response,” International Monetary Fund, April 15, 2020.
Congressional Research Service

56

Global Economic Effects of COVID-19

during the COVID-19 pandemic.241 As of June 1, 2020, the World Bank had approved, or was in
the process of approving, 150 COVID-19 projects, totaling $15 billion, in 99 countries.242
Examples of approved projects include $47 million for the Democratic Republic of Congo to
support containment strategies, train medical staff, and provide equipment for diagnostic testing
to ensure rapid case detection; $11.3 million for Tajikistan to expand intensive care capacity; $20
million for Haiti to support diagnostic testing, rapid response teams, and outbreak containment;
and $1 billion for India to support screening, contract tracing, and laboratory diagnostics, procure
personal protective equipment, and set up new isolation wards, among other projects.243
Over the next 15 months, the World Bank Group estimates it could deploy as much as $160
billion 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
trust fund to help countries prepare for disease outbreaks, the Health Emergency Preparedness
and Response Multi-Donor Fund (HEPRF).244 The new fund is to complement, and augment, the
$160 billion 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 developing countries worldwide, a number of smaller and more specialized multilateral
development banks (MDBs) are also mobilizing resources in response to the COVID-19
pandemic. The United States is a member of a number of regionally focused MDBs, including the
African Development Bank, the Asian Development Bank, the European Bank for Reconstruction
and Development, and the Inter-American Development Bank, as well as the functionally focused
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
Development Bank created by the BRICS countries (Brazil, Russia, India, China, and South
Africa), the European Investment Bank, or the Islamic Development Bank.
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
approval procedures. According to the President of the World Bank, other multilateral
development banks have committed roughly $80 billion over the next 15 months to respond to
COVID-19.245 Together with the World Bank’s commitment of $160 billion, $240 billion in
financing is to be made available to developing countries from the MDBs during this time
period.246
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
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
should pursue fiduciary reforms that would allow them to expand their lending based on existing

241 Remarks by World Bank Group President David Malpass on G20 Finance Ministers Conference Call on COVID-19,
March 23, 2020.
242 https://maps.worldbank.org/. Accessed on June 1, 2020.
243 World Bank, “World Bank Group Launches First Operations for COVID-19 (Coronavirus) Emergency Health
Support, Strengthening Developing Country Response,” Press Release, April 2, 2020.
244 World Bank, “World Bank Group to Launch New Multi-donor Trust Fund to help Countries Prepare for Disease
Outbreaks,” Press Release, April 17, 2020.
245 David Malpass, “Remarks to G20 Finance Ministers,” World Bank, April 15, 2020.
246 World Bank Group President David Malpass: Remarks to G20 Finance Ministers, April 15, 2020.
Congressional Research Service

57

Global Economic Effects of COVID-19

resources, particularly lending against donor country guarantees to the institutions (called
“callable” capital).
International Economic Cooperation
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
and coordinate their policy responses to the economic fallout from the global spread of COVID-
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
response through closer cooperation and enhanced cooperation of efforts.”247 The countries
pledged to coordinate research efforts, increase the availability of medical equipment; mobilize
“the full range” of policy instruments, including monetary and fiscal measures as well as targeted
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
Group, as well as other international organizations, to support countries worldwide as part of a
coordinated global response.248
Saudi Arabia, the 2020 chair of the G-20, called an emergency G-20 summit on March 25 to
discuss a response to the pandemic.249 The G-20 is a broader group of economies, including the
G-7 countries and several major emerging markets.250 During the global financial crisis, world
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
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.251
Analysts are hopeful that the recent G-7 summit, and a G-20 summit, will mark a shift towards
greater international cooperation at the highest (leader) levels in combatting the economic fallout
from the spread of COVID-19.252 An emergency meeting of G-7 finance ministers on March 3,
2020, fell short of the aggressive and concrete coordinated action that investors and economists
had been hoping for, and U.S. and European stock markets fell after the meeting.253 More
generally, governments have been divided over the appropriate response and in some cases have
acted unilaterally, particularly when closing borders and imposing export restrictions on medical
equipment and medicine. Some experts argue that a large, early, and coordinated response is
needed to address the economic fallout from COVID-19, but several concerns loom about the G-
20’s ability to deliver.254 Their concerns focus on the Trump Administration’s prioritization of an

247 White House, G-7 Leaders’ Statement, March 16, 2020, https://www.whitehouse.gov/briefings-statements/g7-
leaders-statement/.
248 Ibid.
249 “Spain Says Saudi Arabia to Cal G-20 to Meet on Covid-19 in Coming Days,” Reuters, March 16, 2020.
250 The G-20 includes the G-7 countries plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia,
Saudi Arabia, South Africa, South Korea, Turkey, and the European Union (EU).
251 For more information about the G-20, see CRS Report R40977, The G-20 and International Economic Cooperation:
Background and Implications for Congress, by Rebecca M. Nelson.
252 See for example, Jennifer Rankin, “EU Leaders Divided on How to Protect Economies after Covid-19,” The
Guardian, March 14, 2020.
253 Jack Ewing and Jeanna Smialek, “Economic Powers Vow to Fight Crisis,” New York Times, March 3, 2020.
254 Matthew Goodman and Mark Sobel, “Time to Pull the G-20 Fire Bell,” Center for Strategic and International
Studies, March 18, 2020.
Congressional Research Service

58

Global Economic Effects of COVID-19

“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
tensions make G-20 consensus more difficult.
Meanwhile, international organizations including the IMF and multilateral development banks,
have tried to forge ahead with economic support given their current resources. Additionally, the
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
March 20, 2020, that its members are actively cooperating to maintain financial stability during
market stress related to COVID-19.255 The FSB is encouraging governments to use flexibility
within 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 many FSB members have already taken action to release available capital and
liquidity buffers.
Estimated Effects on Developed and Major
Economies
Among most developed and major developing economies, economic growth at the beginning of
2020 was tepid, but still was estimated to be positive. Countries highly dependent on trade—
Canada, Germany, Italy, Japan, Mexico, and South Korea—and commodity exporters are now
projected to be the most negatively affected by the slowdown in economic activity associated
with the virus.256 In addition, travel bans and quarantines are taking a heavy economic toll on a
broad range of countries. The OECD notes that production declines in China have spillover
effects around the world given China’s role in producing computers, electronics, pharmaceuticals
and transport equipment, and as a primary source of demand for many commodities.257 Across
Asia, some forecasters argue that recent data indicate that Japan, South Korea, Thailand, the
Philippines, Indonesia, Malaysia, and Vietnam could experience an economic recession in
2020.258
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
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.
Growth rates in Latin America and the Middle East were also projected to be positive in 2020.259
These projections likely will 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
of the dollar, and other secondary effects that could curtail growth. Commodity exporting

255 “FSB Coordinates Financial Sector Work to Buttress the Economy in Response to Covid-19,” Financial Stability
Board, Press Release 6/2020, March 20, 2020.
256 OECD Interim Economic Assessment, p. 7.
257 Ibid., p. 5.
258 Arnold, Martin Arnold and Valentina Romei, “European Factory Output Plummets as Covid-19 Shutdown Bites,”
Financial Times, April 1, 2020. https://www.ft.com/content/8646c0ee-8fba-4e4c-a047-cf445ff41cf6.
259 Tentative Stabilization, Sluggish Recovery? World Economic Outlook Update, January 20, 2020, The International
Monetary Fund. https://www.imf.org/en/Publications/WEO/Issues/2020/01/20/weo-update-january2020.
Congressional Research Service

59

link to page 65

Global Economic Effects of COVID-19

countries, in particular, likely will 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.
Emerging Markets
The combined impact of COVID-19, an increase in the value of the dollar, and an oil price war
between Saudi Arabia and Russia are hitting developing and emerging economies hard. Not all of
these countries have the resources or policy flexibility to respond effectively. According to figures
compiled by the Institute for International Finance (IIF), cumulative capital outflows from
developing countries since January 2020 are double the level experienced during the 2008/2009
crisis and substantially higher than recent market events (Figure 11).260
Figure 11. Capital Flows to Emerging Markets in Global Shocks

Source: Original graphic and data from International Institute for Finance using data from Haver. Edited by CRS
for clarification.
The impact of the price war and lower energy demand associated with a COVID-19-related
economic slowdown is especially hard on oil and gas exporters, some of whose currencies are at
record lows (Figure 12). Oil importers, such as South Africa and Turkey, have also been hit hard;
South Africa’s rand has fallen 18%261 against the dollar since the beginning of 2020 and the
Turkish lira has lost 8.5%.262 Some economists are concerned that the depreciation in currencies

260 These include concerns in 2015 over China’s renminbi devaluation and the so-called “Taper Tantrum” in 2013 when
the Federal Reserve announced that it would slow down the pace of its post global financial crisis asset purchases.
Sergei Lanau and Jonathan Fortun, “Economic Views—The COVID-19 Shock to EM Flows,” Institute for
International Finance, March 17, 2020.
261 Paul Wallace, “Here’s How the Oil Crash is Hitting Emerging Market Currencies,” Bloomberg, March 17, 2020,
https://www.bloomberg.com/news/articles/2020-03-17/here-s-how-the-oil-crash-is-hitting-emerging-market-currencies.
262 Nevzat Devranoglu, “Turkish Lira Hits Weakest Level Since 2018 Currency Crisis Due to Covid-19,” Nasdaq,
March 17, 2020, https://www.nasdaq.com/articles/turkish-lira-hits-weakest-level-since-2018-currency-crisis-due-to-
Covid-19-2020-03-17.
Congressional Research Service

60

Global Economic Effects of COVID-19

could lead to rising rates of inflation by pushing up the prices of imports and negatively economic
growth rates in 2020.263
Depending on individual levels of foreign exchange reserves and the duration of the capital flow
slowdown, some countries may have sufficient buffers to weather the slowdown, while others
will likely need to make some form of current account adjustment (reduce spending, raise taxes,
etc.). Several countries, such as Iran and Venezuela, have already asked the IMF for financial
assistance and others are likely to follow.264 (Venezuela’s request was quickly rebuffed due to
disagreement among the IMF membership over who is recognized as Venezuela’s legitimate
leader: Nicolás Maduro or Juan Guaidó.265)
Figure 12. Depreciation Against the Dollar Since January 1, 2020

Source: Created by CRS. Data from Bloomberg.
International Economic Cooperation
Initial efforts at coordinating the economic response to the COVID-19 pandemic across countries
have been uneven. Governments are divided over the appropriate response and in some cases
have acted unilaterally, particularly when closing borders and imposing export restrictions on
medical 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, fell
short of the aggressive and concrete coordinated action that investors and economists had been
hoping for, and U.S. and European stock markets fell sharply after the meeting.266 However, on
March 16, 2020, the leaders of the G-7 countries held an emergency summit by teleconference to
discuss and coordinate their policy responses to the economic fallout from the global spread of

263 Johnson, Steve, “Currency Sell-Off Threatens Emerging Market Response to Covid-19,” Financial Times, March 3,
2020. https://www.ft.com/content/94ad9d70-2ca2-4490-96fb-5b01b509ed37.
264 “COVID-19-Hit Iran Asks IMF for Aid amid US Sanctions,” Deutsche Walle, March 13, 2020,
https://www.dw.com/en/covid-19-hit-iran-asks-imf-for-aid-amid-us-sanctions/a-52763114. Iran is currently under U.S.
sanctions, which include, among other things, prohibitions on the ability of the United States to vote in favor of lending
IMF or World Bank assistance to Iran. The United States, however, cannot unilaterally block lending to a particular
country. Approving an IMF or World Bank loan requires a majority of the total voting power and the U.S. voting
power is 16.5% of the total voting power at the IMF and 15.4% at the World Bank. Iran has not borrowed from the IMF
since 1962, but did borrow from the World Bank between 2003 and 2005 over U.S. opposition.
265 Joshua Goodman, “IMF Rejects Maduro’s Bid for Emergency Loan to Fight Virus,” StarTribune,
http://www.startribune.com/venezuela-seeks-emergency-5-billion-imf-loan-to-fight-virus/568868442/.
266 Jack Ewing and Jeanna Smialek, “Economic Powers Vow to Fight Crisis,” New York Times, March 3, 2020.
Congressional Research Service

61

link to page 67 link to page 67 Global Economic Effects of COVID-19

COVID-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 response through closer cooperation and enhanced cooperation of efforts.”267 The
countries pledged to coordinate research efforts, increase the availability of medical equipment;
mobilize “the full range” of policy instruments, including monetary and fiscal measures as well as
targeted 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 Group, as well as other international organizations, to support countries worldwide
as part of a coordinated global response.268 G-7 coordination has not been unproblematic
however, including 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.269
The United States is chairing the G-7 in 2020, and while the June summit at Camp David had
been canceled due to concerns about COVID-19, on May 20, President Trump indicated that the
summit may be held after all.
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.270 Even though G-20
coordination is 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 current context: the Trump
Administration’s prioritization of an “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 tensions make G-20 consensus more difficult.271
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
already doing.272 However, G-20 coordination appears to be gaining momentum, most notably
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,
have tried to forge ahead with economic support given their current resources. Additionally, the
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
March 20, 2020 that its members are actively cooperating to maintain financial stability during
market stress related to COVID-19.273 The FSB is encouraging governments to use flexibility
within existing international standards to provide continued access to funding for market
participants and for businesses and households facing temporary difficulties from COVID-19,

267 White House, G-7 Leaders’ Statement, March 16, 2020, https://www.whitehouse.gov/briefings-statements/g7-
leaders-statement/.
268 Ibid.
269 “Pompeo, G-7 Foreign Ministers Spar over ‘Wuhan Virus’,” Politico, March 25, 2020; Katrin Bennhold and David
E. Sanger, “U.S. Offered ‘Large Sum’ to German Company for Access to Coronavirus Vaccine Research, German
Officials Say,” New York Times, March 15, 2020.
270 The G-20 includes the G-7 countries plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia,
Saudi Arabia, South Africa, South Korea, Turkey, and the European Union (EU).
271 Matthew Goodman and Mark Sobel, “Time to Pull the G-20 Fire Bell,” Center for Strategic and International
Studies, March 18, 2020.
272 Matthew Goodman, Stephanie Segal, and Mark Sobel, “Assessing the G20 Virtual Summit,” Center for Strategic
and International Studies, March 27, 2020.
273 “FSB Coordinates Financial Sector Work to Buttress the Economy in Response to Covid-19,” Financial Stability
Board, Press Release 6/2020, March 20, 2020.
Congressional Research Service

62

Global Economic Effects of COVID-19

while noting that many FSB members have already 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.274 In Q3 2019—before the
outbreak of COVID-19—global debt levels reached an all-time high of nearly $253 trillion, about
320% of global GDP.275 About 70% of global debt is held by advanced economies and about 30%
is held by emerging markets. Globally, most debt is held by nonfinancial corporations (29%),
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-
owned enterprises.
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
exogenous shock that will make it significantly more difficult for many private borrowers
(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
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
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.276 Some governments, including Argentina
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
countries, such as Abu Dhabi and Egypt, have completed successful sovereign bond sales since
the outbreak of the pandemic.277
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
debts, absent government intervention. These defaults will result in a decline in bank assets,
making it difficult for banks to extend new loans during the crisis or, more severely, creating
solvency problems for banks. Meanwhile, many governments are dramatically increasing
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
dynamics are particularly problematic in emerging economies, where debt obligations
denominated in foreign currencies (usually 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
currency.
Governments will 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
economically 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

274 John Plender, “The Seeds of the Next Debt Crisis,” Financial Times, March 4, 2020.
275 Emre Tiftik, 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,
nonfinancial institutions, and households.
276 “Covid-19 Worsens Debt Crisis in Poor Countries,” Jubilee Debt Campaign, March 22, 2020.
277 Trieu Pham, “EM Sovereign Debt Issuance: Encouraging Signs but Not Yet Back to Business as Usual,” ING, May
26, 2020.
Congressional Research Service

63

Global Economic Effects of COVID-19

allocate rescue funds, and what conditions if any to attach to funds. Governments have
undertaken extraordinary fiscal and monetary measures to combat the crisis. However,
developing countries that are constrained by limited financial resources and where health systems
could quickly become overloaded are particularly vulnerable.
In terms of defaults by governments (sovereign defaults), emergency assistance is generally
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 will need to consider whether
the IMF has adequate resources to respond to the crisis, how to allocate funding if the demand for
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
sharing” with private investors).
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
(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
contributions will allow this debt service relief to be extended for two years. Additionally, the G-
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
banks, hedge funds, and other global financial funds, also announced that private creditors will
join the debt relief effort on a voluntary basis. This debt standstill will free up more than $20
billion for these countries to spend on improving their health systems and fighting the
pandemic.278 Private sector commitments were critical for official creditors, so that developing
countries could redirect funds to improving health systems rather than repaying private creditors.
However, the debt standstill is complicated. There is debate among creditor governments about
what debts should be included in the standstill, 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 still, including
reliance on “voluntary” participation, each participating creditor will need to make its own
assessments, the standstill could require a lengthy contract-by-contract approach, and the
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
have characterized the letter as a list of reasons private creditors may cite as justification for their
refusal to participate in the debt standstill.279 Reportedly, some African countries are opting to
negotiate debt relief individually with China and other creditor nations because of concerns they
will be blocked from financial markets if they participate in the G-20 debt standstill.280
Other Affected Sectors
Public concerns over the spread of the virus have led to self-quarantines, reductions in airline and
cruise liner travel, the closing of such institutions as the Louvre, and the rescheduling of theatrical
releases of movies, including the sequel in the iconic James Bond series (titled, “No Time to

278 Davide Barbuscia, Marwa Rashad, and Andrea Shalal, “G20 Countries Agree Debt Freeze for World’s Poorest
Countries,” Reuters, April 15, 2020
279 Patrick Bolton, Lee Buchheit, Pierre-Olivier Gourinchas, et. al, “Sovereign Debt Standstills: An Update” VoxEU,
May 28, 2020.
280 Jevans Nyabiage, “All Eyes on China as Africa Spurns G20 Debt Relief Plan,” South China Morning Post, May 26,
2020.
Congressional Research Service

64

Global Economic Effects of COVID-19

Die”).281 School closures are affecting 1.5 billion children worldwide, challenging parental leave
policies.282 Other countries are limiting the size of public gatherings.
Some businesses are considering 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 travel bans. Some firms are adopting an open-leave policy to ensure employees
receive sick pay if they are, or suspect they are, infected. Other firms are adopting paid sick leave
policies to encourage sick employees to stay home and are adopting remote working policies.283
Microsoft and Amazon have instructed all of their Seattle-based employees to work from home
until the end of March 2020.284
The drop in business and tourist travel has caused a sharp drop in scheduled airline flights by as
much as 10%; airlines are estimating they could lose $113 billion in 2020 (an estimate that could
prove optimistic given the Trump Administration’s announced restrictions on flights from Europe
to the United States and the growing list of countries that are similarly restricting flights),285 while
airports in Europe estimate they could lose $4.3 billion in revenue due to fewer flights.286 Industry
experts estimate that many airlines will be in bankruptcy by May 2020 under current conditions
as a result of travel restrictions imposed by a growing number of countries.287 The loss of Chinese
tourists is another economic blow to countries in Asia and elsewhere that have benefitted from the
growing market for Chinese tourists and the stimulus such tourism has provided.
The decline in industrial activity has reduced demand for energy products such as crude oil,
causing prices to drop sharply, which negatively affects energy producers, renewable energy
producers, and electric vehicle manufacturers, but generally is positive for consumers and
businesses. Saudi Arabia is pushing other OPEC (Organization of the Petroleum Exporting
Countries) members collectively to reduce output by 1.5 million barrels a day to raise market
prices. U.S. shale oil producers, who are not represented by OPEC, support the move to raise
prices.288 An unwillingness 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
oil prices below $25 per barrel at times, half the estimated $50 per barrel break-even point for

281 Rosenberg, Alyssa, “Covid-19 Shut Down Mona Lisa and James Bond. We Can’t Let it Isolate Us,” Washington
Post, March 4, 2020. https://www.washingtonpost.com/opinions/2020/03/04/Covid-19-shut-down-mona-lisa-james-
bond-we-cant-let-it-isolate-us/.
282 Taylor, Adam, Teo Armus, Rick Noak, “Covid-19 Turmoil Widens as U.S. Death Toll Mounts; Xi Cancels Japan
Trip,” Washington Post, 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,” Washington Post, March 27, 2020.
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/.
283 Hill, Andrew and Emma Jacobs, “Covid-19 May Create Lasting Workplace Change,” Financial Times, February 27,
2020. https://www.ft.com/content/5801a710-597c-11ea-abe5-8e03987b7b20.
284 Armus, Teo, “Live Updates: Covid-19 Turmoil Widens as U.S. Death Toll Mounts; Xi Cancels Japan Trip,”
Washington Post, March 5, 2020, https://www.washingtonpost.com/world/2020/03/05/Covid-19-live-updates/.
285 Taylor, Adam, “Airlines Could Suffer up to $113 Billion in Lost Revenue Due to Covid-19 Crisis, IATA Says,”
Washington Post, March 5, 2020. https://www.washingtonpost.com/world/2020/03/05/Covid-19-live-updates/.
286 “Airlines Slash Flights to Cut Costs as Covid-19 Hits Travel Demand,” Financial Times. https://www.ft.com/
content/c28b5790-62c6-11ea-a6cd-df28cc3c6a68.
287 Smyth, Jamie Smyth, Andrew Edgecliffe-Johnson, Peggy Hollinger, Myles McCormick, David Keohane, and
Richard Milne, “Most Airlines Face Bankruptcy by End of May, Industry Body Warns,” Financial Times, March 16,
2020.
288 Brower, Derek, “Cash-Strapped US Shale Producers Pray for OPEC Aid,” Financial Times, March 3, 2020.
https://www.ft.com/content/9161e62c-5cb1-11ea-b0ab-339c2307bcd4.
Congressional Research Service

65

Global Economic Effects of COVID-19

most oil producing countries.289 Rising oil supplies and falling demand combined to create an
estimated surplus of 25 million barrels a day and overwhelmed storage capacity at times and
challenged the viability of U.S. shale oil production.290 In 2019, low energy prices combined with
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.291 Reportedly, in late
2019 and early 2020, bond and equity investors, as well as banks, reduced their lending to shale
oil producers and other energy producers that typically use oil and gas reserves as collateral.292
Disruptions to industrial activity in China reportedly caused delays in shipments of computers,
cell phones, toys, and medical equipment.293 Factory output in China, the United States, Japan,
and South Korea all declined in the first months of 2020.294 Reduced Chinese agricultural exports,
including to Japan, are leading to shortages in some commodities. In addition, numerous auto
producers have faced shortages in parts and other supplies that have been sourced in China.
Reductions in international trade have also affected ocean freight prices. Some freight companies
argue they could be forced to shutter if prices did not rebound quickly.295 Disruptions in the
movements of goods and people reportedly caused some companies to reassess how international
they want their supply chains to be.296 According to some estimates, nearly every member of the
Fortune 1000 has been affected by disruptions in production in China.297
Conclusions
The quickly evolving nature of the COVID-19 crisis creates a number of issues that make it
difficult to estimate the full cost to global economic activity. These issues include, but are not
limited to the following:
 How long will the crisis last?
 How many workers will be affected both temporarily and permanently?
 How many countries will be infected and how much economic activity will be
reduced?
 When will the economic effects peak?

289 Strauss, Delphine, “Why There Are No Winners from the Oil Price Plunge This Time,” Financial Times, March 10,
2020. https://www.ft.com/content/da2b0700-622c-11ea-b3f3-fe4680ea68b5; Mufson, Steve and Will Englund, “Oil
Price War Threatens Widespread Collateral Damage,” Washington Post, March 10, 2020.
https://www.washingtonpost.com/climate-environment/oil-price-war-threatens-widespread-collateral-damage/2020/03/
09/3e42c9e2-6207-11ea-acca-80c22bbee96f_story.html.
290 Sheppard, David and Derek Brower, “U.S. Crude Oil Price Drops Below $20,” Financial Times, March 29, 2020.
https://www.ft.com/content/bc938195-82d3-43eb-b031-740028451382.
291 “Texas Oil Groups: Panhandling Ahead,” The Financial Times, January 20, 2020.
292 Ibid.
293 Hille, Kathrin, Alistair Gray, and Patrick McGee, “Covid-19 Delays PC and Smartphone Shipments for Weeks,”
Financial Times, March3, 2020. https://www.ft.com/content/72742872-5c31-11ea-b0ab-339c2307bcd4.
294 Newmyer, Tory, “The Finance 202: Stocks Stage Major Comeback, but Manufacturing Report Points to Continued
Covid-19 Pain,” Washington Post, 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-
Covid-19-pain/5e5d84a6602ff10d49ac081f/?itid=hp_hp-cards_hp-card-politics%3Ahomepage%2Fcard-ans.
295 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-
mounts-across-the-globe/2020/02/13/7bb69a12-4e8c-11ea-9b5c-eac5b16dafaa_story.html?itid=lk_inline_manual_12
296 Ibid.
297 Ibid.
Congressional Research Service

66

Global Economic Effects of COVID-19

 How much economic activity will be lost as a result of the viral outbreak?
 What are the most effective monetary and fiscal policies at the national and
global level to address the crisis?
 What temporary and permanent effects will the crisis have on how businesses
organize their work forces?
 Many of the public health measures taken by countries such as Italy, Taiwan,
South Korea, Hong Kong, and China have sharply impacted their economies
(with plant closures, travel restrictions, and so forth). How are the tradeoffs
between public health and the economic impact of policies to contain the spread
of the virus being weighed?
Congressional Research Service

67

Global Economic Effects of COVID-19

Appendix. Table A-1. Select Measures Implemented
and Announced by Major Economies in Response to
COVID-19
United States
U.S. Federal Reserve
March 3: Cut the target range for the federal funds rate by 0.5 percentage point.
March 12: Expanded reverse repo operations, adding $1.5 tril ion of liquidity to the
banking system.
March 15: Cut the target range for the federal funds rate by a ful percentage point
to a range of 0.00% to 0.25% and restarted quantitative easing with the purchase of at
least $500 bil ion in Treasury securities and $200 bil ion in mortgage-backed
securities.
March 16: Increased reverse repo operations by another $500 bil ion.
March 17: U.S. Treasury Secretary Mnuchin approved the Federal Reserve’s creation
of a “Commercial Paper Funding Facility," (CPFF) through March 17, 2021, which wil
allows the Fed to create a corporation which can purchase commercial paper, short-
term, unsecured loans made by businesses for everyday expenses and authorized up
to $10 bil ion from the Treasury to help cover loan losses incurred under this
program.
March 17: Relaunched the Primary Dealer Credit Facility (PDCF) for at least six
months. Starting March 20, the PDCF wil offer short-term loans to banks secured by
col ateral such as municipal bonds or investment-grade corporate debt.
March 18: Launched the Money Market Mutual Fund Liquidity Facility (MMLF)
through the end of September, a new program to lend money to banks so they can
purchase assets from money market funds. Treasury is offering up to $10 bil ion to
cover loan losses the Fed incurs from the program.
March 23: Announced a series of measures designed to stabilize markets, enhance
liquidity and stimulate growth. The measures included the rol out of 2 new facilities,
the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan
issuance and the Secondary Market Corporate Credit Facility (SMCCF) to provide
liquidity for outstanding corporate bonds. The FOMC removed its caps on planned
QE purchases and wil now purchase Treasuries and agency mortgage-backed
securities “in the amounts needed to support smooth market functioning and
effective transmission of monetary policy to broader financial conditions and the
economy.”

U.S. Congress
March 5: Passed, and the President signed, a bil providing $8.3 bil ion in emergency
funding for federal agencies to respond to the COVID-19 outbreak (H.R. 6074:
COVID-19 Preparedness and Response Supplemental Appropriations Act 2020).
March 13: The House of Representatives passed a COVID-19 response package
(H.R. 6201; P.L. 116-127, Families First COVID-19 Response Act); measure was
signed by President Trump on March 18, 2020. The measure appropriates about $100
bil ion and includes tax credits for employers offering paid sick leave and increases to
unemployment benefits and food assistance.
March 19: The Senate introduced the COVID-19 Aid, Relief, and Economic Security
Act (S. 3548) to provide $2.0 tril ion in assistance to businesses and workers.
March 27: Passed, and the President signed, the COVID-19 Aid, Relief, and
Economic Security Act (CARES Act, H.R. 748, P.L. 116-136), a $2.1 tril ion fiscal
stimulus package. It includes $454 bil ion in loans for businesses, $349 bil ion in loans
for small businesses, $300 bil ion for direct payments of $1,200 each for lower- and
Congressional Research Service

68

Global Economic Effects of COVID-19

middle-income individual taxpayers (and $500 for each child), $250 bil ion for
unemployment insurance, and $221 bil ion in tax deferrals, among other measures.
March 30: Some Members of the House of Representatives announced they had
begun work on a fourth COVID-19 bil targeting a number of issues, including short
supplies of medical equipment and protective gear to enhance worker protections,
infrastructure needs, and additional payments to individuals.

Trump Administration
March 13: President Trump declared a state of emergency, allowing the Federal
Government to distribute up to $50 bil ion in aid to states, cities, and territories.
March 17: The Internal Revenue Service postponed the April 15 tax-payment
deadline for 90 days and wil waive interest and penalties. (The extension and waiver
is available only to individuals and corporations that owe $1 mil ion or $10 mil ion or
less, respectively.)
March 17: Administration officials begin negotiations with Members of Congress on
a third stimulus package.
March 31: President Trump calls for $2 tril ion infrastructure spending, possibly as
part of fourth COVID-19 stimulus bil .
Albania
The Bank of Albania
March 25: Cut its benchmark interest rate to a record-low 0.5% and its one-day
lending rate to 0.9% on to help lending in the economy affected by the COVID-19
outbreak. It also announced that it would inject unlimited liquidity into the banking
sector, ensure the normal functioning of the electronic payments system, and that,
together with the government, it had agreed to postpone until the end of May all loan
repayments by businesses and individuals facing difficulties due to the outbreak.

Government of Albania
March 20: Passed measures totaling $370 mil ion in its budget to soften the impact
from the COVID-19 crisis, including $25 mil ion for the health sector; guarantees
worth $100 mil ion to companies unable to pay their employees; and $65 mil ion to
help the needy, small businesses, and those unable to work because of stay-at-home
orders. It also announced that it would write off penalties on delayed electricity bil
payments worth some $150 mil ion, postpone taxes on company profits, and cut the
wages of government ministers and lawmakers by half for the duration of the crisis.
Argentina
Central Bank of Argentina
March 19: Indicated that it would lower reserve requirements for banks that
extended special credit lines to small and medium-sized enterprises at a maximum
annual interest rate of 24% in a bid to offset the impact of COVID-19.

Government of Argentina
March 19: Announced a fiscal stimulus package of 700 bil ion pesos ($11.3 bil ion) to
mitigate the impact of the COVID-19 and support the economy. The main measures
include providing credit to productive activities (350 bil ion pesos), increasing public
investments (100 bil ion pesos), and waiving payrol taxes for firms affected by the
COVID-19.
Armenia
March 17: The Central Bank of Armenia cut its key refinancing rate by 25 basis
points to 5.25% from 5.5% due to the effects of the COVID-19 outbreak on the
economy.
Australia
Reserve Bank of Australia
March 3: Cut its benchmark interest rate by 25 basis points to 0.5% due to the
significant effect of the COVID-19 outbreak on the Australian economy.
March 19: Cut its cash rate by 25 basis points to 0.25% and and introduced a series
of measures: (1) targeting the 3-year government bond yield at 0.25% via purchases in
Congressional Research Service

69

Global Economic Effects of COVID-19

the secondary market, (2) providing a three-year term funding facility to authorized
deposit-taking institutions worth at least AU$90 bil ion at a fixed rate of 0.25%,
aiming to support credit to small and medium-sized enterprises, (3) fixing the
exchange settle balances at the central bank at 10 basis points. It wil also continue to
provide liquidity by conducting one-month and three-month repo operations until
further notice. Longer-term repo operations of six-month maturity or longer would
be undertaken at least weekly. The central bank also set out forward guidance, saying
that it wil not increase the cash rate until progress is made towards ful employment
and confident that inflation is sustainably within its target band.
March 19: Through its daily money market operation, it has injected cash into the
banking system (through repurchasing agreements), aiming to ease liquidity
constraints in the stressed bond market: AU$12.7 bil ion (March 19), AU$10.7 bil ion
(March 18), AU$8.8 (March 17), AU$5.9 bil ion (March 16), and AU$8.8 (March 13).

Government of Australia
March 12: Announced a AU$17.6 bil ion ($11.4 bil ion) stimulus package that
includes support for business investment, cash flow assistance for small and medium
sized business and employees, and household stimulus payments.
March 16: The Australian Securities and Investments Commission ordered large
equity market participants to reduce their number of executed trades by 25% from
the levels executed on March 13, 2020, until further notice.
March 19: Announced that the Australian Office of Financial Management (AOFM)
wil be provided with an investment capacity of $15 bil ion to enable smaller lenders
to continue supporting Australian consumers and small businesses. (AOFM wil be
able to purchase residential mortgage backed securities and invest in a range of other
asset backed securities and warehouse facilities over the next 12 months.)
March 22: Announced an additional AU$66.4 bil ion ($38.5 bil ion) fiscal package,
which extends income support measures for existing welfare and newly unemployed
workers, and boosted previously announced measures for businesses such as cash
flow and wage subsidies. The government is also expected to give local businesses
AU$100,000 if the company has a turnover of less than AU$50 mil ion each year and
underwrite 50% of up AU$40 bil ion in loans offered by local lenders to small and
medium sized companies.
March 30: Unveiled an economic package of AU$130 bil ion ($79.85 bil ion) to
subsidize the wages of an estimated 6 mil ion people, marking a third tranche of
stimulus designed to limit the fallout of the COVID-19 pandemic on the country’s
economy. The “job keeper” allowance, which would bring the country’s COVID-19-
related stimulus so far to A$320 bil ion (about 15% of Australia’s gross domestic
product), wil provide eligible companies with AU$1,500 every fortnight for six
months for each employee. Any company that lost 30% of its revenue can apply for
the funds.
Austria
Government of Austria
March 14: Set up an initial 4 bil ion euro ($4.4 bil ion) “corona crisis fund” to cover,
among other things, benefits for affected workers, as well as bridge loans and credit
guarantees to shore up businesses’ liquidity.
March 18: Announced that it wil spend up to 38 bil ion euros ($42 bil ion) to secure
jobs and keep companies afloat, and it wil provide another 9 bil ion euros in
guarantees and warranties, 15 bil ion euros in emergency aid, and 10 bil ion euros in
tax deferrals.
Bosnia and
March 17: The prime minister met with the IMF Resident Representative in Bosnia
Herzegovina
to request assistance from the IMF. The IMF indicated that it may extend a 165
mil ion euros ($181 mil ion) loan to Bosnia under a Rapid Financing Instrument (RFI)
to finance the increasing costs sustained by the country’s health system in combating
COVID-19.
Congressional Research Service

70

Global Economic Effects of COVID-19

Brazil
Central Bank of Brazil
March 18: Cut its benchmark interest rate by 50 basis points to 3.75% to cushion
the economic blow of the COVID-19 pandemic. It also sold $830 mil ion in two
rounds of spot foreign exchange intervention and announced a repurchase program
for dol ar-denominated sovereign bonds held by Brazilian banks, which wil be carried
out in conjunction with the Treasury.
March 23: Announced that it planned to inject 1.2 tril ion reais ($233.81 bil ion) into
the country’s financial system to counteract the effects of the COVID-19 outbreak,
with more than half that amount comprising loans to banks. Under the program,
lenders wil be able to package their loan portfolios into long-term deposits to be
acquired by the central bank in a move aimed at freeing up 670 bil ion reais for fresh
loans. It also (1) cut long-term reserve requirements to 17% from 25%, freeing up 68
bil ion reais currently in compulsory deposits with the central bank to banks, (2)
announced measures allowing small and mid-sized lenders to issue up to 2 bil ion
reais in special long-term bonds guaranteed by a privately held deposit insurance fund,
limited to an amount equivalent to its shareholders’ equity, and (3) wil extend loans
backed by corporate bonds to financial institutions between March 23 and April 30 to
add liquidity to their investment funds.

Government of Brazil
March 16: Announced a fiscal stimulus package of 147.1 bil ion reais ($28.6 bil ion)
to mitigate the impact of the COVID-19 and boost the economy. It does not contain
new money, but is a range of measures that aim to protect the most vulnerable
population through social assistance payments (83.4 bil ion reais), support domestic
companies and defer business taxes (59.4 bil ion reais), and increase investments in
healthcare to combat the COVID-19 (4.5 bil ion reais). The government also
announced a 3.1 bil ion reais boost to the “Bolsa Família” assistance for some of
Brazil’s poorest families.
March 16: The National Monetary Council (CMN) approved the measures that wil
allow banks to (1) increase loans and offer better terms to firms and households over
the next six months and (2) extend certain loan maturities for the next six months. It
also lowered capital requirements for banks.
April 1: Announced that it wil cut the IOF financial tax for 90 days. It wil be
temporary and cost 7 bil ion reais. It wil also extend the deadline for submitting the
2019 base year net income report to June 30 from April 30 and allow companies to
postpone payment of certain tax contributions for two months and reduce wages by
up to 70% (or the minimum wage) for three months, among other measures.
Bulgaria
Government of Bulgaria
March 30: Announced it wil spend more than 1 bil ion levs ($566 mil ion) to pay
part of workers’ salaries in companies whose operations have been hit by the
COVID-19 crisis, part of part of an overall 4.5 bil ion-lev package.
March 31: Announced plans to raise the ceiling on new debt it can raise to 10 bil ion
levs due to the COVID-19 pandemic.
Cambodia
Government of Cambodia
March 5: Announced that it would allocate $30 mil ion to finance Cambodia’s
COVID-19 screening and monitoring efforts.
March 10: Al ocated between $800 mil ion to $2 bil ion to address the economic
impacts of the novel COVID-19 outbreak.
Canada
Bank of Canada
March 4: Lowered its target for the overnight rate by 50 basis points to 1.25%
(setting the bank rate to 1.5% and the deposit rate to 1%).
March 12: Announced that it wil broaden the scope of the current Government of
Canada bond buyback program and temporarily add new Term Repo operations.
Congressional Research Service

71

Global Economic Effects of COVID-19

March 13: Lowered its benchmark overnight rate to 1.25% from 1.75% in response
to the epidemic.
March 13: Announced its intention to launch the Bankers’ Acceptance Purchase
Facility (BAPF), starting the week of March 23, 2020, in an effort to support the
continuous functioning of financial markets; it wil conduct secondary market
purchases of one-month Bankers’ Acceptances issued and guaranteed by any
Canadian bank and of sufficiently high quality. BAPF operations wil be conducted
weekly with the purchase amount and reserve rate being adjusted to reflect market
conditions. (For the first operation, the Bank of Canada will purchase up to $10
bil ion of one-month Bankers’ Acceptances with a reserve rate of the overnight index
swap rate plus 20 basis points.)
March 16: Announced that it wil broaden eligible col ateral for its term repo facility
and increase purchases of mortgage-backed securities (Canada Mortgage Bonds).
March 27: Cut its overnight interest rate by 50 basis points to 0.25%, its lowest level
since June 2010 and the third cut in March, to support an economy hit hard by the
outbreak of COVID-19. It also announced that it would begin purchases of CA$5
bil ion per week of Government of Canada securities in the secondary market.

Canadian Government
March 6: Announced an investment of CA$27 mil ion to fund COVID-19 research
and accelerate the development, testing, and implementation of measures to deal
with the COVID-19 outbreak.
March 11: Unveiled CA$1 bil ion ($750 mil ion) in funding for vaccine research and
health measures.
March 13: Established a Business Credit Availability Program (BCAP) to support
financing in the private sector through the Business Development Bank of Canada
(BDC) and Export Development Canada (EDC); it wil allow BDC and EDC to
provide more than $10 bil ion of additional support to businesses.
March 13: The Office of the Superintendent of Financial Institutions (OSFI) lowered
the Domestic Stability Buffer requirement for domestic systemically important banks
by 1.25% of risk weighted assets; it wil increase the lending capacity of Canada’s large
banks and support the supply of credit to the economy by more than CA$300 bil ion.
March 25: Almost doubled the value of an aid package previously announced to help
people and businesses deal with losses from the COVID-19 outbreak, from CA$27
bil ion to CA$52 bil ion ($36.6 bil ion). It wil give people affected by the outbreak
CA$2,000 a month, delay student loan repayments, and defer tax payments, among
other measures to boost the economy.
Chile
Central Bank of Chile
March 16: Cut its benchmark rate by 75 basis points to 1% and announced measures
to inject liquidity, including allocating $4 billion to purchase inflation-linked bank
bonds and providing additional credit to banks.
March 31: Cut its benchmark interest rate by 50 basis points to 0.50% amid the
COVID-19 pandemic.

Government of Chile
March 19: Announced a stimulus package of $11.75 bn to mitigate the negative
economic impact of the outbreak of COVID-19 and civil unrest. The measures
include extending unemployment insurance to those who are sick or unable to work
from home, delaying tax payments for small businesses, a cash bonus for
approximately 2 mil ion workers who lack formal employment, and emergency funds
for municipalities.
China
People’s Bank of China (PBOC)
February 3: Expanded reverse repo operations by $174 bil ion; added another $71
bil ion on February 4.
Congressional Research Service

72

Global Economic Effects of COVID-19

February 16: Cut the one-year medium-term lending facility rate by 10 basis points.
February 20: Cut the one-year and five-year prime rates by 10 and 5 basis points,
respectively.
March 13: Lowered bank reserve requirements, freeing up about $79 bil ion to be
loaned out.
March 30: Lowered the interest rate on reverse repurchase agreements to 2.20%
from 2.40%, as authorities stepped up easing measures to relieve pressure on the
economy that has been hit hard by the epidemic.

PRC Government
February: Asked banks to extend the terms of business loans and commercial
landlords to reduce rents.
February 24: The Asian Infrastructure Investment Bank (AIIB) contributed $1
mil ion in medical equipment to help China control the spread of COVID-19.
February 27: Announced a number of tax relief measures to tackle COVID-19
disruption, including a temporary reduction its value-added tax (VAT) and the
elimination of VAT on medical, catering, accommodation, hairdressing, and laundry
services as well as on masks and protective clothing.
March: Earmarked $15.9 bil ion to fight the epidemic.
March 21: Announced that it would cut fees on a large scale to stimulate private-
sector investment and also accelerate the development of “new infrastructure” to
help spur the economy.
March 19: Reportedly is considering a fiscal stimulus package worth tril ions of yuan
to revive the economy amid the COVID-19 pandemic. The ramped-up spending will
aim to spur infrastructure investment, backed by as much as 2.8 tril ion yuan ($394
bil ion) of local government special bonds.
March 27: The Communist Party’s Politburo announced that it would step up
macroeconomic policy changes and pursue more proactive fiscal policy. It called for
expanding the budget deficit, issuing more local and national bonds, guiding interest
rates lower, delaying loan repayments, reducing supply-chain bottlenecks and
boosting consumption.
Colombia
Central Bank of Colombia
March 18: Announced a $400 mil ion dol ar to peso swap to take place on March
19, and that it would increase the resources available to financial institutions and ease
rules on which institutions can have access to funds.
March 27: Cut its benchmark interest rate by 50 basis points to 3.75% in an effort to
boost economic growth amid fall-out from COVID-19.

Government of Colombia
March 18: Announced that it has 14.8 tril ion pesos ($3.65 bil ion) to spend on
emergency measures to ease the economic fallout from COVID-19, but it wil not
take on additional debt to finance the efforts (12.1 tril ion pesos wil come from the
country’s savings programs). It wil initially spend 1 tril ion pesos on the healthcare
system and 500 bil ion pesos on additional payments to social welfare programs for
families, young people and the elderly, accelerate a plan to return value added tax to
the neediest Colombians from April, and make 48 tril ion pesos available to give
credit guarantees to small and medium-sized businesses and households.
Congo-Kinshasa
March 24: The Central Bank of the Congo cut its base interest rate to 7.5% from
(Democratic Republic
9.0% in order to cushion the economic impact of the COVID-19 outbreak. It wil also
of the Congo)
cut mandatory reserve requirements and provide liquidity to banks.
Cyprus
Government of Cyprus
March 15: Unveiled a 700 mil ion euro support package for companies and workers
to deal with the impact of the spread of COVID-19, which includes a temporary VAT
Congressional Research Service

73

Global Economic Effects of COVID-19

reduction, support for individuals and companies affected, additional paid sick leave,
and 100 mil ion euro for the public health sector.
March 23: Announced that it is revising the economic package announced on March
15. It wil amount to at least 1.5 bil ion euro and include direct support, deferred
government income in the form of payment suspension of direct and indirect taxes
and other fees, as well as government guarantees (which would not incur a fiscal
impact unless they materialize).
Czech Republic
Czech National Bank
March 16: The Czech National Bank lowered its main two-week repo rate by 50
basis points to 1.75%, reversing its February rate hike to combat the hit from the
virus outbreak. It also raised the number of repo operations that provide liquidity to
banks to three times a week from once, noting that bids would be met with zero
spread to the repo rate.
March 17: Revised the countercyclical capital buffer for exposures located in the
Czech Republic to 1.75 %.
March 26: Cut its main two-week repo rate by 75 basis points to 1.00% and
announced that it was ready to cut interest rates further if needed.

Government of the Czech Republic
March 9: Adopted a number of economic measures, which wil include providing 100
bil ion CZK ($3.9 bil ion) in direct support and 900 bil ion CZK ($34.8 bil ion) in
indirect in the form of guarantees to maintain the employment rate, paying out
(through the respective employers) 60% of the average contribution base to
employees affected by the quarantine, supporting employers who continue, despite
their businesses being shut down, to pay out 100% of the salary to affected
employees by covering 80% of salary costs (up to 1.2 bil ion CZK), and allocating 10
bil ion CZK ($390 mil ion) to the Czech-Moravian Guarantee and Development Bank
for immediate granting of interest-free loans with a one-year deferral with the
possibility of a two-year extension for businesses affected by the COVID-19
(“COVID Loans Program”). (On March 16, the government earmarked another 1
bil ion CZK to the COVID Loans Program.)
March 13: Extended the deadline for the filing of tax returns until 1 July and waived
fines stemming from the late submission of tax declarations or reports.
March 13: The Czech Banking Association (ČBA) wil allow banks to voluntarily
extend the deadlines on loan and mortgage payments.
March 23: Approved a five-fold rise in this year’s budget deficit, as it offers help to
businesses hit hard by the COVID-19 outbreak.
April 1: Announced that it had approved a scheme for a moratorium of up to six
months on consumer, company, and mortgage loan payments to help the country
through the COVID-19 crisis.
Denmark
Danmarks Nationalbank
March 12: Released banks’ emergency buffer and wil be offering low interest rate
loans to banks.
March 26: Injected $2.85 bil ion in loans to Danish banks and financial institutions by
auctioning off U.S. dol ars in two loans with a maturity date on April 8 and June 19
and a cut-off rate of 0.32 and 0.34, respectively.
April 1: Sold $750 mil ion worth of its mint 30-year government bonds in an auction
that was held a month early to expedite funding of aid packages due to COVID-19
that is expected to cost the state more than 60 bil ion Danish crowns ($8.8 bil ion).

Government of Denmark
March 10: Wil grant tax breaks to businesses affected by the COVID-19 as part of a
series of measures worth $20 bil ion. Large businesses wil be given an additional 30
days to pay value added tax, while all companies wil be granted four additional
Congressional Research Service

74

Global Economic Effects of COVID-19

months to pay their labor contributions. The government is also lifting the ceiling on
businesses’ tax accounts, so that corporations can avoid paying the negative interest
rates they are charged when placing cash in the bank.
March 12: Indicated that it would release banks’ counter-cyclical capital buffer,
freeing about 200 bil ion Danish crowns ($30 bil ion) for lending. Other fiscal
measures, worth 2.8 bil ion Danish crowns ($416 mil ion), include compensation to
companies for salary payments to employees who have fallen il or been quarantined
due to the COVID-19.
March 18: Proposed an economic aid package worth 40 bil ion kroner ($5.8 bil ion)
to help small businesses cover (for three months) most of the losses in revenue and
some of their fixed expenses as a result of the COVID-19 outbreak. Under the
program, companies who have seen their revenues decline by 40% or more wil
receive government grants to help cover between 25% to 80% of their fixed costs,
and self-employed and small firms who see their revenues fall more than 30% wil also
be offered government compensation worth 75% of their normal monthly income.
March 31: Announced that it wil postpone by three months around 200,000
companies’ deadline of end-May to submit their annual reports in an effort to help
companies affected by the COVID-19 outbreak.
Egypt
Central Bank of Egypt
March 16: Cut by 300 basis points both the overnight lending rate (from 13.25% to
10.25%) and the overnight deposit rate (from 12.25% to 9.25%) in what it described
as a “preemptive” move to support the economy in the face of the COVID-19
outbreak.
March 23: Told commercial banks to cut interest on dol ar deposits to 1% above the
London Interbank Offered Rate (Libor) instead of 1.5% above Libor, starting March
23, in order to control the exchange market and reduce the expected dol arization
operations after cutting interest rates on March 16.
March 29: Instructed Egyptian banks to apply temporary limits on daily withdrawals
and deposits in a move seemingly designed to control inflation and hoarding during
the coronavirus’ spread, after 30 bil ion Egyptian pounds ($1.91 bil ion) were
withdrawn from banks in the past three weeks. The daily limit for individuals would
be 10,000 Egyptian pounds ($635) and 50,000 pounds for companies.

Government of Egypt
March 14: Indicated that the government wil allocate 100 bil ion Egyptian pounds
($6.4 bil ion) to finance a “comprehensive” state plan for combating the COVID-19
outbreak.
March 22: Announced that the government would allocate 20 bil ion Egyptian
pounds ($1.27 bil ion) to support the stock exchange.
March 30: Ordered relevant authorities to boost strategic reserves of staple goods,
as global concerns about food security rise amid the COVID-19 crisis.
Eswatini (Swaziland)
March 21: The Central Bank of Eswatini cut its main lending rate by 100 basis points
to 5.5%, citing global and domestic economic developments and the impact of
COVID-19. The reduction was to ensure the equal pegging of the local currency with
the South African rand after the South African Reserve Bank (SARB) cut its main
lending rate by 100 basis points to 5.25% on March 19.
European Union
European Central Bank (ECB)
March 12: Announced that it would provide banks with loans at a rate as low as
minus 0.75%, below the-0.5% deposit rate, increase bond purchases by 120 bil ion
euros ($135.28 bil ion) this year (with a focus on corporate debt), and allow euro
zone banks to fall short of some key capital and cash requirements (in order to keep
credit flowing to the economy).
March 18: Launched a new, 750 bil ion euro ($818 bil ion) temporary asset purchase
program of private and public sector securities to counter the risks posed by the
outbreak and escalating diffusion of COVID-19 (the Pandemic Emergency Purchase
Congressional Research Service

75

Global Economic Effects of COVID-19

Programme). Purchases wil be conducted until the end of 2020 and wil include all
the asset categories eligible under the existing asset purchase program. It wil also
support commercial debt markets by expanding the range of eligible assets under the
corporate sector purchase program to nonfinancial commercial paper of sufficient
credit quality, and by easing col ateral standards by expanding the scope of Additional
Credit Claims to include claims related to the financing of the corporate sector.
March 26: Announced that under the new 750 bil ion euro ($818 bil ion) temporary
bond purchase Pandemic Emergency Purchase Program (PEPP), it would not apply
self-imposed limits on how many bonds it could buy from any single euro zone
country. Under its long-running asset purchase scheme, the ECB has capped bond
buys at 33% of each euro zone state’s debt.

European Commission
March 11: Announced a 37 bil ion euro ($41 bil ion) “Corona Investment Fund” that
would use “spare” money from the EU budget to help businesses, health-care
systems, and sectors in need; additionally, the EU’s own investment fund wil
guarantee 8 bil ion euros ($8.9 bil ion) of loans to 100,000 small- and medium-sized
enterprises and affected companies may be able to delay the payment of their existing
loans.
March 19: Adopted a Temporary Framework to enable Member States to use the
ful flexibility foreseen under state aid rules to support the economy in the context of
the COVID-19 outbreak. It provides for five types of aid: (1) direct grants, selective
tax advantages and advance payments (Member States wil be able to set up schemes
to grant up to 800,000 euros to a company to address its urgent liquidity needs); (2)
state guarantees for loans taken by companies from banks; (3) subsidized public loans
to companies; (4) safeguards for banks that channel state aid to the real economy;
and (5) short-term export credit insurance.
Fiji
March 18: The Reserve Bank of Fiji cut its Overnight Policy Rate by 25 basis points
to 0.25% in order to stimulate demand and cushion the blow to its important tourism
industry from the global spread of COVID-19.
France
Government of France
March 12: Pledged more generous guarantees on loans made to small businesses,
more cash for firms struggling to hold on to workers, and a solidarity fund to help
companies cushion the blow from the COVID-19 outbreak; it also announced that
the government would be ready to increase funds available to help companies reduce
workers’ hours, instead of laying them off.
March 16: Announced that the government would guarantee 300 bil ion euros in
bank loans for small and medium-sized businesses.
March 17: The Autorité des Marchés Financiers (AMF), France’s financial-markets
authority, stated that it would forbid short selling of stock in 92 companies during the
March 17 session.
March 17: Announced that it would spend 45 bil ion euros ($50 bil ion) to help small
businesses and employees struggling with the COVID-19 outbreak, including through
an expanded partial-unemployment package in which the state pays the salaries of
employees who are not needed during the crisis.
Gambia
February 28: The Central Bank of The Gambia lowered its policy rate by 50 basis
points to 12.0% amid risks from the COVID-19 outbreak and uncertainty surrounding
global food prices.
Georgia
April 1: The government announced that it wil put 2 bil ion lari ($606 mil ion) from
its state budget toward helping the economy through the COVID-19 pandemic, in
addition to 351 mil ion lari that wil be allocated for the healthcare system from the
state budget. The government wil fund three months’ payments for electricity and
gas consumption to Georgians who used less than 200 kilowatts of electricity and 200
cubic meters of gas a month in March, April, and May.
Congressional Research Service

76

Global Economic Effects of COVID-19

Germany
Government of Germany
March 13: Pledged to provide unlimited liquidity assistance to German companies hit
by the pandemic. (The measure envisages an expansion of loans provided by KfW, the
state development bank, and wil allow companies to defer bil ions of euros in tax
payments.) The Bundestag also expanded the Kurzarbeit or short-time work scheme,
under which companies that put their workers on reduced hours can receive state
support. The government also indicated that it would boost investments by €3.1
bil ion per year (about $3.5 bil ion) between 2021 and 2024.
March 23: Agreed to a package worth more than 750 bil ion euros ($808 bil ion) to
mitigate the damage of the COVID-19 outbreak. It includes 156 bil ion euros in debt
to finance higher social spending, 50 bil ion-euro liquidity fund for self-employed
people, 600 bil ion-euro rescue fund (400 bil ion euros in guarantees,100 bil ion euros
in loans through state-run development bank KfW, and 100 bil ion euros earmarked
for equity stakes in companies). Additionally, the state’s KfW bank has 500 bil ion
euros available to boost liquidity of German companies.
March 30: Announced that, in response to COVID-19, it would expand export loan
guarantees on short-term payments to include transactions within the EU and with
Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland, Britain, and the
United States.
Ghana
March 18: The Bank of Ghana (Ghana’s central bank) cut its interest rate to 14.5%
from 16% due to the negative economic impacts it anticipates from the spread of the
COVID-19.
Greece
Government of Greece
March 9: Wil suspend the payment of sales taxes due at the end of March (for four
months) of social security contributions by companies (until June 30).
March 17: Announced a package of up to 2 bil ion euros ($2.20 bil ion) to support
businesses fol owing the COVID-19 outbreak
March 17: The Hellenic Bank Association wil offer businesses hit by the COVID-19
crisis a six-month freeze on loan payments as part of relief efforts to help borrowers
deal with the economic shutdown.
March 30: Announced new tax breaks and economic assistance to thousands of
businesses and workers to buffer its economy from a national lockdown triggered by
the COVID-19 pandemic. The support measures include a one-off benefit for 1.7
mil ion, or 81% of private sector workers whose jobs are temporarily suspended and
payment of their social security contributions for 45 days, extend financial aid for the
self-employed, and suspend VAT and tax arrear payments for 800,000 businesses.
Guatemala
March 29: The government announced that it would use nearly $26 mil ion from an
emergency fund to help the country’s neediest families, as measures to combat the
spread of a COVID-19 impact on the economy and jobs, It plans to withdraw 200
mil ion quetzals ($25.8 mil ion) from the emergency fund and give families 1,000
quetzals ($129) to help pay for electricity, water and supplies.
Hong Kong
Hong Kong Monetary Authority
March 3: Lowered its base rate charged through the overnight discount window by
50 basis points to 1.5% after the U.S. Federal Reserve delivered a rate cut of the same
margin.
March 16: Lowered its base rate charged through the overnight discount window to
0.86%, after the U.S. Federal Reserve delivered a rate cut. It also cut the level of
capital buffers it requires financial institutions to hold to 1% from 2% of their risk-
weighted assets to help companies and lenders weather the impact of the COVID-19
outbreak.

Government of Hong Kong
February 26: Announced a HK$120 bil ion ($15.4 bil ion) relief package as part of
its 2020-2021 budget, including a payment of HK$10,000 ($1,200) to each permanent
Congressional Research Service

77

Global Economic Effects of COVID-19

resident of the city 18 or older, paying one month’s rent for people living in public
housing, cutting payrol , income, property, and business taxes, low-interest,
government-guaranteed loans for businesses, and an extra month’s worth of
payments to people col ecting old-age or disability benefits.
Hungary
Hungarian National Bank
March 16: Announced emergency steps to help businesses, boosting the range of
col ateral it accepts from banks and calling on lenders to apply a loan repayment
moratorium for firms hit by the coronavirus economic fallout. (It said in a statement
that performing corporate loans in domestic banks’ balance sheets totaled close to
3.6 tril ion forints, and that it would apply a 30% haircut on those, boosting the range
of col aterals that can be used and thus also lifting banks’ lending potential by more
than 2.5 tril ion forints ($8.10 bil ion)). It also offered to inject forint liquidity into the
banking system via foreign exchange swaps.
March 18: Urged domestic banks to introduce a moratorium on household loan
repayments considering the “extraordinary situation” due to the coronavirus crisis,
and that if banks did not bring in the measure, the Bank would ask the government to
pass a decree enforcing it. It also announced that it was considering restarting its
mortgage note buying program to provide more long-term liquidity for the banking
system and reduce the financing costs of household loans.
March 24: Launched new measures to boost liquidity and flagged further steps if
needed to prevent long-term damage to the economy from the coronavirus
pandemic. It moved to pump more money into the banking system by introducing a
massive fixed-rate col ateralized loan instrument. Lending will be provided to banks at
a fixed interest rate in unlimited quantity, to support bank lending and also
government bond purchases. It also released domestic lenders from the requirement
to hold a certain level of cash as reserves.
April 1: Announced its col ateralized loan tenders, offering liquidity to banks at a
fixed rate of 0.9% on various maturities, and that it would offer them to domestic
open-ended investment funds, in order to support the government securities market
and the real estate market and help offset the fallout from the coronavirus pandemic.

Government of Hungary
April 4: Created a $2 bil ion special fund to aid the fight against COVID-19 and it wil
include contributions from banks and foreign retailers. Hungarian banks wil be
expected to pay 55 bil ion forints ($163 mil ion) in the fund this year, with
multinational retailers adding 36 bil ion forints. Local governments wil have to divert
vehicle taxes amounting to a total of 34 bil ion forints to the fund, while political
parties wil pay half of their central budget revenue to the fund for a total of 1.2
bil ion forints.
April 6: Announced a stimulus package, which includes subsidized loans to Hungarian
companies and funds to preserve jobs. It would amount to 18%-20% of gross
domestic product (GDP), including National Bank of Hungary programs. The prime
minister said that the government was ready to pay some of the wage costs of
companies forced to cut working hours, would support investments with 450 bil ion
forints ($1.3 bil ion), and would provide targeted support for sectors such as tourism,
the food industry, and construction. Subsidized loans to companies wil total more
than 2 tril ion forints, while pensioners wil get one month’s extra pension to be
disbursed in four tranches from early 2021.
Iceland
The Central Bank of Iceland
March 11: Cut its benchmark interest rate by 50 basis points to 2.25%, as it tries to
alleviate the potential impact of the COVID-19 on its tourism-dependent economy. It
wil also lower deposit institutions’ average reserve requirement to 0% from 1% to
ease banks’ liquidity positions.
March 18: Cut its key interest rate for the second time in a week by 50 basis points
to 1.75% and reduced the banks’ countercyclical capital buffer to 0% from 2%.
Congressional Research Service

78

Global Economic Effects of COVID-19

March 23: Announced that it would start buying up treasury bonds in order to boost
liquidity and support government plans to increase spending to help the economy
weather the COVID-19 outbreak.
Government of Iceland
March 10: Announced an action plan to respond to the economic impact of COVID-
19, which includes deferring taxes and levies, providing temporary relief to the
tourism industry, and accelerating ongoing and planned infrastructure projects.
March 21: Announced a 230-bil ion-krona ($1.6 bil ion) package (8% of gross
domestic product) to cushion the impact of COVID-19 on the economy. It includes
state guarantees on bridge loans to businesses and the payment of as much as 75% of
an employee’s lost salaries over the next two-and-a-half months. In addition, public
projects worth 20 bil ion krona will be moved forward to this year and tax breaks for
banks wil be implemented sooner than originally planned.
India
Reserve Bank of India
March 12: Announced a $2 bil ion injection into the foreign-exchange market to
support the rupee.
March 13: Announced a plan to add liquidity through short-term repurchase
operations.
March 14: Plans to infuse 250 bil ion rupees ($3.4 bil ion) into the system through
short-term repurchase operation.
March 19: Announced that it wil buy bonds on the open market for a total of 100
bil ion Indian rupees ($1.35 bil ion) due to mature between 2022 and 2025 to try to
keep all market segments liquid and stable.
March 27: Lowered its benchmark repo rate by 75 basis points to 4.40% and
announced several other steps to tackle the impact of COVID-19 on various
industries from the lockdown, some of which include cutting banks’ cash reserve
ratio and targeted long term repos operations. The reverse repo rate was reduced by
90 basis points to 4%.

Government of India
March 15: Pledged $10 mil ion towards South Asian Association for Regional
Cooperation (SAARC) “COVID-19 emergency fund.”
March 15: Is reportedly “pushing” state-run banks to approve new loans amounting
to 500 bil ion-600 bil ion rupees by the end of March.
March 26: Announced a 1.7-tril ion-rupee ($22.6 bil ion) economic stimulus plan
providing direct cash transfers and food security measures to give relief to mil ions of
poor people hit by a nationwide lockdown over COVID-19. It wil provide direct cash
transfers to 200 mil ion women and the elderly, hand out free cooking gas cylinders
to 83 mil ion poor families, and help feed about 800 mil ion poor people over the
next three months by distributing 5 kilograms of staple food-grains wheat or rice for
each person free of cost, with a kilogram of pulses for every low-income family. The
government outlined plans for medical insurance cover of 5 mil ion rupees ($66,000)
for every frontline health worker, from doctors, nurses and paramedics to those
involved in sanitary services.
Indonesia
Bank Indonesia (Bank Sentral Republik Indonesia)
February 20: Cut the seven-day reverse repurchase rate by 25 basis points to
4.75%.
March 19: Cut the seven-day reverse repurchase rate by 25 basis points to 4.50%
and indicated that it wil intensify intervention to ensure market confidence and
liquidity. It has purchased government bonds to combat capital outflows amid the
COVID-19 epidemic, including 27 tril ion rupiah ($2 bil ion) on February 20 and 6
tril ion rupiah ($405 mil ion) on March 13, adding to 8 tril ion rupiah of bonds
purchased March 12.
Congressional Research Service

79

Global Economic Effects of COVID-19

March 25: Announced with the country’s financial regulator that currency market
and stock trading hours wil be limited next week as part of efforts to contain the
spread of COVID-19.

Government of Indonesia
February 25: Announced a stimulus package worth 10.3 tril ion rupiah ($742.6
mil ion) to protect its economy from the impact of the COVID-19 outbreak. It
includes 4.6 tril ion rupiah in subsidies for basic needs for poor households, 1.5
tril ion rupiah for the state property financing program, 443.4 bil ion rupiah for
airlines and travel agents, 298.5 bil ion rupiah to bring in foreign tourists, 3.3 tril ion
rupiah cover for shortfalls in regional budgets, and fiscal transfers (147 bil ion rupiah).
March 13: Announced a 120 tril ion rupiah ($8.1 bil ion) stimulus package to support
the economy, of which 22.9 tril ion rupiah wil be tax breaks, lasting six months
starting in April. The government is also exempting companies in 19 manufacturing
sectors from having to pay import taxes, while giving them a 30% corporate tax
discount, relaxing rules for exports (e.g., fisheries and forestry products) and imports
(e.g., steel, sugar, flour and salt), and easing rules on loan restructuring for small- and
medium-sized companies.
March 17: Ordered the Finance Minister to divert 40 tril ion rupiah ($2.7 bil ion)
from the non-urgent government budget to increase spending in programs that could
provide direct support to household consumption or increase people’s purchasing
power.
March 31: Announced a national public health emergency and that it would spend
405.1 tril ion rupiah ($24.85 bil ion) more on COVID-19 response, social welfare
programs, and economic stimulus, including a 3 percentage point cut in corporate tax
rates to 22%.
Iran
Central Bank of Iran
February/March: Indicated that it would help small businesses affected by the
COVID-19 outbreak by providing tax breaks and allowing defaults on bank loans for
several months.
March 12: Requested $5 bil ion emergency funding from the International Monetary
Fund’s Rapid Financing Instrument to help Iran fight the COVID-19 outbreak.
March 17: Allocated at least 250 mil ion euro to import medicine and medical
equipment required to fight COVID-19.

Government of Iran
March 12: Asked the United Nations to allocate resources to help it tackle COVID-
19 and facilitate imports as a way of boosting the country’s sanctions-hit healthcare
system.
March 15: Announced a series of banking, welfare and tax relief measures to
support businesses and families as the COVID-19 outbreak puts severe strain on the
economy. Employees wil be able to defer health insurance, tax and utility bil
payments for the next three months, while the 3 mil ion poorest Iranians wil receive
an additional cash subsidy starting March 17, 2020.
March 23: The European Union’s High Representative of the Union for Foreign
Affairs and Security Policy (Josep Borrell) announced that the EU would provide 20
mil ion euros in humanitarian aid to Iran to help alleviate the COVID-19 and support
Iran’s request for IMF financial help.
March 26: President Hassan Rouhani wrote to Supreme Leader Ayatol ah Ali
Khamenei requesting permission to withdraw $1 bil ion from the country’s sovereign
wealth fund (the National Development Fund) to support the healthcare system,
which is overstretched by the COVID-19 outbreak.
March 28: Announced that it would allocate 20% of its annual state budget to
fighting the pandemic in the country. The budget allocation, amounting to about 1,000
tril ion rials, would include grants and low-interest loans to those affected by COVID-
Congressional Research Service

80

Global Economic Effects of COVID-19

19, Rouhani said. While the allocated amount is worth some $6.3 bil ion at the rial’s
free market exchange rate of about 160,000 rials per dol ar, the government may
decide to allocate some of the funds at the official rate of 42,000 (which is used to
subsidize food and medicine).
Ireland
March 9: The government announced that it wil set aside 3 bil ion euros ($3.44
bil ion) to provide additional funding to the health service (435 mil ion euros), boost
workers’ sick pay and benefits (2.4 bil ion euros), and offer liquidity assistance to
businesses affected (200 mil ion euros).
Israel
Bank of Israel
March 18: Announced it would allocate up to $15 bil ion for swap transactions
between currencies for domestic banks, part of a move aimed at shoring up the
Israeli economy amid the COVID-19 pandemic.
April 6: Cut its benchmark interest rate to 0.1% from 0.25%, its first rate cut in five
years, expanded its repo transactions so that the agreements can include corporate
bonds—in addition to government bonds—as security, and wil provide loans to
banks for a term of three years (with a fixed interest rate of 0.1%) with the goal of
increasing the supply of bank credit to small businesses. The size of the plan wil be 5
bil ion shekels.

Government of Israel
March 9: The Finance Ministry announced that it was opening a 4 bil ion-shekel
credit line for banks to lend money to small and medium-sized businesses facing a
cash crisis with a high-level government guarantee.
March 11: Wil expand an aid package (for a second time) to help the country deal
with the COVID-19 outbreak by 6 bil ion shekels to a total of 10 bil ion shekels ($2.8
bil ion). Of that, 8 bil ion shekels wil be in a fund to provide cheap loans to
businesses, 1 bil ion shekels wil boost the health system by increasing medicine
stocks and preparing hospitals to receive a larger number of patients, and 1 bil ion wil
be earmarked for needs such as the police force.
March 16: Wil expand its aid package (for a third time) to help businesses hurt by
the COVID-19 crisis by another 5 bil ion shekels ($1.3 bil ion).
March 30: Announced that it wil spend 80 bil ion shekels ($22 bil ion) to help the
economy weather the COVID-19 crisis—70 bil ion shekels in addition to 10 bil ion
already promised to boost welfare services for those who have lost their jobs or are
on unpaid leave and to assist the private sector. It includes a 20-bil ion-shekel social
safety net, with stipends for those who lost income; 40 bil ion shekels earmarked to
assist businesses with tax breaks, loans, and other services; about 10 bil ion for the
healthcare system; and nearly 8 bil ion wil be spent to speed up the recovery.
Italy
Government of Italy
March 11: Announced two packages worth 25 bil ion euros ($28.3 bil ion): A
package worth 12 bil ion euros wil provide extra funding for the health system as
well as a mix of measures to help companies and households, including freezing tax
and loan payments and boosting unemployment benefits to ensure no jobs were lost.
The remainder wil be a reserve to pay for any further measures. The government
also indicated that payments on mortgages wil be suspended across Italy. ABI, Italy’s
banking lobby, said lenders would offer debt moratoriums to small firms and
households grappling with the economic fallout from the virus.
April 6: Announced a new emergency decree aimed at granting liquidity and bank
loans worth more than 400 bil ion euros to companies hit by COVID-19. The new
legislation, combined with a previous stimulus package in March, would allow banks
to offer credit totaling over 750 bil ion euros ($809.78 bil ion).
Japan
Bank of Japan
March 16: Announced that it would (1) double its upper limit of annual purchases of
exchange traded funds to 12 tril ion yen ($112.46 bil ion) and of real-estate
investment trusts to 180 bil ion yen ($1.7 bil ion) per year, (2) expand its upper limit
Congressional Research Service

81

Global Economic Effects of COVID-19

of its corporate bond balance and commercial paper balance by 1 tril ion yen ($9.5
bil ion) each, and (3) start a lending program for commercial banks, providing them
with one-year loans in exchange for corporate col ateral worth 8 tril ion yen ($75.6
bil ion).
Government of Japan
February 13: Unveiled a set of measures worth 15.3 bil ion yen ($140 mil ion) to
fight the spread of COVID-19; secured 500 bil ion yen ($4.7 bil ion) for emergency
lending and loan guarantees at the Japan Finance Corporation and other institutions
for small businesses hit hard by the virus outbreak.
March 10: Unveiled a second package of measures totaling 430.8 bil ion yen ($4.1
bil ion) in spending to cope with the fallout of the COVID-19 outbreak (focusing on
support to small and mid-sized firms) and boosted to 1.6 tril ion yen ($15.1 bil ion) its
special financing for small- and mid-size firms hit by the virus, up from 500 bil ion yen.
March 23: Announced that it is working on a package of measures to combat the
widening economic fallout from the COVID-19 that wil involve direct fiscal spending
exceeding 15 tril ion yen ($137 bil ion). Including loans and other steps that does not
include direct spending, the size of the package may exceed 30 tril ion yen.
April 6: Announced a 108 tril ion yen ($989 bil ion, equivalent to 20% of gross
domestic product) stimulus package, Japan’s largest ever, to rescue the COVID-19-hit
economy. It wil include cash handouts worth 6 tril ion yen for households and small
businesses hit by the virus and offers businesses deferrals on tax and social service
costs worth 26 tril ion yen. The first phase of the package aims to stop job losses and
bankruptcies, while a second round of aid, after the virus is contained, wil try to
support a V-shaped economic recovery.
Kazakhstan
National Bank of Kazakhstan
April 3: Cut its policy rate to 9.5% from 12.0% in an unscheduled move aimed at
boosting economic growth.

Government of Kazakhstan
March 23: The president ordered state-owned companies to start selling part of
their foreign currency revenue on the domestic market to support the local tenge
currency (and to pay out up to 100% of last year’s profits in dividends) in order to
soften the impact of the oil price crash and the COVID-19 outbreak on the economy.
He also ordered a standstil on bank loan repayments by individuals and small- and
medium-sized businesses for the duration of the state of emergency, announced that
the government would pay 42,500 tenge ($95) per month to people who have lost
their source of income, was delaying tax payments for small businesses, and stood
ready to more than triple spending on a program to provide temporary employment
through infrastructure maintenance and construction projects. Together with soft
loan program and other spending, the volume of the stimulus package is expected to
reach $10 bil ion.
April 2: Announced that it plans to borrow $3 bil ion on foreign capital markets to
finance its budget deficit this year, due to the col apse in energy prices and the
additional stimulus spending amid the COVID-19 outbreak.
Kenya
Central Bank of Kenya
March 23: Cut its benchmark lending rate by 100 basis points to 7.25% and lowered
the cash reserve ratio for commercial banks to 4.25% from 5.25%. The move to
lower the cash ratio is expected to release an extra 35.2 bil ion shil ings ($330.83
mil ion) for banks to lend to customers trying to deal with the outbreak.

Government of Kenya
March 16: The World Bank announced that it is making $60 mil ion available to
Kenya’s health sector to help it deal with the COVID-19 outbreak.
March 24: Announced that it wil seek emergency assistance from the IMF of up to
$350 mil ion, and $750 mil ion from the World Bank, release 49 bil ion shil ings ($460
Congressional Research Service

82

Global Economic Effects of COVID-19

mil ion) to pay pending bil s to suppliers, and expedite the payment of close to 10
bil ion ($94 mil ion) shil ings in value-added tax refunds to businesses in the next two
to three months.
March 25: Announced that the value-added tax rate would be cut to 14% from 16%
and corporation tax would be reduced to 25% from 30% under plans scheduled to
come into force by April, and that there would be 100% tax relief for Kenyans
earning a monthly income of up to 24,000 Kenyan Shil ings ($226) to increase their
disposable income.
Kuwait
Central Bank of Kuwait
March 16: Cut by 100 basis points its deposit rate to 1.5% and its overnight, one-
week, and one-month repo rates to 1%, 1.25%, and 1.75%, respectively.
April 2: Announced a stimulus package to support vital sectors and small and
medium enterprises (SMEs) amid the fallout from the COVID-19 pandemic. It cut
capital adequacy requirements by 2.5%, eased the risk weighting for SMEs to 25%
from 75%, raised the maximum lending limit to 100% from 90%, and increased the
maximum financing for residential real estate developments to the value of the
property or the cost of development. The measures are expected to raise banks’
lending capacity by 5 bil ion dinars ($16 bil ion).

Government of Kuwait
April 1: Announced measures aimed at shoring up its economy against the pandemic,
including soft long-term loans from local banks to provide liquidity for small and
medium-sized enterprises and directing government agencies to pay obligations to the
private sector as soon as possible.
Malaysia
Government of Malaysia
February 27: Announced the “Economic Stimulus Package 2020” to mitigate the
economic impact of COVID-19, improve the cash flow of affected businesses,
stimulate private consumption, and accelerate domestic investment activities. It
includes exempting accommodation services from services tax, providing sales tax
exemptions, and lifting duties on certain imports.
March 27: Announced a stimulus package worth 250 bil ion ringgit ($58.28 bil ion),
its second in a month, to help cushion the economic blow from the pandemic. It
includes a 25 bil ion ringgit direct fiscal injection by the government aimed at helping
families and business owners; one-off payments and discounts on utilities for people
whose livelihoods have been affected; 1 bil ion ringgit for a food security fund; and a
50 bil ion ringgit loan scheme for larger companies, which wil offer guarantees of up
to 80% of the sum borrowed to shore up working capital in the corporate sector.
Mauritius
March 10: The Bank of Mauritius cut its key repo rate by 50 basis points to 2.85%
amid the COVID-19 outbreak, which is expected to have a significant impact on the
domestic economy.
Mexico
Banxico (Bank of Mexico)
February 13: Cut its key rate by 25 basis points to 7.0%.
March 19: Lowered its benchmark interest rate by 50 basis points to 6.50% in an
out-of-cycle cut in a bid to support the country’s financial markets, reduced the rates
on its additional ordinary liquidity facility, and cut by 50 bil ion pesos ($2.06 bil ion)
the monetary regulation deposit that private banks must observe.
Moldova
National Bank of Moldova
March 4: Cut its main interest rate by 100 basis points to 4.50%, citing the domestic
disinflationary trend and global economic concerns related to the COVID-19
outbreak.
March 20: Cut its main interest rate for the second time in March to 3.25% from
4.50% in order to support banking system amid markets volatility due to the COVID-
19 spread.
Congressional Research Service

83

Global Economic Effects of COVID-19

Mongolia
March 11: The Central Bank of Mongolia cut its policy rate 100 basis points to
10.0% in response to increased uncertainties in connection with the spread of
COVID-19. It also lowered the reserve requirement on banks.
Morocco
March 15: Morocco’s King Mohammed VI ordered the creation of a 10 bil ion-
dirham ($1 bil ion) fund to upgrade health infrastructure, help vulnerable economic
sectors such as tourism, maintain jobs, and mitigate the social repercussions of the
outbreak.
March 17: Bank Al-Maghrib (Central Bank of the Kingdom of Morocco) cut its
benchmark interest rate by 25 basis points to 2% in order to help shore up economic
activity fol owing a drought and the outbreak of COVID-19.
Netherlands
Government of the Netherlands
March 12: Announced that it would expand loan guarantees for small and medium
sized enterprises, from 50% to 75%.
March 12: The Tax Authority wil al ow companies affected by COVID-19 to defer
income, corporate, turnover, and wage taxes for the time being.
March 17: Announced measures to support companies, ranging from tax
exemptions to having up to 90% of wages lost for work hour reductions paid by the
government.
New Zealand
Reserve Bank of New Zealand
March 16: Cut the official cash rate by 75 basis points to a record low of 0.25%, and
pledged to keep it at this level for at least 12 months.
March 22: Announced that it wil purchase up NZ$30 bil ion ($17 bil ion) of
government bonds in the secondary market over the next 12 months. It wil seek to
buy NZ$750 mil ion bonds a week across a range of maturities, via an auction
process.
March 24: Reduced banks’ core funding ratios to 50% from 75% to help banks make
credit available.
March 30: Announced that it was deploying more tools to provide additional
liquidity to the corporate sector and support market functioning to offset the impact
of the pandemic. A new weekly Open Market Operation—to be held each Tuesday—
wil provide liquidity in exchange for eligible corporate and asset-backed securities by
offering up to NZ$500 mil ion ($300 mil ion) for terms out to approximately three
months, starting on March 31. The bank also wil offer to purchase government bonds
maturing on May 15, 2021, for liquidity management purposes.

Government of New Zealand
March 16: Announced a spending package of NZ$12.1 bil ion ($7.3 bil ion),
equivalent to 4% of GDP in an attempt to fight the effects of COVID-19 on the
economy; approximately NZ$5 bil ion wil go toward wage subsidies for businesses,
NZ$2.8 bil ion toward income support, NZ$2.8 bil ion in business tax relief, and
NZ$600 mil ion toward the airline industry.
March 24: Announced that retail banks wil offer a six-month principal and interest
payment holiday for mortgage holders and small business customers whose incomes
have been affected by the economic disruption from COVID-19. The government and
the banks wil also implement a NZ$6.25 bil ion ($3.62 bil ion) Business Finance
Guarantee Scheme for small and medium-sized businesses. It wil include a limit of
NZ$500,000 per loan and wil apply to firms with a turnover of between
NZ$250,000 and NZ$80 mil ion per annum (the government wil carry 80% of the
credit risk, with the other 20% to be carried by the banks).
Norway
Norges Bank
March 13: Cut its key interest rate to 1% from 1.5%, as it seeks to counter the
economic impact of the COVID-19 pandemic. It indicated that it would offer funding
to banks to help counter the volatility in financial markets and announced that banks’
Congressional Research Service

84

Global Economic Effects of COVID-19

countercyclical capital buffer would be reduced from 2.5% to 1%, to help banks
continue to lend money.
March 20: Cut its key policy rate by 75 basis points to 0.25% from 1.0% in a bid to
alleviate the economic impact from the COVID-19 outbreak. It also offered a third
batch of extraordinary loans to the banking industry to ensure it has enough for the
months ahead.
March 30: Increased its planned issuance of government bonds this year to between
70 bil ion and 85 bil ion Norwegian crowns ($6.68 bil ion-$8.11 bil ion) from an
original plan of 55 bil ion crowns, fol owing the government’s decision to offer loans
worth tens of bil ions of crowns in emergency funding to companies hurt by the
coronavirus outbreak.
March 31: Wil increase further its daily purchase of Norwegian currency to 2 bil ion
crowns ($190 mil ion) per day from 1.6 bil ion crowns in order to make funds
available for the government’s fiscal budget. (On March 18, it announced that it would
increase it to 1.6 bil ion Norwegian crowns per day from 500 mil ion crowns.)

Government of Norway
March 13: Announced that it would pay a greater part of the bil for all companies
seeking to make temporary layoffs, suspended all airport fees for the first six months
of 2020, and lifted for a period of 10 months the tax charged for each passenger.
March 15: Announced that it would offer companies at least 100 bil ion Norwegian
crowns ($9.7 bil ion) in funding in the form of loan guarantees (50 bil ion crowns to
small and medium sized companies seeking bank loans) and bond issues (50 bil ion
crowns to large firms issuing corporate bonds). In addition, payments of payrol taxes
wil be postponed.
March 20: Presented legislation that would temporarily reduce the value-added tax,
postpone tax filing deadlines and add worker and business protections under a 280
bil ion kroner ($24 bil ion) plan to boost the economy amid the pandemic. Along with
the tax provisions, the legislative package includes two previously announced lending
programs that the government said would provide up to 100 bil ion kroner in support
for Norwegian businesses, improving their access to credit to ensure liquidity.
March 27: Proposed new measures to support businesses hit by the viral outbreak
and a sharp fall in the price of oil. They include, among other things, covering fixed
costs for companies affected by the coronavirus outbreak at a cost of 10 bil ion to 20
bil ion Norwegian crowns ($958 mil ion to $1.92 bil ion) per month for two months.
Oman
March 18: The Central Bank of Oman announced that it wil provide about 8 bil ion
Omani rials ($20.8 bil ion) in extra liquidity to banks as one of several measures
aimed at supporting the economy. It also asked banks to cut banking fees, adjust
capital and credit ratios, allow repayment postponements for up to six months, and
facilitate lending, particularly in sectors affected by the COVID-19, including
healthcare, travel and tourism.
Pakistan
State Bank of Pakistan
March 17: Cut its key interest rate by 75 basis points to 12.50% in response to the
anticipated slowdown due to COVID-19, provided additional support to investment,
offering a new package of 100 bil ion rupees ($630.5 mil ion) for investment in the
manufacturing sector to fund investors at 7% for 10 years., and announced that it
would refinance banks to provide 5 bil ion rupees ($31.5 mil ion) at a maximum of 3%
for the purchasing of equipment used to fight the COVID-19.
March 24: Cut its benchmark interest rate for the second time in a week, lowering
it by 150 basis points to 11% amid considerable uncertainty about how the COVID-
19 outbreak would impact the global economy and Pakistan.

Government of Pakistan
March 24: Announced a financial-relief package of more than 1 tril ion rupees ($6.3
bil ion) to support the economy and poorer workers. It wil include help to the
Congressional Research Service

85

Global Economic Effects of COVID-19

export and industry sectors, tax breaks, procurement of medical and other
equipment required to fight the pandemic, and the distribution of a monthly cash
stipend among the poor.
Paraguay
Central Bank of Paraguay
March 13: Cut its benchmark interest rate by 25 basis points to 3.75%, as part of a
series of measures aimed at dealing with the impact of the COVID-19 outbreak.
Banks’ reserve requirements wil also be reduced to help the financial sector
refinance debts.

Government of Paraguay
March 13: Announced tax relief measures, as well as $150 mil ion of credit lines in
state banks and loans from multilateral agencies.
Peru
Central Reserve Bank of Peru
March 19: Cut its benchmark interest rate by 100 basis points to 1.25%, from 2.25%
to counter the economic impact of the COVID-19 pandemic and announced that, if
necessary, could employ other additional liquidity injection instruments to alleviate
the crisis.
March 29: Announced that that as part of the 90 bil ion soles stimulus plan
announced on March 29, the Bank would inject 30 bil ion soles into banks for loans to
mainly smaller companies to help cover their working capital.
April 2: Announced that it is preparing a major bond issuance to help underwrite an
unprecedented stimulus package to counter the economic impact of the fast-
spreading pandemic.

Government of Peru
March 29: Announced that it is planning an economic stimulus package worth
around 90 bil ion soles ($26.41 bil ion or 12% of gross domestic product) to support
citizens and the key mining sector that have been impacted by COVID-19. It wil have
three phases of 30 bil ion soles each: containing the disease, ensuring companies’
payment chains by granting credit guarantees, and reactivating production, particularly
in the copper industry.
Philippines
Central Bank of the Philippines (Bangko Sentral ng Pilipinas)
March 19: Cut the rate on its overnight reverse repurchase facility by 50 basis
points to 3.25%, authorized a temporary relaxation of regulations on compliance
reporting by banks, calculations of penalties on required reserves and single borrower
limits, and approved a temporary reduction to zero of the term spread on
rediscounting loans relative to the overnight lending rate.
March 23: Revealed it would purchase up to 300 bil ion Philippine peso ($5.9 bil ion)
worth of short-term securities under a repurchase agreement with the Bureau of the
Treasury in a bid to inject a fresh round of liquidity into the market and to keep a lid
on interest rates in the process.
March 24: Announced a 200 basis points reduction in the reserve requirement ratio
(RRR) to calm financial markets and boost lending. The cut, effective March 30, wil
bring the ratio to 12% and ensure there is sufficient liquidity to counter the economic
impact of the COVID-19 outbreak.

Government of the Philippines
March 13: Instructed the Government Service Insurance System and the Social
Security System “to take advantage of the low stock prices" and "support the stock
market by at least doubling their daily average purchase volumes" from 2019.
March 16: The government announced a 27.1-bil ion peso package to help fight the
COVID-19 pandemic and provide economic relief to affected sectors.
Congressional Research Service

86

Global Economic Effects of COVID-19

March 17: The Philippine Stock Exchange halted all stock, bond and currency trading
until further notice, after President Rodrigo Duterte placed Luzon, the country’s
economic powerhouse, under “enhanced community quarantine”.
March 22: The Philippine Congress is reportedly drafting a stimulus package of at
least 200 bil ion pesos ($3.9 bil ion) as part of a supplemental budget to shore up the
economy from the impact of the COVID-19 outbreak.
March 19: The Philippine Stock Exchange reopened with shortened hours.
Poland
National Bank of Poland
March 17: Cut its benchmark interest rate by 50 basis points to 1.0% from 1.5% in
response to the COVID-19 pandemic; it also lowered its lombard rate to 1.50% from
2.50% and the rediscount rate to 1.05% from 1.75%, reduced banks’ required reserve
ratios to 0.5% from 3.5%, announced plans to boost banking sector liquidity (through
the extension of repo operations), and offered “large-scale” purchases of government
bonds as part of its open-market operations.

Government of Poland
March 18: Announced an economic stimulus package of 212 bil ion zloty ($52 bil ion,
or approximately 9% of gross domestic product) to assist entrepreneurs and
employees during the COVID-19 crisis. It consists of 5 pil ars: employee safety,
company financing, health protection, strengthening the financial system, and a public
investment program. Specific measures include holidays in debt repayments and social
contributions, loan guarantees, as well as payments of salaries to those unable to
work.
March 26: Announced that the state bank BGK wil issue bonds worth around 16
bil ion zlotys ($3.9 bil ion) in 2020-2021 as part of a wider plan to combat the
coronavirus impact on the economy. The state wil buy the bonds back in 2021-2025,
spending around 2.5 bil ion zlotys a year in the first year and then around 3.7 bil ion
zlotys annually.
Portugal
Government of Portugal
March 13: Announced a 2.3 bil ion-euro package that wil include delaying some tax
payments and granting soft loans. Companies wil be allowed to suspend social
security payments and maintain employees’ contracts with payments equal to two-
thirds of salaries, funded largely by the state, and workers who have to stay at home
to care for school children of up to 12 years of age wil receive 66% of their base
salaries.
March 18: Announced a 9.2 bil ion-euro package to support workers and provide
liquidity for companies affected by the COVID-19 outbreak. It consists of 5.2 bil ion
euros in fiscal stimulus, 3 bil ion in state-backed credit guarantees, and 1 bil ion
related to social security payments. (Just over half of the 3 bil ion euros in credit lines
announced is aimed at companies working in tourism, hotels and restaurants. The
other half goes to industries like textiles, clothing and wood. Around a third is set
aside for micro and small enterprises.)
Qatar
Qatar Central Bank
March 16: Cut the deposit rate by 50 basis points to 1%, lending rate by 100 basis
points to 2.50%, and repurchase rate (repo) by 50 basis points to 1%.

Government of Qatar
March 15: The Emir of Qatar announced several measures to shield the economic
and financial sectors in the country from the impact of the COVID-19, including: (1)
allocating 75 bil ion Qatari riyals ($20.6 bil ion) to support and provide financial and
economic incentives in the private sector, (2) directing the Central Bank of Qatar to
provide additional liquidity to banks operating in the country and putting in place the
appropriate mechanism to encourage banks to postpone loan installments and
obligations of the private sector with a grace period of six months, (3) directing the
Qatar Development Bank to postpone the installments for all borrowers for a period
Congressional Research Service

87

Global Economic Effects of COVID-19

of six months, (4) directing the government to increase its investments in the stock
exchange by 10 bil ion Qatari riyals ($2.75 bil ion), (5) exempting food and medical
goods from customs duties for a period of six months, and (6) exempting the various
sectors of the economy from electricity and water fees for a period of 6 months.
Romania
March 20: The National bank of Romania cut its benchmark interest rate by 50 basis
points to 2.0% in order to curb the economic fallout from the COVID-19 outbreak. It
also cut its lending rate facility to 2.50% from 3.50% and wil provide liquidity to banks
via repo transactions and purchase leu-denominated debt on the secondary market.
Saudi Arabia
Saudi Arabian Monetary Authority
March 15: Announced that it had prepared a 50 bil ion riyal ($13.32 bil ion) package
to help small and medium-sized enterprises cope with the economic impacts of
COVID-19; it also lowered by 75 basis points both its repo rate to 1%, and its
reverse repo rate to 0.5%.

Government of Saudi Arabia
March 20: Introduced an additional stimulus package worth 120 bil ion riyals ($32
bil ion) to aid businesses, including the postponement of value-added tax (VAT),
excise tax, and income tax payments for a period of three months and exemptions of
various government levies and fees.
March 30: Announced that it wil finance treatment for anyone infected with
COVID-19 in the country, and took steps to boost wheat and livestock supplies amid
global fears of a food shortage.
Serbia
National Bank of Serbia
March 11: Cut its reference interest rate by 50 basis points to 1.75% to help
minimize economic disruption caused by the COVID-19 outbreak.

Government of Serbia
March 29: Announced that it plans to offer about 5 bil ion euros ($5.54 bil ion) in
loans and subsidies to businesses to help them cope with the economic impact of
COVID-19 and make a one-time payment of 100 euros to every citizen older than
18. The president indicated that the state would use 700 mil ion euros to pay
minimum wages of 30,367 dinars ($288.58) and allow tax delays for micro and small
enterprises for the three months after the end of the state of emergency to avoid job
loss.
Seychelles
March 24: The Central Bank of Seychelles cut its monetary policy rate by 100 basis
points to 4.0%, indicating that this was the first phase of its response to the challenge
from the spread of the COVID-19, which is expected to lower this year’s earnings
from tourism by 70% and trigger a double-digit drop in economic growth.
Singapore
Monetary Authority of Singapore
March 30: Announced that it would adopt a 0% per annum rate of appreciation of
the policy band starting at the prevailing level of the Singapore Dol ar Nominal
Effective Exchange Rate (S$NEER), currently slightly below the mid-point of the
policy band.

Government of Singapore
February 18: Announced around $4.5 bil ion in financial packages to help contain
the COVID-19 outbreak, including $575 mil ion to fight and contain the disease,
mainly through healthcare funding, and 4 bil ion in economic stimulus measures to
manage its impact on businesses, jobs and households.
March 26: Unveiled stimulus plan worth around S$48 bil ion ($33.7 bil ion) to deal
with the economic fallout from COVID-19 (of which S$17 bil ion wil be drawn from
the national reserves). A key part of the stimulus package involves ramping up a jobs
support scheme first announced in February. The government wil now offset up to
Congressional Research Service

88

Global Economic Effects of COVID-19

25% of the first S$4,600 of workers’ monthly wages for a nine-month period (up from
the 8% quantum and S$3,600 cap announced in February), while self-employed
workers wil be eligible to receive monthly payments of S$1,000 for nine months.
Some hard-hit sectors wil receive additional support: the government would offset
up to 50% of wages in the food services sector and up to 75% of wages in the aviation
and tourism sectors. A previously announced cash payout to all adult Singaporeans
would be tripled and low-income families wil also receive grocery vouchers.
Slovakia
Government of the Slovak Republic
March 29: Announced plans for an aid package of up to 1 bil ion euros a month to
help firms and employees hurt by the pandemic. Under the plan, the state would (1)
pay 80% of wages for employees at firms forced to shut, (2) help self-employed
people and employees in firms that suffer falling revenue, with payments linked to the
size of the revenue drop, (3) allow employers to postpone their contributions to
state social and health systems and delay some tax payments if they suffer a 40% drop
in revenue; (4) allow firms to offset accumulated losses from past years going back to
2014 against corporate income tax, and (5) offer firms bank guarantees of up to 500
mil ion euros a month.
South Africa
South African Reserve Bank
March 19: Cut its main lending rate by 100 basis points to 5.25% as it sought to
offset the drag from the COVID-19 outbreak and the plunge in oil prices.
March 20: Announced measures to inject liquidity into local markets, including
intraday overnight supplementary repos to provide liquidity support to clearing banks,
lowering the standing facilities’ borrowing rate by 100 basis points to 200 basis point
below the benchmark repo rate, and lowering the standing facilities’ lending rate to
the repo rate from the previous rate of repo plus 100 basis points.
March 25: Announced that it would begin buying an unspecified amount of
government bonds as part of additional emergency policy measures aimed at easing a
severe liquidity crunch triggered by the COVID-19.
South Korea
Bank of Korea
March 16: Cut the seven-day repurchase rate by 50 basis points to 0.75% in an
effort to soften the impact of the COVID-19 pandemic on the Korean economy. It
also lowered borrowing costs for the bank’s low interest rate loan programs and
relaxed col ateral rules of its repurchasing operations, to ensure companies can easily
and cheaply access credit.
March 19: Announced that it wil buy government bonds worth 1.5 tril ion won
($1.2 bil ion) to bolster liquidity in the bond market and back short-term liquidity in
banks under increased loan demand due to fallout from COVID-19.

Government of the Republic of Korea
March 3: Announced a 11.7 tril ion won ($9.8 bil ion) stimulus package that includes
funding for medical institutions and quarantine efforts, assistance to small- to
medium-sized businesses struggling to pay wages to their workers, and subsidies for
child care.
March 17: The National Assembly approved a supplementary budget worth 11.7
tril ion won ($9.4 bil ion) to help contain COVID-19 and cushion the economic
fallout. The government has indicated that it plans to execute at least 75% of its
spending within the next two months.
March 18: Pledged 50 tril ion won ($40 bil ion) in emergency financing for small
businesses and other stimulus measures to help the economy. Some highlights of the
package include 12 tril ion won in low-interest financing for small firms, 5.5 tril ion
won in loan guarantees, easing loan terms and suspending interest payments for small
businesses. The Bank of Korea reportedly wil actively provide liquidity support for
around half of the new package.
Congressional Research Service

89

Global Economic Effects of COVID-19

March 20: South Korea’s financial authorities and local banks agreed to set up a
bond market stabilization fund worth more than 10 tril ion won ($7.9 bil ion) as part
of the country’s efforts to calm financial markets roiled by the spread of COVID-19.
March 24: Announced that it would double the planned economic rescue package
announced on March 18 to 100 tril ion won ($80 bil ion) to save companies hit by the
COVID-19 and put a floor under crashing stocks and bond markets. It includes 29.1
tril ion won in loans to small- and medium-sized companies and 20 tril ion won wil be
used to buy corporate bonds and commercial paper of companies facing a credit
crunch. As part of the rescue package, the Financial Services Commission wil
establish a 10.7 tril ion won facility set up to stabilize stock markets. It wil also
commence a bond buying facility in April that wil be funded by 84 institutions,
including the Bank of Korea, commercial banks and insurers.
March 29: Announced that an “emergency disaster relief payment” of up to 1 mil ion
won ($820) would be made to all households (except the top 30% by income),
totaling some 9.1 tril ion won ($7.44 bil ion). It is also preparing another extra budget
worth 7.1 tril ion won ($5.80 bil ion) for parliamentary approval in April, and wil
exempt some small and medium-sized companies from paying utility bil s.
Spain
Government of Spain
March 12: Approved the creation of a 2.8 bil ion euro ($3 bil ion) aid package to
help regional authorities mitigate the economic impact from COVID-19, and
announced a 1 bil ion euro contribution to the health ministry’s budget and 14 bil ion
euros ($15.1 bil ion) in liquidity for small and medium companies (e.g., small
businesses affected by the outbreak would be exempt from paying taxes for six
months). It also announced that it would open a 400 mil ion euro credit line to aid
the tourism industry.
March 17: Unveiled a package of 200 bil ion euros ($219 bil ion) to mitigate the
effects of COVID-19 (117 bil ion euros wil be mobilized by the state, with the rest
coming from private companies). It wil include state-backed credit guarantees for
companies, loans and aid for vulnerable people, a moratorium on mortgage payments
and evictions; the government wil also guarantee water, electricity and internet to
for people adversely affected.
Sri Lanka
March 16: The Central Bank of Sri Lanka cut the Standing Deposit Facility Rate
(SDFR) and the Standing Lending Facility Rate (SLFR) by 25 basis points to 6.25% and
7.25%, respectively, and the Statutory Reserve Ratio (SRR) on all rupee deposit
liabilities of licensed commercial banks was reduced by 1 percentage point to 4%
March 16: The Colombo Stock Exchange was closed until March 19, as the
government extended the public holiday in a bid to halt the spread of COVID-19 in
the country.
April 3: The Central Bank of Sri Lanka cut by a further 25 basis points its benchmark
interest rates (the Standing Deposit Facility Rate and Standing Lending Facility Rate to
6.00% and 7.00%, respectively), its second such reduction in three weeks, in a move
to support the economy amid the coronavirus pandemic.
Sweden
Sveriges Riksbank
March 13: Stated that it would lend up to 500 bil ion crowns ($51 bil ion) to
Swedish companies via banks to shore up credit flows as the epidemic wreaks havoc
on financial markets.
March 16: Announced that it would buy securities for up to an additional 300 bil ion
Swedish crowns ($31 bil ion) in 2020 to facilitate credit supply and mitigate the
downturn in the economy caused by the COVID-19, reduced the overnight lending
rate to banks to 0.2 percentage point above its repo rate (from 0.75 percentage
point), and indicated that it would be flexible with the col ateral banks can use when
they borrow money from the Riksbank, giving lenders more scope to use mortgage
bonds as col ateral.

Congressional Research Service

90

Global Economic Effects of COVID-19

Government of Sweden
March 16: Presented a package worth more than 300 bil ion Swedish crowns ($31
bil ion) to support the economy in the face of the COVID-19 pandemic. It included
measures such as the central government assuming the ful cost for sick leave from
companies through the months of April and May 2020 and for temporary
redundancies due to the crisis, and allowing companies to put off paying tax and VAT
for up to a year (retroactive to the start of 2020).
Switzerland
Swiss National Bank
March 23: Hiked its foreign currency interventions to their highest level since the
Brexit referendum in 2016 in an effort to stem the rise in the franc, which has
appreciated as investors sought safe assets while stock markets have plunged during
the coronavirus pandemic.

Government of Switzerland
March 13: Unveiled an emergency economic-aid package of roughly 10 bil ion francs
($10.5 bil ion) for workers and small businesses. It includes 8 bil ion francs for
“Kurzarbeit,” or short-time work, and 580 mil ion francs in guaranteed bank loans.
March 20: Announced a new 32 bil ion franc ($32.56 bil ion) aid package to support
companies and workers hit by the widening COVID-19 outbreak. The bulk of the
cash (20 bil ion francs) wil go into guarantees for bank loans to companies at “very
modest” interest rates. Firms wil be able to get loans worth up to 10% of their
revenue, to a maximum of 20 mil ion francs. Amounts of 500,000 francs wil be paid
out immediately and guaranteed by the government. The government’s short-time
working scheme would also be extended to fixed-term, temporary workers, and
trainees. The package fol ows one worth 10 bil ion francs announced on March 13,
bringing the total stimulus to 42 bil ion francs ($42.8 bil ion).
March 31: Announced that it is stepping up its funding plans in response to
government measures to cushion the economic impact of the pandemic, doubling the
volume of outstanding short-term money market instruments. The Federal Finance
Administration (FFA) wil increase the outstanding volume of short-term money
market instruments, from around 6 bil ion francs ($6.24 bil ion) to 12 bil ion francs,
and wil once again step up sales of its own Confederation bond holdings.
Taiwan
Central Bank of the Republic of China (Taiwan)

March 19: Cut its benchmark rate by 25 basis points to 1.125%, and announced that
it would expand the scope of repurchase facility operations and provide banks with
T$200 bil ion ($6.6 bil ion) of financing to support small and medium sized companies
which have been hard hit by the COVID-19 outbreak.

Government of Taiwan
February 25: Approved a T$60 bil ion ($2 bil ion) package to help cushion the
impact of the COVID-19 outbreak on its export-reliant economy, including loans for
small businesses, subsidies for hard-hit tour agencies, tax cuts for tour bus drivers,
and vouchers to spend on food in night markets.
March 12: Announced that an additional T$40 bil ion ($1.33 bil ion) from the
Employment Stabilization Fund and the Tourism Development Fund would be
available to stimulate Taiwanese economy.
March 19: The president said that the government would help its hard-hit airline
industry access T$50 bil ion in financing, and did not rule out further economic
stimulus.
March 19: Authorized its National Stabilisation Fund to intervene and buy stocks on
the market, as the island’s bourse continues to fall on COVID-19 worries.
Thailand
Bank of Thailand
March 20: Cut its key interest rate by 25 basis points to 0.75%, as the spread of
COVID-19 exerted further pressure on the Thai economy.
Congressional Research Service

91

Global Economic Effects of COVID-19

March 22: Together with the Ministry of Finance and the Securities and Exchange
Commission, announced three measures to address liquidity concerns and ensure the
functioning of local financial markets: (1) setting up a special facility that allows
commercial banks that purchase units in high-quality money market funds or daily
fixed-income funds to use them as col ateral for liquidity support (initial estimate is 1
tril ion baht); (2) creation of a 70-100 bil ion baht “Corporate Bond Stabilization
Fund” that invests in high-quality, newly issued bonds by corporates that cannot ful y
rol over maturing corporate bonds, and (3) Bank of Thailand wil continue to
purchase government bonds to provide liquidity to the market.

Government of Thailand
March 10: Approved a stimulus package worth an estimated 400 bil ion baht ($12.74
bil ion) to help alleviate the impact of the COVID-19 outbreak. It includes 150 bil ion
baht of soft loans, a 20 bil ion baht fund to help firms and workers affected, and tax
benefits and support for utilities costs.
March 24: Approved a package of stimulus measures worth at least 117 bil ion baht
($3.56 bil ion) to try to mitigate the impact of the coronavirus outbreak. The
measures include cash handouts worth 45 bil ion baht for 3 mil ion workers outside
the social security system; soft loans worth 60 bil ion baht; and tax breaks. Separately,
small firms wil be offered 10 bil ion baht of loans and business tax payments wil be
delayed.
March 30: Announced that it is preparing a third stimulus package, worth more than
500 bil ion baht ($15.3 bil ion), to alleviate the impact of the coronavirus crisis.
March 31: Agreed to triple the number of workers receiving cash handouts to nine
mil ion to help ease the impact of the spreading coronavirus. It had previously planned
to provide cash handouts of 15,000 baht ($458) each to 3 mil ion workers, taking the
total to 45 bil ion baht ($1.38 bil ion). Now its total handout wil reach 135 bil ion
baht ($4.13 bil ion).
Tunisia
Central Bank of Tunisia
March 17: Cut its key interest rate by 100 basis points to 6.75%, as it responded to
the negative impact of the COVID-19 on the global growth outlook.
April 1: Asked banks and financial institutions to suspend the distribution of 2019
dividends and allow customers to defer loan payments for three months as part of a
package to ease the social and economic effects of the coronavirus.

Government of Tunisia
March 21: Announced that it would allocate 2.5 bil ion dinars ($850 mil ion) to
combat the economic and social effects of the COVID-19 health crisis. Among new
measures, the government wil delay tax debts, postpone taxes on small- and
medium-sized businesses, delay repayment of low-income employee loans, and
provide financial assistance to poor families and those who have lost their jobs due to
the crisis and loans and aid to help companies affected.
March 23: The finance minister announced that the International Monetary Fund wil
disburse $400 mil ion to help the country face the effects of COVID-19.
March 28: The European Union granted Tunisia 250 mil ion euros in aid to help it
cope with the economic and social effects of the viral outbreak.
Turkey
Central Bank of Turkey
March 17: Lowered its benchmark one-week repo rate by 100 basis points to 9.75%,
as it responded to the negative impact of the COVID-19 on the global growth
outlook.
March 31: Announced emergency measures to stem the fallout from a growing
pandemic. It would (1) allow primary dealers to sell to the Bank (for a temporary
period) debt they purchased from the Unemployment Insurance Fund, (2) extend 60
bil ion lira ($9 bil ion) worth of rediscount credits, (3) add more lending options well
below its 9.75% policy rate, (4) hold swap auctions with six-month maturities for lira
Congressional Research Service

92

Global Economic Effects of COVID-19

against dol ars, euros, or gold at an interest rate 125 basis points lower than the
policy rate, and (5) allow lenders to use mortgage- and asset-backed securities as
col ateral for foreign exchange operations.

Government of Turkey
March 18: Unveiled a 100 bil ion-lira ($15.4 bil ion) plan to help businesses affected
by the COVID-19 pandemic. It includes measures from tax cuts and payment
deferrals for businesses to an increase in minimum pension payouts.
Ukraine
March 19: The government published a new law that wil exempt taxpayers from
paying the land and property taxes from March 1 to April 30, introduced a
moratorium on tax audits from March 18 to May 31, and suspended some tax-related
penalties from March 1 to May 31.
Uganda
Bank of Uganda
March 24: Sold dol ars in the interbank market to support the local currency, which
has been experiencing sharp depreciation due to COVID-19-related disruptions.
April 6: Cut its policy rate by 100 basis points to 8.0% to support the economy
which has been hit by the impact of COVID-19. It also announced that it had
“directed” commercial banks to defer all discretionary payments, such as dividends
and bonus payments, for at least 90 days from March.
United Arab Emirates
Central Bank of the UAE
(UAE)
March 15: Announced a 100 bil ion dirham ($27 bil ion) stimulus package to deal
with the economic effects of the COVID-19 pandemic; it cut the rate on one-week
certificates of deposit by 75 basis points and wil also ease regulatory limits on loans.
April 5: Announced new measures to guarantee liquidity in the banking system in the
face of the pandemic, boosting its stimulus to a total of 256 bil ion dirhams ($70
bil ion) from a previously announced 100 bil ion dirhams ($27 bil ion) package. It also
halved banks’ reserve requirements for demand deposits to 7% from 14%, which wil
inject about 61 bil ion dirhams of liquidity to support banks’ lending and liquidity
management, extended the duration of a previously announced deferral of loan
principal and interest payments for customers until the end of the year, and said
banks participating in the scheme can benefit from a capital buffer relief of 50 bil ion
dirhams until December 2021, among other measures.

Government of the UAE
March 30: Announced that it would inject funding into state-owned Emirates
Airlines to help it deal with the impact of COVID-19 on its business.
April 5: Announced that it would reinforce its stockpile of strategic goods and waive
residency visa fines for the rest of the year in response to the viral outbreak.
United Kingdom
Bank of England
March 11: Cut its benchmark interest rate by half a percentage point, to 0.25%,
revived a program to support lending to small and midsize businesses, and reduced
bank capital requirements to further boost credit.
March 19: Cut its benchmark rate by 15 basis points to 0.1% to try to mitigate the
impact of COVID-19 on the British economy, added 200 bil ion pounds ($232 bil ion)
to its asset purchase program (including sovereign and private debt), increased its
banks’ borrowing allowance under the Term Funding Scheme for Small and Medium
Enterprises from 5% to 10% of participants’ stock of real economy lending, and
cancelled its 2020 stress test of the 8 major UK banks.
April 2: Announced that it wil double the size of its corporate bond purchase
program to at least 20 bil ion pounds ($24.7 bil ion), part of a previously announced
stimulus package to help the economy. It wil begin ramping up its corporate bond
purchases through a series of reverse auctions starting on April 7, holding three a
week, and it wil be able to buy 20 mil ion pounds of any single bond—double the
previous amount.
Congressional Research Service

93

Global Economic Effects of COVID-19

UK Government
March 11: Announced a stimulus package totaling 30 bil ion pounds ($39 bil ion). It
wil include 7 bil ion pounds ($8.6 bil ion) available to support the labor market, 5
bil ion pounds ($6.1 bil ion) to help the health-care system, and 18 bil ion pounds ($22
bil ion) to support the UK economy, bringing the total fiscal stimulus to 30 bil ion
pounds ($39 bil ion). (Among the specific measures, there wil be a tax cut for
retailers, cash grants to small businesses, a mandate to provide sick pay for people
who need to self-isolate, subsidies to cover the costs of sick pay for small businesses,
and expanded access to government benefits for the self-employed and unemployed.)
March 17: Unveiled a package of 350 bil ion pounds ($424 bil ion) to support the
economy; it includes 330 bil ion pounds of guaranteed loans for businesses that need
cash to pay rent or suppliers, 20 bil ion pounds of tax cuts and grants for businesses
in 2020, a three-month mortgage payment holiday for borrowers affected by the
virus, and a one-year “business rates” holiday for businesses in the retail, leisure, and
hospitality industry.
March 28: Wil ease regulations for affected businesses, including simplifying the
insolvency system to keep companies trading, easing administrative requirements and
barriers to the import of personal protective equipment, and helping new companies
produce and distribute hand sanitizer within a matter of days.
Vietnam
State Bank of Vietnam
February 24: Ordered commercial banks to eliminate, cut, or delay interest
payments on loans to companies facing losses due to the coronavirus outbreak.
March 16: Cut by 100 basis points both its refinance rate (to 5%) and the overnight
lending rate in the inter-bank market (to 6%), and by 50 basis points its discount rate
(to 3.5%).

Government of Vietnam
March 3: Announced measures worth 27 tril ion dong ($1.16 bil ion) to help
businesses cope with the coronavirus epidemic and help the economy stick to its
6.8% growth target this year. They include tax breaks, delayed tax payments, and a
reduction in land lease fees. The government will also speed up state spending on
infrastructure projects.
Zimbabwe
Reserve Bank of Zimbabwe
March 26: Cut its main lending rate to 25% from 35% and set a fixed exchange rate
(at 25 Zimbabwe dol ars to the U.S. dol ar) as part of measures to support the
economy. It indicated that it had suspended the managed floating exchange rate
system to provide for greater certainty in the pricing of goods and services in the
economy.

Government of Zimbabwe
March 29: Published new exchange control regulations making it legal for
Zimbabweans to use electronic and cash foreign currencies in domestic transactions,
as the country readies for a 21-day lockdown to prevent the spread of COVID-19.
Congressional Research Service

94

Global Economic Effects of COVID-19

Multi-Country and
March 4: The International Monetary Fund (IMF) made $50 bil ion in loans
International
available to deal with the COVID-19 through its rapid-disbursing emergency financing
Institutions’
facilities, including $10 bil ion of zero-interest loans to the poorest IMF member
Responses
countries. On March 16, the IMF announced that it “stands ready to mobilize its $1
tril ion lending capacity to help our membership" and that it has “40 ongoing
arrangements—both disbursing and precautionary—with combined commitments of
about $200 bil ion,” some of which could be used for this crisis, and that it is aiming
to boost its debt relief fund to $1 bil ion from its current level of $400 mil ion.
March 3: The World Bank announced an initial package of up to $12 bil ion in
loans for countries to help countries cope with the effects of the COVID-19
outbreak. Specifically, it comprises up to $2.7 bil ion new financing from IBRD, $1.3
bil ion from IDA, complemented by reprioritization of $2 bil ion of the Bank’s existing
portfolio, and $6 bil ion from IFC, as well as policy advice and technical assistance ($8
bil ion is new funding and the remaining $4 bil ion is redirected from current lines of
credit).
March 11: The Inter-American Development Bank (IADB) announced that it
has up to $2 bil ion in resources that can be programmed to countries requesting
support for disease monitoring, testing and public health services, and that it could
work with countries that have undisbursed loan balances to redirect resources to
pandemic-response efforts.
March 13: The European Bank for Reconstruction and Development
(EBRD) unveiled an emergency €1 bil ion “Solidarity Package” of measures to help
companies across its regions deal with the impact of the COVID-19 pandemic. Under
the emergency program, the EBRD wil set up a “resilience framework” to provide
financing for existing EBRD clients with strong business fundamentals experiencing
temporary credit difficulties, comprising emergency liquidity, working capital and
trade finance.
March 15: The Bank of Canada, the Bank of England, the Bank of Japan, the
European Central Bank, the U.S. Federal Reserve, and the Swiss National Bank
agreed to lower the pricing on the standing US dol ar liquidity swap arrangements by
25 basis points, so that the new rate wil be the US dol ar overnight index swap (OIS)
rate plus 25 basis points.
March 16: The European Investment Bank Group (EIBG) proposed a 40
bil ion euro financing package consists of dedicated guarantee schemes to banks based
on existing program for immediate deployment (20 bil ion euros), liquidity lines to
banks to ensure additional working capital support for SMEs and mid-caps (10 bil ion
euros), and asset-backed securities purchasing programs to allow banks to transfer
risk on portfolios of SME loans (10 bil ion euros).
March 16: The Islamic Development Bank (IsDB) Group announced that it is
setting-up a special “Strategic Preparedness and Response Facility” of $730 mil ion to
mitigate the negative health and socio-economic impact of the COVID-19 pandemic.
It wil include $280 mil ion from the Bank and Islamic Solidarity Fund for
Development (ISFD) for sovereign projects and programs, $300 mil ion from
International Islamic Trade finance Corporation (ITFC) for trade finance and $150
mil ion from the Islamic Corporation for the Insurance of Investment and Export
Credit (ICIEC) for insurance coverage.
March 16: The Central American Bank for Economic Integration (CABEI)
granted a nonreimbursable financial package worth $8 mil ion to the eight countries
of the Central American Integration System in order to combat the widening
economic fallout from the COVID-19 (Guatemala, El Salvador, Honduras, Nicaragua,
Costa Rica, Panama, Belize, and the Dominican Republic wil each receive $1 mil ion).
March 18: The Asian Development Bank (ADB) announced a $6.5 bil ion initial
package to address the immediate needs of its developing member countries (DMCs)
as they respond to the COVID-19 pandemic. The initial package includes
approximately $3.6 bil ion in sovereign operations for a range of responses to the
health and economic consequences of the pandemic, $1.6 bil ion in non-sovereign
operations for micro, small, and medium-sized enterprises, domestic and regional
trade, and firms directly impacted, about $1 bil ion in concessional resources through
Congressional Research Service
R46270 · VERSION 31 · UPDATED
95

Global Economic Effects of COVID-19

reallocations from ongoing projects and assessing possible needs for contingencies,
and $40 mil ion in technical assistance and quick-disbursing grants. (Since February
2020, ADB has provided more than $225 mil ion to meet urgent needs of both
governments and businesses in DMCs.)
March 19: The U.S. Federal Reserve announced the establishment of temporary
U.S. dol ar liquidity arrangements (swap lines) with 9 central banks to help lessen
strains in global U.S. dol ar funding markets. These new facilities wil support the
provision of U.S. dol ar liquidity in amounts up to $60 bil ion each for the Reserve
Bank of Australia, the Banco Central do Brasil, the Bank of Korea, the Banco de
Mexico, the Monetary Authority of Singapore, and the Sveriges Riksbank, and $30
bil ion each for the Danmarks Nationalbank, the Norges Bank, and the Reserve Bank
of New Zealand.
March 19: The Board of Directors of the New Development Bank approved
RMB 7 bil ion ($1 bil ion) Emergency Assistance Program Loan to the People’s
Republic of China. The Program wil help finance urgent and unexpected public health
expenditures in Hubei, Guangdong, and Henan.
March 20: The Development Bank of Latin America (CAF) announced that it
has opened an additional $2.5 bil ion line of credit to support the measures that
member countries are taking to mitigate the effects of COVID-19. On March 3, it
approved a credit line worth $300 mil ion to manage emergencies related to COVID-
19 and the possibility of granting technical help of up to $5 mil ion for initiatives
related to the outbreak in countries across the region.
March 26: The Group of 20 (G20) announced that it would inject “over $5 tril ion
into the global economy, as part of targeted fiscal policy, economic measures, and
guarantee schemes to counteract the social, economic and financial impacts” of
COVID-19.
Source: Congressional Research Service based on information from news articles and press releases.

Author Information

James K. Jackson, Coordinator
Andres B. Schwarzenberg
Specialist in International Trade and Finance
Analyst in International Trade and Finance

Martin A. Weiss
Rebecca M. Nelson
Specialist in International Trade and Finance
Specialist in International Trade and Finance

Acknowledgments
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.

Disclaimer
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
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
Congressional Research Service
R46270 · VERSION 31 · UPDATED
96

Global Economic Effects of COVID-19

its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

Congressional Research Service
R46270 · VERSION 31 · UPDATED
97