Global Economic Effects of COVID-19

Global Economic Effects of COVID-19
September 4, 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 18%, depending on the depth and extent of the
Trade and Finance
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


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Contents
Overview ......................................................................................................................................... 1
Economic Policy Responses ............................................................................................................ 6
Economic Forecasts ........................................................................................................................ 11
Global Growth .......................................................................................................................... 11
The OECD Forecast .......................................................................................................... 13
The IMF Forecast .............................................................................................................. 18
The World Bank Forecast ................................................................................................. 20
Global Trade ............................................................................................................................ 21
Economic Policy Challenges ......................................................................................................... 24
Major Economic Developments .................................................................................................... 26
Financial Markets .................................................................................................................... 26
International Role of the Dollar .............................................................................................. 28
March 2020 ............................................................................................................................. 31
April 2020 ............................................................................................................................... 37
May 2020 ................................................................................................................................ 41
June 2020 ................................................................................................................................ 42
July 2020 ................................................................................................................................. 44
August 2020 ............................................................................................................................ 45
September 2020 ....................................................................................................................... 45

Policy Responses ........................................................................................................................... 46
The United States .................................................................................................................... 47
Monetary Policy ................................................................................................................ 51
Fiscal Policy ...................................................................................................................... 53
Europe ..................................................................................................................................... 60
The United Kingdom ............................................................................................................... 68
Japan ........................................................................................................................................ 70
China ....................................................................................................................................... 71
Multilateral Response .................................................................................................................... 72
International Monetary Fund ................................................................................................... 72
World Bank and Regional Development Banks ............................................................................ 73
International Economic Cooperation ...................................................................................... 74
Estimated Effects on Developed and Major Economies ............................................................... 75
Emerging Markets ......................................................................................................................... 76
International Economic Cooperation ............................................................................................. 77
Looming Debt Crises and Debt Relief Efforts .............................................................................. 79
Other Affected Sectors .................................................................................................................. 80
Conclusions ................................................................................................................................... 82

Figures
Figure 1. Initial U.S. Weekly Claims for Unemployment Insurance, 2020 ..................................... 3
Figure 2. IMF Projected Government Fiscal Deficits Relative to GDP .......................................... 9
Figure 3. Unemployment Rates Among Major OECD Countries ................................................. 14
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Figure 4. Major Economic Forecasts ............................................................................................. 15
Figure 5. IMF Forecast, Gross Domestic Product, Percentage Change ........................................ 20
Figure 6. WTO Estimates of Quarterly Global Exports and Imports, Volumes and Values .......... 22
Figure 7. Dow Jones Industrial Average ........................................................................................ 28
Figure 8. U.S. Dollar Trade-Weighted Broad Index, Goods and Services .................................... 29
Figure 9. International Role of the Dollar ..................................................................................... 30
Figure 10. Brent Crude Oil Price per Barrel of Dollars ................................................................. 35
Figure 11. U.S. GDP, Percentage Change From Preceding Quarter .............................................. 48
Figure 12. U.S. Exports and Imports of Goods and Services 2020 ............................................... 48
Figure 13. Price and Quantity Indexes, U.S. Exports and Imports ................................................ 49
Figure 14. Change in U.S. Employment by Major Industrial Sector ............................................ 50
Figure 15. U.S. Personal Income, Consumption, and Saving ....................................................... 57
Figure 16. UK Month Over Month Quarterly Percentage Change in GDP ................................... 70
Figure 17. Capital Flows to Emerging Markets in Global Shocks ................................................ 76
Figure 18. Depreciation Against the Dollar Since January 1, 2020 ............................................... 77

Tables
Table 1. Seasonally Adjusted Weekly Unemployment Insurance Claims ....................................... 3
Table 2. Elements of Announced Fiscal Measures to Address COVID-19 ..................................... 6
Table 3. Selected Central Bank and Prudential Measures to Address COVID-19 ........................ 10
Table 4. Major Economic Forecasts, Differing Assessments ........................................................ 13
Table 5. OECD, IMF and World Bank Economic Forecasts ......................................................... 15
Table 6. WTO April Forecast: Merchandise Trade Volume and Real GDP 2018-2021 ................ 23
Table 7. Dow Jones Industrial Average Market Changes by Month ............................................. 27
Table 8. Economic Projections of Federal Reserve, June 2020 ..................................................... 58
Table 9. European Commission Economic Forecast ..................................................................... 61
Table 10. EU Real GDP Growth Rates, Second Quarter 2020 ...................................................... 62

Appendixes
Appendix. Table A-1. Select Measures Implemented and Announced by Major
Economies in Response to COVID-19 ....................................................................................... 84

Contacts
Author Information ....................................................................................................................... 112


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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 between
addressing the public health crisis and economic considerations 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.
 Implementing fiscal policies to stimulate economic activity, while consumers in
developed economies sharply increase their savings as households face limited
spending opportunities, or a form of involuntary saving, and concerns over their
jobs, incomes, and the course of their economies, or precautionary saving.
 Intervention by central banks and monetary authorities generally in sovereign
debt and corporate bond markets to stabilize markets and insure liquidity are
raising concerns among some analysts that this activity is compromising the
ability of the markets to perform their traditional functions of pricing risk and
allocating capital.
 Fiscal and monetary policies that have been adopted to date to address the
immediate impact of the health crisis compared with the mix of such policies
between assisting households, firms, or state and local governments that may be
needed going forward should the health and economic crises persist.
Policymakers and financial and commodity market participants generally have been hopeful of a
global economic recovery starting 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 more extensively and for a longer period of time with a
slow, drawn-out recovery. Without a quick resolution of the health crisis, the economic crisis may
persist longer than most forecasters have assumed and require policymakers to weigh the most
effective mix of additional fiscal and monetary policies that may be required without the benefit
of a relevant precedent to follow. Additional measures may have to balance the competing
requirements of households, firms, and state and local governments. Various U.S. States reversed
course in late June to impose or reimpose social distancing guidelines and close down businesses
that had begun opening as a result of a rise in new confirmed cases of COVID-19, raising the
prospect of a delayed recovery.
In its July 29 policy statement and subsequent press conference, the U.S. Federal Open Market
Committee (FOMC) indicated that the rise in COVID-19 cases in the United States since mid-
June was weighing down economic growth and that, “The path of the economy will depend
significantly on the course of the virus. 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.”
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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 may be adding to 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
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 nearly 26 million people, about one-fourth
in the United States, with nearly 900,000 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 24-week period from mid-March to late August 2020, 59.3 million Americans filed for
unemployment insurance, as indicated in Figure 1.5 On a seasonally adjusted basis, the number of
insured unemployed workers was 13.3 million in late August, down from a peak of 25 million in
mid-May, as indicated in Table 1. The total number of people claiming benefits in all programs in

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
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, September 3, 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/
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the week ending August 15, totaled 29 million, up from 1.6 million in the comparable week in
2019. The insured unemployment rate was 9.1%, also down from the peak reached in early May.
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 September
4, BLS reported that nonfarm employment increased by 1.4 million in August, reducing the total
number of unemployed Americans to 13.6 million8 and pushing the unemployment rate down to
8.4%, again with some caveats.9
Figure 1. Initial U.S. Weekly Claims for Unemployment Insurance, 2020
(in millions of individual claims)

Source: Department of Labor. Created by CRS.

Table 1. Seasonally Adjusted Weekly Unemployment Insurance Claims
In thousands
Insured
Change from
Insured
Unemployment
Week Ending
Initial Claims
Prior Week
Unemployment
Rate
Total Claims
21-Mar-20
3,307
3,025
3,059
2.1%
3,307
28-Mar-20
6,867
3,560
7,446
5.1
10,174
4-Apr-20
6,615
-252
11,914
8.2
16,789

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 7.6 million workers who were working part time not by choice and 7.0 million individuals
who were seeking employment.
9 The Employment Situation-August 2020, Bureau of Labor Statistics, September 4, 2020, https://www.bls.gov/. BLS
indicated that some individuals were misclassified in previous months. Instead of being classified as unemployed, they
were misclassified as employed, but absent from work due to coronavirus-related business closures. If such individuals
had been classified as unemployed, the unemployment rate would have been 5 percentage points higher in April.
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Insured
Change from
Insured
Unemployment
Week Ending
Initial Claims
Prior Week
Unemployment
Rate
Total Claims
11-Apr-20
5,237
-1,378
15,819
10.9
22,026
18-Apr-20
4,442
-795
18,011
12.4
26,468
25-Apr-20
3,867
-575
22,377
15.4
30,335
2-May-20
3,176
-691
22,548
15.5
33,511
9-May-20
2,687
-489
24,912
17.1
36,198
16-May-20
2,446
-241
20,841
14.3
38,644
23-May-20
2,123
-323
21,268
14.6
40,767
30-May-20
1,897
-226
20,606
14.1
42,664
6-Jun-20
1,566
-331
20,544
14.1
44,230
13-Jun-20
1,540
-26
19,231
13.2
45,770
20-Jun-20
1,482
-58
19,290
13.2
47,252
27-Jun-20
1,408
-74
17,760
12.2
48,660
4-Jul-20
1,310
-98
17,304
11.8
49,970
11-Jul-20
1,308
-2
16,151
11.1
51,278
18-Jul-20
1,422
114
16,951
11.6
52,700
25-Jul-20
1,435
13
16,090
11.0
54,135
1-Aug-20
1,191
-244
15,480
10.6
55,326
8-Aug-20
971
-220
14,759
10.1
56,297
15-Aug-20
1,104
133
14,492
9.9
57,401
22-Aug-20
1,011
-98
13,254
9.1
58,412
29-Aug-20
881
-130


59,293
Source: Department of Labor, CRS calculations.
Preliminary data also indicate that U.S. GDP fell by 9.5% in the second quarter of 2020 from the
previous quarter, but at an annualized rate of 33%, the largest quarterly decline in U.S. GDP
recorded over the past 70 years.10 In its May 27 Beige Book analysis, the Federal Reserve (Fed)
reported that economic activity had fallen sharply in each of the 12 Federal Reserve districts.11
In Europe, governments have attempted a phased reopening of businesses.12 After several months
of data indicating an economic rebound had begun in the Eurozone, surveys of business activity

10 Gross Domestic Product, 2nd Quarter 2020 (Advance Estimate) and Annual Update, Bureau of Economic Analysis,
July 30, 2020. https://www.bea.gov/news/2020/gross-domestic-product-2nd-quarter-2020-advance-estimate-and-
annual-update.
11 The Beige Book, Federal Reserve System, May 27, 2020. https://www.federalreserve.gov/monetarypolicy/beige-
book-default.htm.
12 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.
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in August reportedly indicated that the recovery was slowing amid a rise in new COVID-19 cases
and countries reimposing new quarantines and lockdowns in various parts of the Euro area.13
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.14 The
European Commission’s July 8, 2020, forecast projected that EU economic growth in 2020 could
contract by 8.3% and only partially recover in 2021.15 In addition, a July forecast by the European
Commission forecasts a larger drop in gross domestic product (GDP) in 2020 among European
economies than it had forecasted in its spring report, with a less vibrant recovery in 2021. Second
quarter data indicate that economic growth in the EU contracted by 11.7% from the first quarter
and by 14.1% compared with the same quarter in 2019.16 Second quarter data indicate the UK
economy contracted by 20.4%, the largest quarterly decline on record. On September 1, 2020,
Eurostat, the statistical office of the European Commission, released data indicating that the
Eurozone experienced price deflation in August of 0.2% at an annual rate, primarily as a result of
declining energy prices.
After protracted talks, European leaders agreed on July 21 to a new €750 billion (about $859
billion) pandemic economic assistance package to support European economies. Second quarter
data also indicated that employment among the EU countries fell by 2.6%, or 5.5 million jobs.
The jobs data, however, does not include roughly 45 million people, or a third of the workforce in
Germany, France, Britain, Italy, and Spain, currently covered by employment protection
programs.17 Similarly, Japan reported on August 17 that its economy contracted by 7.8% in the
second quarter of 2020, compared with the previous quarter, or at an annual a rate of 27.8%.18
On May 27, 2020, European Central Bank (ECB) President Christine Lagarde 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.19 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. Some analysts are also concerned that Africa, after
escaping the initial spread of infections, is now facing a sharp increase in rates of infection
outside South Africa, Egypt, Nigeria, Algeria, and Ghana, where most of the infections have
occurred to date.20 On August 31, 2020, India reported that the second quarter GDP growth rate

13 Arnold, Martin, Eurozone Economic Rebound is Losing Steam, Surveys Suggest, Financial Times, August 21, 2020.
https://www.ft.com/content/cc4fa3df-40e7-4e19-be9f-9d01efb74f69. Chazan, Guy and Anna Gross, Europe Battles to
Contain Surge in Coronavirus Cases. Financial Times, July 29, 2020. https://www.ft.com/content/bcddc297-b7f2-444d-
908f-54e8ce6f4f98.
14 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,
15 European Economic Forecast Summer 2020, European Commission, July 8, 2020.
16 Newsrelease, Eurostat, August 14, 2020.
17 Ben Hall, Ben, Delphine Strauss, and Daniel Dombey, Millions of European Jobs at Risk When Furlough Support
Ends, Financial Times, August 14, 2020. https://www.ft.com/content/0f01a9ed-5b15-4e2d-921c-6eed7a80d0bd.
18 Quarterly Estimates of GDP for April - June 2020 (First Preliminary Estimates), Cabinet Office, August 17, 2020.
19 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.
20 Pilling, David, The Pandemic is Getting Worse: Africa Prepares for Surge in Infections, Financial Times, July 20,
2020. https://www.ft.com/content/1b3274ce-de3b-411d-8544-a024e64c3542.
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fell by 23.9% compared with the first quarter, raising concerns that the country could experience
its most severe economic contraction on record.21
Economic Policy Responses
After a delayed response, central banks and monetary authorities in developed and emerging
market economies have engaged in an ongoing series of interventions in financial markets and
national governments have adopted an array of fiscal policy initiatives to stimulate their
economies. The Bank for International Settlements (BIS) has characterized the pandemic as fully
global in nature, eliciting a fiscal, monetary, and prudential response that has surpassed that of the
global financial crisis of 2008-2009. In addition, the BIS argues that the evolving nature of the
health crisis is causing the financial crisis to evolve as well, changing from a liquidity crisis in the
initial stages to a solvency crisis that could worsen if the economic recovery is delayed. As a
result of the potential damage to the global economy arising from the pandemic, the BIS stated
that future economic historians may describe the pandemic as, “the defining moment of the 21st
century.”22
As indicated in Table 2, central governments have adopted fiscal measures to provide support to
the health sector, households, and firms, although the size and scope of the programs vary by
country.23 These measures broadly include tax cuts and tax deferrals, wage and income
supplements to individuals, including expanding unemployment insurance; and tax cuts, tax
deferrals, and other payments to businesses. 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. In some emerging economies,
governments reportedly adopted special programs to provide financial assistance to “informal”
workers, or workers outside traditional labor markets such as family businesses.24
In developed economies, however, as governments are adopting fiscal packages to assist
households, consumers have sharply increased their savings as they face limited spending
opportunities, or a form of involuntary saving, and concerns over lost jobs, incomes, and the
course of their economies, or precautionary saving. (For additional countries and measures, see
Appendix A of this report.) International organizations also took 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.
Table 2. Elements of Announced Fiscal Measures to Address COVID-19

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

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

21 Slater, Joanna, India’s Economy Contracts by Nearly 24%, It’s Sharpest Drop On Record, The Washington Post,
August 31, 2020. https://www.washingtonpost.com/world/asia_pacific/indias-economy-contracts-by-nearly-24-percent-
amid-pandemic/2020/08/31/92318fbe-eb70-11ea-bd08-1b10132b458f_story.html?hpid=hp_world-right-4-0_world-
latest-feed%3Ahomepage%2Fstory-ans.
22 Annual Economic Report 2020, Bank for International Settlements, June 2020, p. ix.
23 Ibid.
24 Ibid, p. 25.
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Advanced Economies
Emerging Market Economies
Measures
US
JP
DE
FR
IT
ES
GB
BR
CN
ID
IN
KR
MX
RU
ZA
Measures supporting households
Targeted
x
x
x
x
x
x
x
x
x
x
x
x

x
x
transfersa
Other
x
x
x
x
x
x
x
x
x
x
x
x

x
x
labor
income
supportb
Wage
x
x
x
x
x
x
x
x
x

x
x

x
x
subsidies
Tax cuts
x
x
x
x

x


x
x
x
x

x
x
Tax deferral x
x
x

x
x
x



x
x
x

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

x
x
x
x
x
x
x
x

x

Targeted

x
x
x
x

x

x
x



x
x
transfers
Source: Annual Economic Report 2020, Bank for International Settlements, June 2020, p. 24, based on data
col ected by the International Monetary Fund and the Organization for Economic Cooperation and
Development.
Notes:
a. Includes cash and in-kind transfers to affected households.
b. Extended unemployment and sick leave benefits.
c. Non-budgetary measures such as equity injections, asset purchases, loans and debt assumptions or
government guarantees and contingent liabilities, US: United States; JP: Japan; DE: Germany; FR: France; IT:
Italy; ES: Spain; GB: Great Britain; BR: Brazil; CN: China; ID: Indonesia; IN: India; KR: South Korea; MX:
Mexico; RU: Russia; ZA: South Africa.
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.25 The IMF also updated its
estimate of the increase in borrowing by governments globally to rise from 3.9% of global gross
domestic product (GDP) in 2019 to 13.9% in 2020, as indicated in Figure 2. Other estimates
indicate that central banks have committed $17 trillion to support their economies to counter
pandemic-related economic effects.26
Among developed economies, the fiscal deficit to GDP ratio is projected to rise from 3.3% in
2019 to 16.6% in 2020; the ratio for the United States is projected to rise from 6.3% to 23.8%,

25 World Economic Outlook Update, International Monetary Fund, June 24, 2020. p. 16.
26 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.
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respectively, the highest ratio for any country or region.27 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.28 For developing economies, the fiscal
deficit to GDP ratio is projected to rise from 4.9% to 10.6%, significantly increasing their debt
burden and raising prospects of defaults or debt rescheduling.29 According to some estimates, the
most fiscally vulnerable countries are Argentina, Venezuela, Lebanon, Jordan, Iran, Zambia,
Zimbabwe, and South Africa.30 The IMF concluded that among developing countries high debt
levels could become “unmanageable” and test the resilience of banks in some countries.31
The IMF also argued there is a growing disconnect between the pricing of risk in financial
markets and projected economic prospects, because investors apparently expect a quick recovery
based on continued and unprecedented central bank intervention. However, a perceived or real
shift in central bank intervention in financial markets could negatively affect investors’ concept of
risk and, in turn, negatively affect asset markets and the economic recovery.32 In addition to
central banks’ actions, the IMF concludes that a number of pre-existing vulnerabilities could
affect the timing and the rate of the economic recovery. These vulnerabilities include corporate
and household debt levels in developed and some emerging economies that could become
unmanageable in a prolonged recession; a rising number of insolvencies that could test the
resilience of the banking sector; additional stresses that could affect nonbank financial
institutions; and the prospect of some developing economies facing high external financing
requirements.33

27 World Economic Outlook Update, p. 20.
28 Global Financial Stability Report Update. International Monetary Fund, June 2020, p. 2.
29 Ibid., p. 6.
30 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.
31 Global Financial Stability Report Update, p. 2.
32 Ibid, p. 4.
33 Ibid, p. 6-7.
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Figure 2. IMF Projected Government Fiscal Deficits Relative to GDP
In percentage shares of Gross Domestic Product

Source: World Economic Outlook Update. International Monetary Fund, June 24, 2020, p. 20. 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.
Simultaneously, as indicated in Table 3, central banks and monetary authorities have adopted an
array of measures to address the potential economic effects of the pandemic, including lowering
interest rates and reserve requirements, announcing new lending and financing facilities, asset
purchases, foreign exchange swaps, prudential measures, and relaxed capital buffers and, in some
cases, countercyclical capital buffers,34 adopted after the 2008-2009 financial crisis, potentially
freeing up an estimated $5 trillion in funds.35
Central banks not only filled the role of lender of last resort through large purchases of
government debt, but also the buyers or lenders of last resort for private sector securities, in many
cases engaging in activities that previously had been considered off-limits. As a result of these
activities, the BIS argues that central banks effectively managed the initial liquidity crisis, the
first of three phases often identified with financial crises. The second and third phases, insolvency
and recovery, are still being navigated and could become more challenging should the pandemic-
related economic crisis be prolonged. 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. The Financial Stability
Board (FSB) argued in its July 15, 2020, report to the G-20 Finance Ministers and Governors that
the actions taken to date to support the functioning of the global financial system have effectively

34 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/.
35 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.
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worked to contain the financial and economic impact of the pandemic, but the crisis is not yet
over and it is not possible to assess whether the actions have achieved their intended results.36
On March 11, the WHO announced that the viral outbreak was officially a pandemic, the highest
level of health emergency.37 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 2008-2009.38 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.39 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.40
Table 3. Selected Central Bank and Prudential Measures to Address COVID-19


Advanced economies
Emerging market economies
Type of
Measures
U
E
J
G
C
A
C
B
C
I
I
K
M
T
Z
tool
S
A
P
B
A
U
H
R
N
D
N
R
X
H
A
Interest
Policy rate
x


x
x
x

x
x
x
x
x
x
x
x
rate
cut

36 COVID-19 Pandemic: Financial Stability Implications and Policy Measures Taken: Report Submitted to the G-20
Finance Ministers and Governors
, Financial Stability Board, July 15, 2020.
37 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.
38 Mapping the Spread of the COVID-19.
39 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/.
40 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.
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Advanced economies
Emerging market economies
Type of
Measures
U
E
J
G
C
A
C
B
C
I
I
K
M
T
Z
tool
S
A
P
B
A
U
H
R
N
D
N
R
X
H
A
Lending
Gen.
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
liquidity
liquidity
provisiona
Specialized
x
x
x
x

x
x
x
x

x
x
x
x

lending
Asset
Governme
x
x
x
x
x
x



x
x
x

x
x
purchase
nt bonds
s/ sales
Commercia
x
x
x
x
x






x



l paper
Corporate
x
x
x
x
x






x

x

bonds
Other

x
x

x










private
securitiesb
FX swap/
USD swap

x
x
x
x
x
x
x



x
x


intervene
line
-tion
FX






x
x

x
x
x
x


interven-
tion
Prudentia
Capital
x
x
x
x
x
x
x
x
x
x
x
x
x

x
l rules
require-
and
ments
regula-
tions
Liquidity
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
require-
ments
Payout

x

x
x
x
x
x

x
x
x
x
x
x
restrictions
Market

x
x
x
x
x
x
x
x
x
x
x
x
x
x
functioningc
Source: Annual Economic Report 2020, Bank for International Settlements, June 2020, p. 23.
Notes:
a. Repo and reverse repo operations, standing facilities, modified discount window and lower reserve
requirement ratio.
b. Asset- and mortgage-backed securities, covered bonds and exchange-traded funds.
c. Shortsel ing bans and circuit breakers. US: United States; EA: Euro Area; JP: Japan; GB: Great Britain; CA:
Canada; AU: Australia; CH: Switzerland; BR: Brazil; CN: China; ID: Indonesia; IN: India; KR: South Korea;
MX: Mexico; TH: Thailand; ZA: South Africa.
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 decisionmaking. In addition,
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uncertainties concerning the global pandemic and the effectiveness of public policies intended to
contain its spread and prevent a second wave of infections have added 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. While prices have recovered
somewhat from the low of nearly $20 per barrel in April, they continue to hover around $40 to
$45 per barrel, reflecting the decline in global economic activity, 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 33.0% at an annual rate
in the second 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.”41
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.42 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 4, 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 a marked decline in projected rates of growth. Between October 2019 and June
2020, for instance, the IMF lowered its global economic growth forecast from a positive 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 2020 and June 2020, the World Bank also lowered its forecast of global growth from
2.9% to a negative 5.2%. In most forecasts, advanced economies are projected to experience the
steepest declines in economic growth from 2019 to mid-June 2020.

41 Federal Reserve Issues FOMC Statement, Board of Governors of the Federal Reserve System, April 29, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200429a.htm.
42 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.
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Table 4. Major Economic Forecasts, Differing Assessments
Percentage changes at annual rates
World
Advanced economies Developing economies
United States


2020
2021
2020
2021
2020
2021
2020
2021
International Monetary Fund
October 2019
3.4%
3.6%
1.7%
1.6%
4.6%
4.8%
2.1%
1.7%
April 2020
–3.0
5.8
–6.1
4.5
–1.0
6.6
–5.9
4.7
June 2020
-4.9
5.4
-8.0
4.8
-3.0
5.9
-8.0
4.5
Organization for Economic Cooperation and Development
Nov 2019
2.9
3.0
1.6
1.7
4.0
4.0
2.0
2.0
March 2020
2.4
3.3
0.8
1.2
NA
NA
1.9
2.1
June 2020 single
-6.0
5.2
-7.5
4.8
-4.6
5.6
-7.3
4.1
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
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% under a
single-wave scenario and 7.6% in under a second wave scenario 2020. 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.43 Under both scenarios, the OECD estimates that the global
economic recovery will be slow and gradual.44 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. Through the first quarter of 2020, however,
most OECD countries had not experienced significant increases in rates of unemployment, in part
due to national income and wage maintenance programs, as indicated in Figure 3. The main

43 OECD Economic Outlook, Organization for Economic Cooperation and Development. June 10, 2020; p. 12.
http://www.oecd.org/economic-outlook/#resources.
44 Ibid., p. 23.
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exceptions were the United States and Canada, where unemployment rates spiked starting at the
end of the first quarter and into the second quarter of 2020. In a major difference between U.S.
and EU data, in the EU, workers absent from work due to temporary layoff are counted as
employed, whereas, in the United States, they are counted as unemployed.
Figure 3. Unemployment Rates Among Major OECD Countries
In percentage

Source: OECD Quarterly Employment Situation, 1st Quarter 2020, Organization for Economic Cooperation and
Development, July 16, 2020. Created by CRS.
Global trade is projected to contract by 9.5% or 11.4% in 2020 under the single or second wave
scenarios, respectively. The OECD projections in Table 5 reflect the single wave scenario.45
According to this scenario, global 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 4.
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.

45 Ibid., p. 13.
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Figure 4. 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.
Table 5. 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.
1.7
-7.5
4.8
Adv.
1.7
–8.0
4.8
Adv.
1.6
-7.0
3.9
Economies
Economies
Economies
1.8
-5.0
4.1
United
2.3
–8.0
4.5
United
2.3
-6.1
4.0
Australia
States
States
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
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World
OECD June
IMF June
Bank June
2020
2020
2020


Projections


Projections


Projections
2019
2020 2021
2019
2020
2021
2019
2020
2021


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
0.9
–11.9
8.0
India
4.2
-3.2
3.1
Volume




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








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.
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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.46
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
countries (non-OECD) are significant.”47 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.48
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.

46 Ibid., p. 31.
47 OECD Interim Economic Assessment: COVID-19: The World Economy at Risk, Organization for Economic
Cooperation and Development. March 2, 2020, p. 2.
48 Ibid., p. 4.
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 Economic effects likely will vary across countries reflecting differences in the
timing and degree of containment measures.49
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.50 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.”51 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 5.52 In contrast, the
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.

49 Evaluating the Initial Impact of COVID Containment Measures on Activity, Organization for Economic Cooperation
and Development, March 27, 2020.
50 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.
51 World Economic Outlook Update, International Monetary Fund, June 24, 2020.
52 The IMF database indicates that global GDP fell by 0.075% in 2009 during the height of the global financial crisis.
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 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 5.
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.53
In an August 2020 analysis, the IMF indicated that fiscal and monetary actions by developed
economies provided developing and emerging market economies the ability to avoid tightening
monetary policy to stem capital outflows. Instead, the countries relied on movements in their
exchange rates to carry the brunt of the economic adjustment, while also following developed
economies in easing monetary policy, providing liquidity injections, and using unconventional
monetary policy measures such as purchases of government and corporate bonds. The IMF also
indicated that a prolonged health crisis could push developing economies to take such measures
as price controls, export restrictions, and unorthodox measures to ease credit and financial
regulation.54

53 World Economic Outlook, p. 9.
54 Mühleisen, Martin, Tryggvi Gudmundsson, and Hélène Poirson Ward, COVID-19 Response in Emerging Market
Economies: Conventional Policies and Beyond,
International Monetary Fund, August 6, 2020.
https://blogs.imf.org/2020/08/06/covid-19-response-in-emerging-market-economies-conventional-policies-and-
beyond/?utm_medium=email&utm_source=govdelivery.
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Figure 5. 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.55
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.56 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 2020.57 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

55 World Economic Outlook, p. v.
56 Global Economic Prospects, World Bank Group, June 8, 2020, p. 15.
57 Ibid., p. 5.
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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.”58
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 2020.59
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.60 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 slowly in 2021.61 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 6. On August 19, the WTO indicated there were positive signs
that global trade could improve in the third quarter of 2020, but that preliminary second quarter
data were consistent with its earlier forecast of a decline in global trade in 2020 of 18,5%. In the
first quarter of 2020, global exports and imports fell by 7.2% and 7.4%, respectively, in volume
terms and 10.2% and 8.6% in value terms, reflecting the global economic impact of the
pandemic, as indicated in Figure 6. The WTO also reported in its June 29 report on G-20 trade
measures that during the mid-October 2019 to mid-May 2020 period, countries had made
“significant” progress in facilitating imports, including products related to COVID-19.62

58 Ibid., p. 115.
59 Ibid., p. 33.
60 Ibid., p. 118.
61 Trade Falls Steeply in First Half of 2020, World Trade Organization, June 23, 2020.
62 WTO Report on G20 Shows Moves to Facilitate Imports Even as Trade Restrictions Remain Widespread, World
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According to the report, various governments initially responded to the pandemic by introducing
new trade restrictive measures, 90% of which were export bans on medical products, such as
surgical masks, gloves, medicine and disinfectant. Since then, the WTO indicated that G20
economies have repealed 36% of the restrictions and lowered barriers to imports of many
pandemic-related products. As of mid-May 2020, the WTO reported that 65 of the 93 pandemic-
related trade measures implemented during the monitoring period were of a trade-facilitating
measures, rather than trade-restricting measures.63
Figure 6. WTO Estimates of Quarterly Global Exports and Imports, Volumes and
Values

Source: World Trade Organization, August 19, 2020. Created by CRS.
Concerning the WTO’s 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.”64 Data in Table 6
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 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.65 More recent WTO estimates
indicate, however, the recovery could take longer than its previous forecasts have indicated and
assume an L-shape recovery.

Trade Organization, June 29, 2020. https://www.wto.org/english/news_e/news20_e/trdev_29jun20_e.htm.
63 Report on G20 Trade Measures (Mid-October 2019 to Mid-May 2020), World Trade Organization, June 29, 2020.
64 Trade Falls Steeply in First Half of 2020, p, 1.
65 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.
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Table 6. 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
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
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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.66 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.67
Beyond the current challenges the pandemic poses to global supply chains, a recent report
catalogues a number of risks that can disrupt supply chains.68 The report estimates that 16% to
26% of global goods exports, worth $2.9 trillion to $4.6 trillion, potentially could move to new
countries over the next five years “if companies restructure their supplier networks.” The report
concluded, however, that the pandemic so far has not reshaped global production networks in
dramatic ways, because the networks reflect, “economic logic, hundreds of billions of dollars’
worth of investment, and long-standing supplier relationships.”69 In addition, the report concluded
that although firms can shift production locations, the interconnected nature of these chains
“limits the economic case for making large-scale changes in their physical location.”70 Instead of
shifting production locations, firms are considering a number of strategies to withstand the
challenges of a global economy by increasing sources of raw materials and critical materials,
expanding and diversifying supplier bases, investing in suppliers to upgrade their capabilities, and
regionalizing supply chains, among a number of possible actions.71
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 has turned into a global trade and
economic crisis. During the initial stages of the pandemic, policymakers weighed the impact of
policies that addressed the immediate economic effects at the expense of longer-term
considerations such as debt accumulation. As the pandemic persists, however, policymakers may
have to consider adopting additional fiscal or monetary measures, in particular, that may further
complicate the economic impact of the policies after the pandemic resides. Initially, 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

66 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.
67 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.
68 Risk, Resilience, and Rebalancing in Global Value Chains, McKinsey Global Institute, August 2020, p. 1
69 Ibid, p. 2.
70 Ibid, In Brief.
71 Ibid, p. 16.
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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 have cancelled international meetings,72 nations are competing for medical supplies, and
some nations reportedly are stoking conspiracy theories that shift blame to other countries.73
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 have grown, however, that virus-related supply shocks are creating 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 affected 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.74
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 adjusted 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

72 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/.
73 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/.
74 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.
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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
attempted to support the market.75 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 August 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.76 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, 2020.77 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).78
Financial Markets
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 7.
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

75 Armstrong, Robert, “Mortgage Investment Funds Become ‘Epicenter’ of Crisis,” Financial Times, March 24, 2020.
https://www.ft.com/content/18909cda-6d40-11ea-89df-41bea055720b.
76 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.
77 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.
78 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/.
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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. As
indicated in Table 7, the DJIA lost the largest part of its market valuation in trading during
February and March when the index lost nearly one-fourth of its value as more trading sessions
ended with overall market values lower than higher. Since March, the index has posted more
trading sessions that closed with positive gains than with losses. By August 27, the DJIA had
recovered more than 90% of the value lost in February and March. 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.79
Table 7. Dow Jones Industrial Average Market Changes by Month
Sessions up Sessions down
Open
Close
Change in index valuation

January
13
8
28,638.97
28,256.03
-382.94
-1.34%
February
8
11
28,319.65
25,409.36
-2,910.29
-10.28%
March
10
12
25,590.51
21,917.16
-3,673.35
-14.35%
April
12
9
21,227.38
24,345.72
3,118.34
14.69%
May
10
10
24,120.78
25,383.11
1,262.33
5.23%
June
14
8
25,342.99
25,812.88
469.89
1.85%
July
13
9
25,879.38
26,428.32
548.94
2.12%
August
14
7
26,542.32
28,430.05
1,887.73
7.11%
Source: Financial Times, calculations by CRS.
Similar to the 2008-2009 global financial crisis, central banks implemented a series of monetary
operations to provide liquidity to their economies. These actions, however, initially 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 attempted to address
financial market volatility and prevent large-scale corporate insolvencies that reflect the
underlying economic uncertainty caused by the pandemic.

79 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.
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Figure 7. Dow Jones Industrial Average
February 14, 2020, to September 3, 2020

Source: Financial Times. Created by CRS.
International Role of the Dollar
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 8, 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 much of the
value it gained against other currencies, but has remained about 2.0% higher than it was at the
beginning of the year. Since March, the exchange value of the dollar has dropped between 1%
and 2% per month in a slow decline as financial strains have eased and demand for the dollar in
international financial markets has lessened. 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. During July, the dollar lost over 2% of its value against the currencies of
major trading partners and is about where it was in mid-March.
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Figure 8. U.S. Dollar Trade-Weighted Broad Index, Goods and Services
January 2, 2020, through August 28, 2020

Source: St. Louis Federal Reserve Bank. Created by CRS.
Notes: January 2006 = 100.
The Bank for International Settlements (BIS) emphasized the role of the dollar as a dominant
global currency in its recent triennial survey of currency markets.80 According to the 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 9. 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.81 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 BIS 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.82
In addition, the dominant role of the dollar in international trade pricing and trade financing
means the dollar plays a key role in the global economic recovery and that it could amplify the
impact of the pandemic, according to the IMF.83 Traditionally, most economic models were based
on the assumption that countries set their prices in their home currencies. As a result,

80 Foreign Exchange Turnover in April 2019, Bank for International Settlements, September 16, 2019.
https://www.bis.org/statistics/rpfx19_fx.htm.
81 See CRS In Focus IF10112, Introduction to Financial Services: The International Foreign Exchange Market.
82 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.
83 Dominant Currencies and External Adjustment, IMF Staff Discussion Note 20/05, International Monetary Fund, July
2020.
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domestically produced goods and services would become cheaper for trading partners when the
domestic currency weakens, leading to increased demand from trading partners and more exports.
However, much international trade, including many commodities, is priced in dollars, which
means that trade volumes respond less than they would if goods were priced in exporters’ home
currencies. Limited evidence indicates that a significant share of bilateral trade between countries
other than the United States is invoiced in U.S. dollars.84 As a result, an appreciation of the dollar
against other currencies, or a weakening in other currencies, has a muted effect on exports by
other countries, at least in the short run, as has been evidenced by recent movements in exchange
rates and trade volumes of emerging market and developing economies. The IMF also concludes
that because countries other than the United States price much of their trade in dollars, an
appreciation in the value of the dollar, or a depreciation in the value of other currencies relative to
the dollar, reduces both exports and imports. As a result, a depreciation in other currencies
relative to the dollar provides less of a boost to exports and, therefore, less of a countercyclical
support to economies.
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
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.85 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 9. 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.

84 Ibid, p. 8.
85 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.
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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 nonnegotiable debt instruments that are loaned by
creditors directly to a debtor or represented by evidence of a deposit. (4) US dol ar denominated international
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.86 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
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.87 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.88
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.89 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.90

86 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.
87 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.
88 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.
89 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.
90 Smith, Colby and Brendan Greeley, “Fed Pumps Extra Liquidity Into Overnight Lending Markets,” Financial Times,
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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.91 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.92 At its March 12
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.93 The Fed also announced that it would 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.94 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.95

March 9, 2020. https://www.ft.com/content/e8c7b5f0-6200-11ea-a6cd-df28cc3c6a68.
91 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.
92 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.
93 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.
94 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.
95 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.
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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%.96 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.97 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.98 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,
including the United States” and that it was prepared to use its “full range of tools.”99 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.100
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.101 The DJIA dropped nearly 3,000 points, or about 13%. Most
automobile manufacturers announced major declines in sales and production;102 similarly, most
airlines reported they faced major cutbacks in flights and employee layoffs due to diminished
economic activity.103 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

96 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.
97 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/.
98 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.
99 Federal Reserve Releases FOMC Statement, Board of Governors of the Federal Reserve System, March 15, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm.
100 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.
101 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.
102 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.
103 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.
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crisis.104 The Bank of Japan announced that it would double its purchases of exchange traded
funds and the G-7 countries105 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.106
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.107 The UK government proposed government-backed loans to support business; a three-
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, nonstandard 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).108 The
ECB also broadened the types of assets it would accept as collateral to include nonfinancial
commercial paper, eased collateral standards for banks, and waived restrictions on acquiring
Greek government debt.109 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.110 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.111 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

104 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.
105 The G-7 is comprised of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
106 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.
107 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.
108 “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.
109 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.
110 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.
111 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.
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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.112 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 gained in value against other major currencies, but generally trended lower
since May and the price of Brent crude oil dropped close to $20 per barrel on March 20, as
indicated in Figure 10. Since the low prices recorded in April, the price of Brent crude oil has
risen to the $40 to $44 range. According to the International Energy Agency (IEA) the rise in oil
prices reflects increased demand in China and India as those economies appear to be gaining
strength and reduced global supply as a result of cuts in output by OPEC and elsewhere,
including the United States.113 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.114 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.
Figure 10. Brent Crude Oil Price per Barrel of Dollars
January 9, 2020, to September 2, 2020

Source: Markets Insider. Created by CRS.
Financial market indexes continued to fall on March 23, 2020, reaching their lowest point since
the start of the pandemic crisis. The Federal Reserve announced a number of new facilities to

112 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.
113 Oil Market Report June 2020, International Energy Agency, June 2020. https://www.iea.org/reports/oil-market-
report-june-2020.
114 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.
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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.115 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.116
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.117 U.S. financial markets were buoyed on March 25 and 26 over
passage in Congress of a $2.2 trillion economic stimulus package.
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-19.118 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.119
Japan announced that it would adopt an emergency spending package worth $238 billion, or
equivalent to 10% of the country’s annual GDP.120 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.121

115 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.
116 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.
117 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.
118 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.
119 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.
120 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.
121 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.
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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.122 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.123 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.124
On April 9, OPEC and Russia agreed to cut oil production by 10 million barrels per day.125 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.126 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.127 G-7 finance ministers and central bank governors agreed to support the G-20 proposal
to suspend debt payments by developing countries.128 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.129

122 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.
123 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.
124 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.
125 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.
126 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.
127 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.
128 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.
129 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.
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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.130 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-19.131 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.132
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.133 On April 16,
the U.S. Labor Department reported that 5.2 million Americans filed for unemployment insurance
during the previous week, raising the total claims since mid-March to over 22 million.134
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.135
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.136 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.137 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

130 Politi, James, “IMF Boosts Emergency Lending Capacity to $100bn,” Financial Times, April 9, 2020.
https://www.ft.com/content/e46faadc-456b-4cf8-a2fd-2017702747ab.
131 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.
132 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.
133 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/.
134 Unemployment Insurance Weekly Claims, Department of Labor, April 16, 2020. https://www.dol.gov/ui/data.pdf.
135 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.
136 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.
137 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.
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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.”138
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.139 Some Eurozone members
reportedly argued for the ECB to create a Eurozone “bad bank” to remove billions of euros in
nonperforming debts from banks’ balance sheets to provide more capacity for Eurozone banks at
a potentially critical time when banks could see an increase in nonperforming loans.140 The World
Bank confirmed that its “pandemic bonds” would pay out $133 billion to the poorest countries
affected by the pandemic.141
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.”142
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.143 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.144 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.145 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

138 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.
139 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.
140 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.
141 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.
142 G20 Extraordinary Agriculture Ministers Meeting: Statement on COVID-19, G-20, April 21, 2020. https://g20.org/
en/media/Pages/pressroom.aspx.
143 Unemployment Insurance Weekly Claims, April 23, 2020. https://www.dol.gov/ui/data.pdf.
144 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.
145 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.
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and quadruple its purchases of corporate debt to keep interest rates low and stimulate the
Japanese economy.146
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.”147 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%).148
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.149 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.150 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.”151 The
ECB also announced a new nontargeted low-interest rate pandemic emergency longer-term
refinancing operation (PELTROs) to complement its Pandemic Emergency Refinance Operations
announced in March.152 House Speaker Pelosi stated that House Democrats were considering a $1
trillion spending bill to support state and local governments.153 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 1987.154

146 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.
147 Federal Reserve Issues FOMC Statement, Board of Governors of the Federal Reserve System, April 29, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200429a.htm.
148 Gross Domestic Product, First Quarter 2020 (Advance Estimate), Bureau of Economic Analysis, April 29, 2020.
https://www.bea.gov/.
149 Unemployment Insurance Weekly Claims, April 30, 2020. https://www.dol.gov/ui/data.pdf.
150 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.
151 Introductory Statement, European Central Bank, April 29, 2020. https://www.ecb.europa.eu/press/pressconf/2020/
html/ecb.is200430~ab3058e07f.en.html.
152 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.
153 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/.
154 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.
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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 Spring 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.155 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.156
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.157
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
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.158 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.159
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.160

155 European Economic Forecast Spring 2020, European Commission, May 2020. https://ec.europa.eu/commission/
presscorner/detail/en/ip_20_799.
156 Unemployment Insurance Weekly Claims, May 5, 2020. https://www.dol.gov/ui/data.pdf.
157 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.
158 GDP Monthly Estimate, UK: March 2020, Office for National Statistics, May 13, 2020. https://www.ons.gov.uk/
economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/march2020.
159 Unemployment Insurance Weekly Claims, May 14, 2020. https://www.dol.gov/ui/data.pdf.
160 Fleming, Sam, Victor Mallet, and Guy Chazan, Germany and France Unite in Call for €500 Billion Europe
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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.161
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.162
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.163
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.164 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.165 The European Central Bank announced that it would double to $1.5 trillion
its Pandemic Emergency Purchase Program to stimulate the European economy.166 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.167 OPEC
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.168
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.169 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.170

Recovery Fund, Financial Times, May 18, 2020. https://www.ft.com/content/c23ebc5e-cbf3-4ad8-85aa-032b574d0562.
161 Unemployment Insurance Weekly Claims, May 21, 2020. https://www.dol.gov/ui/data.pdf.
162 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.
163 Unemployment Insurance Weekly Claims, May 29, 2020. https://www.dol.gov/ui/data.pdf.
164 Monthly U.S. International Trade in Goods and Services in April 2020, U.S. Census Bureau, June 4, 2020.
https://www.census.gov/foreign-trade/data/index.html.
165 Unemployment Insurance Weekly Claims, June 4, 2020. https://www.dol.gov/ui/data.pdf.
166 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.
167 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-
coronavirus-economy/.
168 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.
169 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.
170 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.
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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.171 The Labor Department reported that an additional 1.57 million Americans filed for
unemployment insurance during the previous week, raising the 12-week total from mid-March to
44 million Americans.172 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.173 The Federal Reserve released its semi-annual
Monetary Policy Report.174
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.175
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.176
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.177 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,
encouraging some U.S. producers to consider restarting wells that were closed when prices
dropped to around $20 per barrel.178
On June 18, the Department of Labor announced that an additional 1.54 million Americans filed
for unemployment during the week, raising the 13-week total to 45.7 million Americans.179
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

171 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/.
172 Unemployment Insurance Weekly Claims, Department of Labor, June 11, 2020. https://www.dol.gov/ui/data.pdf.
173 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.
174 Board of Governors of the Federal Reserve System, Monetary Policy Report, June 12, 2020.
https://www.federalreserve.gov/monetarypolicy/2020-06-mpr-summary.htm
175 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.
176 Powell, Jerome H., Semiannual Monetary Report to the Congress, June 16, 2020. https://www.federalreserve.gov/
newsevents/testimony/powell20200616a.htm.
177 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.
178 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.
179 Unemployment Insurance Weekly Claims, Department of Labor, June 18, 2020. https://www.dol.gov/ui/data.pdf.
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economic growth would contract by 4.9% in 2020, compared with an April forecast of a decline
of 3.0%.180
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.181 Elsewhere, the Labor Department
reported that an additional 1.48 million Americans filed for unemployment insurance, raising the
14-week total from mid-March to over 47 million.182 Between June 1 and June 26, the DJIA
posted 13 days with gains and 7 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.183 Also on June 25, the Federal Reserve announced the result of stress tests
on 33 U.S. banks under 3 scenarios184 to ascertain their capital sufficiency given the strains to the
financial system caused by COVID-19.185 The Fed reported that all large U.S. banks are
“sufficiently capitalized” to survive the three scenarios.186 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 15-week period from mid-
March.187 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 nonP:farm payroll rose by 4.8 million, lowering
the unemployment rate to 11.5%. The Census Bureau also released U.S. trade data for May
indicating that the U.S. merchandise trade deficit rose by nearly 10% over that recorded in April
as exports fell by more than imports.188
On July 9, the BLS reported that an additional 1.3 Americans filed for Unemployment Insurance,
raising the 16-week total from mid-March to 50 million.189 On July 17, the European Council met
to approve a proposed plan to provide an additional €750 billion in pandemic support funds to
assist European economies. Negotiations failed to produce an agreement and talks continued over

180 World Economic Outlook Update, p. 5.
181 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.
182 Unemployment Insurance Weekly Claims, Department of Labor, June 25, 2020. https://www.dol.gov/ui/data.pdf.
183 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.
184 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.
185 Ibid.
186 Ibid., pp. 1-2.
187 Unemployment Insurance Weekly Claims, July 1, 2020. https://www.dol.gov/ui/data.pdf.
188 Monthly U.S. International Trade in Goods and Services, May 2020, U.S. Census Bureau, July 2, 2020.
https://www.census.gov/foreign-trade/data/index.html.
189 Unemployment Insurance Weekly Claims, July 9, 2020. https://www.dol.gov/ui/data.pdf.
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the weekend and resumed on July 20. On July21, however, European leaders announced they had
agreed to a €750 billion (about $859 billion) pandemic economic relief package.
On July 29, the Federal Open Market Committee (FOMC) announced it was not changing key
interest rates. It also announced that it was extending foreign currency swap lines and a number
of its lending facilities. Federal Reserve Chairman Powell indicated “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.” On July 30, second
quarter GDP data indicated that U.S. economic output fell by 9.5% from the previous quarter, but
at an annualized rate of 33%. The Department of Labor also announced that an additional 1.4
million individuals applied for unemployment insurance during the previous week, raising the 19-
week total to 54 million.
August 2020
On August 20, the Department of Labor announced that an additional 1.1 million workers filed
for unemployment insurance during the previous week, raising the total over the 22-week period
from mid-March to mid-August 2020 to 56 million Americans who had filed for unemployment
insurance.190 On a seasonally adjusted basis, the number of insured unemployed workers was 14.8
million in mid-August, down from a peak of 25 million in mid-May. The total number of people
claiming benefits in all programs in the week ending August 1, totaled 28 million, up from 1.7
million in the comparable week in 2019. The insured unemployment rate was 10.2%, also down
from the peak reached in early May.
The Bank of England announced through its standard Monetary Policy Committee meeting that it
would maintain its key interest rate at 0.1% and continue its purchases of UK government bond
and nonfinancial investment-grade corporate bonds.191
September 2020
On September 3, the Department of Labor announced that over the 24-week period from mid-
March to late August 2020, 59.3 million Americans filed for unemployment insurance.192 On a
seasonally adjusted basis, the number of insured unemployed workers was 13.3 million in late
August, down from a peak of 25 million in mid-May. The total number of people claiming
benefits in all programs in the week ending August 15, totaled 29 million, up from 1.6 million in
the comparable week in 2019. The insured unemployment rate was 9.1%, also down from the
peak reached in early May.
On September 4, BLS reported that U.S. nonfarm employment increased by 1.4 million in
August, reducing the total number of unemployed Americans to 13.6 million193 and pushing the
overall unemployment rate down to 8.4%, with some caveats.194

190 Unemployment Insurance Weekly Claims, Department of Labor, August 20, 2020. https://www.dol.gov/.
191 Monetary Policy Report August 2020, Bank of England, August 6, 2020.
192 Unemployment Insurance Weekly Claims, Department of Labor, September 3, 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/
193 This total does not include 7.6 million workers who were working part time not by choice and 7.0 million
individuals who were seeking employment.
194 The Employment Situation-August 2020, Bureau of Labor Statistics, September 4, 2020, https://www.bls.gov/. BLS
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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.
Source: Prepared by Martin A. Weiss, CRS.
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.195 The Finance Ministers also pledged

indicated that some individuals were misclassified in previous months. Instead of being classified as unemployed, they
were misclassified as employed, but absent from work due to coronavirus-related business closures. If such individuals
had been classified as unemployed, the unemployment rate would have been 5 percentage points higher in April.
195 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
Announce Any New Action,” Washington Post, March 3, 2020. https://www.washingtonpost.com/business/2020/03/
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fiscal support to ensure health systems can sustain efforts to fight the outbreak.196 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.”197 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 Appendix A to this report for detailed information about the policy actions by individual
governments.198
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.199” 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.200
On August 27, the Bureau of Economic Analysis released updated second quarter U.S. GDP data
indicating that the U.S. economy had contracted by 5.0% at an annual rate in the first quarter and
31.7% in the second quarter, as indicated in Figure 11. A decline in economic activity in the
second quarter of 80% or more was recorded in 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 31% in the first
quarter compared with the previous quarter, but falling by 6% in the second quarter.

03/economy-COVID-19-rate-cuts/.
196 Giles et al., “Finance Ministers Ready to Take Action.”
197 Federal Reserve Releases FOMC Statement, March 3, 2020, https://www.federalreserve.gov/newsevents/
pressreleases/monetary20200303a.htm.
198 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.
199 Federal Reserve Issues FOMC Statement, March 15, 2020. https://www.federalreserve.gov/newsevents/
pressreleases/monetary20200315a.htm.
200 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.
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Figure 11. U.S. GDP, Percentage Change From Preceding Quarter

Source: Bureau of Economic Analysis. Created by CRS.
On September 3, the U.S. Census Bureau reported an increase in the overall U.S. goods and
services trade deficit in July to $63 billion, or an increase on a month-to-month basis of $10.1
billion, reflecting higher amounts of exports and imports of goods and services, as indicated in
Figure 12.201 Exports and imports of both goods and services rose from the previous month: the
deficit in goods trade increased from $72 billion in June to $81 billion in July; the surplus in
services trade fell from $18.2 billion to $17.4 billion. Through July, U.S. exports of goods and
services had fallen by 17.5% in value terms compared with the comparable period in 2019;
imports of goods and services had fallen by 13.8%, reflecting the overall decline in global trade.
Figure 12. U.S. Exports and Imports of Goods and Services 2020
In billions of dollars

Source: Census Bureau. Created by CRS.

201 Monthly U.S. International Trade in Goods and Services, July 2020, Census Bureau, September 3, 2020.

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GDP data through the second quarter indicate that U.S. trade has dropped sharply in real, or index
terms, in both the quantity of goods exported or imported and the value of those goods, as
indicated in Figure 13. The data show the sharp drop in U.S. trade, both exports and imports, as a
result of the global lockdown due to actions to contain the spread of the viral pandemic. In
quantity terms, exports fell by 25%, while imports fell by 15% in the second quarter compared
with the preceding quarter. In value terms, the price of exports fell by 6%, while the price of
imports fell by 3.7% compared with the first quarter.
Figure 13. Price and Quantity Indexes, U.S. Exports and Imports

Source: Bureau of Economic Analysis. Created by CRS.
Notes: 2012 = 100.
On May 8, the Department of Labor reported that the U.S. nonfarm 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
did not include approximately 10 million workers who were involuntarily working part-time and
another 9 million individuals who were seeking employment. As indicated in Figure 14, 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 nonfarm
sector and all labor groups.
On September 4, the BLS also released data on the employment situation in August, indicating
that nonfarm payroll rose by 1.4 million from the previous month, lowering the unemployment
rate to 8.4%.202 The number of unemployed fell to 13.6 million. Over the four–month period from
May to August, job gains were notable in the leisure and hospitality industry (particularly in food
services and drinking establishments), public-sector education and health services, retail trade,
health care and social assistance, professional and business services, and other services.

202 The Employment Situation-July 2020, Bureau of Labor Statistics, September 4, 2020. https://www.bls.gov/. The
unemployment number does not include 7.6 million workers who were working part time not by choice and 7.0 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.
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Figure 14. Change in U.S. Employment by Major Industrial Sector

Source: The Employment Situation, Bureau of Labor Statistics, various months 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.”203 Chairman Powell also
indicated that given the extraordinary nature of the current economic downturn the Fed would,
“continue to use our tools to their fullest until the crisis has passed and the economic 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

203 Current Economic Issues; Speech at the Peterson Institute for International Economics, Jerome H. Powell, May 13,
2020.
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advancement. The result could be an extended period of low productivity growth and
stagnant incomes.204
Monetary Policy205
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

204 Ibid.
205 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.
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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
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.206
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.

206 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.
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 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.
 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
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payroll tax,207 and extended of the tax filing deadline.208 President Trump has taken additional
actions, including
 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.209
 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.210
 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.211
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.

207 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/.
208 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.
209 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.
210 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/.
211 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.
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 Increases unemployment insurance benefits, expands eligibility and offer workers
an additional $600 a week for four month, in addition to state unemployment
programs.212
 Establishes special rules for certain tax-favored withdrawals from retirement
plans; delays due dates for employer payroll taxes and estimated tax payments
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

212 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.
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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.
 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 8 times a year by the 12 regional Federal Reserve banks—that
provides an assessment of economic activity across the various regions of the country. The
assessment indicated that economic activity to mid-May had fallen sharply in each of the
districts.213 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 15. 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 August, BEA reported that personal income fell by 4.2%
in May and 1.0% in June, but rising by 0.4% in July, as government transfer payments fell from
$6.6 trillion in April to $4.9 trillion in July. Also, personal consumption recovered somewhat,
rising by 8.2% in May as some businesses began opening, but increasing by 6.2% in June and

213 The Beige Book: Summary of Commentary on Current Economic Conditions by Federal Reserve District, May 17,
2020, the Federal Reserve System.
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1.9% in July. As a result of the increase in spending, the personal savings rate fell to 17.8% in
July, down from 33.7% in April, although still a high rate of saving by historical standards.
Figure 15. U.S. Personal Income, Consumption, and Saving
Change from preceding month, unless otherwise indicated

Source: Personal Income and Outlays, July 2020, Bureau of Economic Analysis, August 28, 2020. Created by CRS.
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 the 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 2020.214
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.”215 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.216 He

214 Congressional Budget Office, Letter to Charles A. Schumer, June 1, 2020.
215 Federal Reserve Issues FOMC Statement, Board of Governors of the Federal Reserve System, June 10, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200610a.htm.
216 Powell, Semiannual Monetary Report to the Congress.
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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
economic growth in the second quarter of 2020 would decline at a rapid pace.217 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 8. 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.218
Table 8. Economic Projections of Federal Reserve, June 2020
Percentage change, fourth quarter over previous year fourth quarter
Median1
Central Tendency2
Range3

Variable
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.

217 Board of Governors of the Federal Reserve System, Monetary Policy Report, June 12, 2020, p. 1.
https://www.federalreserve.gov/monetarypolicy/mpr_default.htm.
218 Chairman’s Federal Open Market Committee Projections Materials, June 10, 2020, p. 9.
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On June 25, the Federal Reserve (Fed) announced the result of stress tests on 33 U.S. banks under
three scenarios219 to ascertain their capital sufficiency given the strains to the financial system
caused by COVID-19.220 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.221 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 reassess 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.222
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 15-week period from mid-
March.223 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 nonfarm payroll rose by 4.8 million, lowering
the unemployment rate to 11.5%.224 The unemployment number does not include 9.1 million
individuals working part time who would prefer to work full time and 8.2 million individuals who
are seeking employment. In addition, the June unemployment number does not include
individuals who were misclassified as being employed, but absent due to temporary, pandemic
closures. Had the individuals been classified as unemployed, the overall unemployment rate
would have been one percentage point higher. On July 2, the Census Bureau also reported that the
U.S. goods and services trade deficit in May was $54.6 billion, up 9.7% from the April deficit as
a result of a 4.4% drop in U.S. exports and a 0.9% drop in U.S. imports.225 Through May, U.S.
exports are down by 14% and imports were down by 13.1% in value terms compared with the
same five months in 2019.
On July 17, the Federal Reserve Board modified its Main Street Lending Program to provide
greater access to credit for nonprofit organizations such as educational institutions, hospitals, and
social service organizations.

219 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.
220 Ibid.
221 Ibid., p. 2.
222 Ibid., pp. 1-2.
223 Unemployment Insurance Weekly Claims, July 1, 2020. https://www.dol.gov/ui/data.pdf.
224 The Employment Situation—June 2020, Bureau of Labor Statistics, July 2, 2020.
225 Monthly U.S. International Trade in Goods and Services, May 2020, U.S. Census Bureau, July 2, 2020.
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On August 13, the Department of Labor announced that over the 21-week period from mid-March
to the beginning of August 2020, 56 million Americans filed for unemployment insurance.226 On
a seasonally adjusted basis, the number of insured unemployed workers was 15.5 million in early
August, down from a peak of 25 million in mid-May. The total number of people claiming
benefits in all programs in the week ending July 25, totaled 28.3 million, up from 1.7 million in
the comparable week in 2019. The insured unemployment rate was 10.6%, also down from the
peak reached in early May.
On August 20, the European Central, the Bank of England, the Bank of Japan, and the Swiss
National Bank jointly announced they would reduce their emergency dollar swap operations with
the Fed to once a week, down from three, as a result of reduced demand for dollars. On a broad
dollar trade weighted index for goods and services, the dollar has depreciated by 7.2% since the
high value reached on March 23 2020. Reportedly, the shift by the central banks reflects market
sentiment that the global financial system has recovered from the initial negative impact of the
pandemic experienced in the first quarter of 2020.227
On August 27, the DOL announced that over the 23-week period from mid-March to late August
2020, 58.4 million Americans filed for unemployment insurance.228 On a seasonally adjusted
basis, the number of insured unemployed workers was 14.5 million in mid-August, down from a
peak of 25 million in mid-May. The total number of people claiming benefits in all programs in
the week ending August 8, totaled 27 million, up from 1.6 million in the comparable week in
2019. The insured unemployment rate was 9.9%, also down from the peak reached in early May.
For additional information about the impact of COVID-19 on the U.S. economy see CRS Insight
IN11235, COVID-19: Potential Economic Effects.229
Europe
Until recently, European countries have not displayed a synchronized fiscal policy response
similar to the one they developed during the 2008-2009 global financial crisis, but that reportedly
changed with the adoption of a pandemic economic recovery package in July 2020. For the most
part, EU members 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 pandemic. Various EU and ECB officials appeared to have negotiated a
coordinated fiscal response by the Eurozone and broader EU.

226 Unemployment Insurance Weekly Claims, Department of Labor, August 13, 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/
227 Arnold, Martin and Eva Szalay, Central Banks Scale Back Dollar Lending Operation as Demand Drops, Financial
Times
, August 20, 2020. https://www.ft.com/content/210ef737-2628-4431-bd6b-456aa65b2024.
228 Unemployment Insurance Weekly Claims, Department of Labor, August 27, 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/
229 CRS Insight IN11235, COVID-19: Potential Economic Effects, by Marc Labonte.
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In its July 2020 economic forecast, the European Commission forecasted that EU GDP in 2020
would fall by 8.3%, nearly a full percentage point higher than in its May forecast, as indicated in
Table 9. 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 by 5.8% in 2021, 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.230
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.”231 The Commission also expects European countries to emerge
from the recession at different rates and different paths, reflecting differences in the timing of
when social distancing measures were introduced and removed, dependency on tourism, and the
magnitude and effectiveness of economic policies. The Commission also noted the rise in saving
among EU households that it argues is mostly involuntary, rather than precautionary and would
revert to pre-crisis levels once consumers felt confident to resume their regular spending patterns.
Table 9. European Commission Economic Forecast
Percentage change, real GDP
Spring Forecast
Summer Forecast

2019
2020
2021
2019
2020
2021

EU
1.5
-7.4
6.1
1.5
-8.3
5.8
Euro area
1.2
-7.7
6.3
1.3
-8.7
6.1
Belgium
1.4
-7.2
6.7
1.4
-8.8
6.5
Germany
0.6
-6.5
5.9
0.6
-6.3
5.3
Ireland
5.5
-7.9
6.1
5.5
-8.5
6.3
Greece
1.9
-9.7
7.9
1.9
-9.0
6.0
Spain
2.0
-9.4
7.0
2.0
-10.9
7.1
France
1.3
-8.2
7.4
1.5
-10.6
7.6
Italy
0.3
-9.5
6.5
0.3
-11.2
6.1
Luxembourg
2.3
-5.4
5.7
2.3
-6.2
5.4
Malta
4.4
-5.8
6.0
4.7
-6.0
6.3
Netherlands
1.8
-6.8
5.0
1.7
-6.8
4.6
Austria
1.6
-5.5
5.0
1.6
-7.1
5.6
Portugal
2.2
-6.8
5.8
2.2
-9.8
6.0

230 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.
231 European Economic Forecast Summer 2020, European Commission, July 8, 2020.
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Spring Forecast
Summer Forecast

2019
2020
2021
2019
2020
2021

Finland
1.0
-6.3
3.7
1.1
-6.3
2.8
Denmark
2.4
-5.9
5.1
2.4
-5.2
4.3
Sweden
1.2
-6.1
4.3
1.2
-5.3
3.1
United Kingdom
1.4
-8.3
6.0
1.5
-9.7
6.0
Source: European Economic Forecast Summer 2020, European Commission, July 8. 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 2020.232
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.233 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.234
According to second quarter data released by Eurostat on August 14, 2020, EU economic growth
over the previous quarter contracted by 11.7% and by 12.1% in the Euro area. Compared with
growth over the same quarter in the previous year, EU economy contracted by 15% and by 14.1%
in the Euro area, as indicated in Table 10. At 20.4%, the United Kingdom experienced the largest
contraction among European countries in the second quarter.
Table 10. EU Real GDP Growth Rates, Second Quarter 2020
Seasonally adjusted data
Percentage change compared with
Percentage change compared with the same
the previous quarter
quarter of the previous year

2019Q3 2019Q4 2020Q1 2020Q2
2019Q3
2019Q4
2020Q1
2020Q2

Euro area 0.3
0.0
-3.6
-12.1
1.4
1.0
-3.1
-15.0
EU
0.3
0.1
-3.2
-11.7
1.6
1.2
-2.5
-14.1
Belgium
0.4
0.5
-3.5
-12.2
1.6
1.3
-2.4
-14.5
Bulgaria
0.7
0.8
0.3
-9.8
3.2
3.1
2.4
-8.2
Czechia
0.5
0.4
-3.4
-8.4
2.3
2.0
-2.0
-10.7
Denmark
0.2
0.6
-2.0
-7.4
2.4
2.1
-0.2
-8.5
Germany
0.3
0.0
-2.0
-10.1
0.8
0.4
-2.2
-11.7
Estonia
1.2
0.9
-3.7
:
4.5
4.0
-0.8
:

232 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.
233 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.
234 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.
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Percentage change compared with
Percentage change compared with the same
the previous quarter
quarter of the previous year

2019Q3 2019Q4 2020Q1 2020Q2
2019Q3
2019Q4
2020Q1
2020Q2

Ireland
1.3
0.4
1.2
:
5.9
6.1
5.3
:
Greece
0.4
-0.7
-1.6
:
2.3
1.0
-0.9
:
Spain
0.4
0.4
-5.2
-18.5
1.9
1.8
-4.1
-22.1
France
0.2
-0.2
-5.9
-13.8
1.6
0.8
-5.7
-19
Croatia
0.6
0.4
-1.2
:
2.8
2.7
0.3
:
Italy
0.0
-0.2
-5.4
-12.4
0.5
0.1
-5.5
-17.3
Cyprus
0.0
1.0
-1.3
-11.6
3.2
3.2
0.8
-11.9
Latvia
0.6
0.1
-2.9
-7.5
1.8
1.0
-1.5
-9.6
Lithuania
0.8
1.1
-0.3
-5.1
3.8
3.9
2.4
-3.7
Luxembo
urg
0.4
0.4
-2.9
:
3.0
3.0
-0.2
:
Hungary
0.9
0.7
-0.4
-14.5
4.7
4.4
2.0
-13.5
Malta
1.6
1.1
-2.3
:
3.9
4.6
0.7
:
Netherlan
ds
0.3
0.5
-1.5
-8.5
1.6
1.6
-0.3
-9.0
Austria
-0.2
-0.2
-2.4
-10.7
1.4
0.4
-2.8
-13.3
Poland
1.2
0.2
-0.4
-8.9
4.1
3.5
1.7
-7.9
Portugal
0.3
0.7
-3.8
-13.9
1.9
2.2
-2.3
-16.3
Romania
0.5
1.2
0.3
-12.3
3.3
3.9
2.7
-10.5
Slovenia
0.8
0.4
-4.5
:
2.1
1.7
-3.4
:
Slovakia
0.4
0.6
-5.2
-8.3
1.9
2
-3.8
-12.1
Finland
0.3
-0.3
-1.9
-3.2
1.6
0.9
-1.1
-5.2
Sweden
0.2
0
0.1
-8.6
1.7
0.5
0.4
-8.3
Other countries







United
Kingdom
0.5
0.0
-2.2
-20.4
1.3
1.1
-1.7
-21.7
Iceland
-1.0
4.8
-7
:
1.0
4.1
-0.4
:
Norway
0.0
1.5
-1.5
:
0.5
1.8
0.2
:
Switzerla
nd
0.4
0.3
-2.6
:
1.1
1.5
-1.5
:
United
States
0.6
0.6
-1.3
-9.5
2.1
2.3
0.3
-9.5
Source: Eurostat, August 14, 2020.
In previous actions, the European Commission announced that it would relax 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
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Eurozone-wide debt instrument have been opposed by Germany and the Netherland, among other
Eurozone members.235 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.236 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.237 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
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.238
 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, 2020.239 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.240
 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,241 and export
credits and guarantees.242
 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

235 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.
236 “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.
237 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.
238 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.
239 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.
240 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.
241 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/.
242 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.
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commercial paper; and ease some collateral standards.243 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.244 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 2020.245
 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
workers and will provide funds to the European Stability Mechanism, the
European Investment Bank, and for unemployment insurance.246
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.247 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

243 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.
244 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.
245 “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.
246 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.
247 European Central Bank. https://www.ecb.europa.eu/mopo/implement/pepp/html/pepp-qa.en.html.
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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.248
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.249 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 ECB projected a drop in the EU economy
of 8% to 12% in 2020, twice as severe as the recession following the 2008 financial crisis, and
called for a €500 billion (about $620 billion) stimulus package.250 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.251 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.252 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

248 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.
249 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.
250 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.
251 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.
252 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.
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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.253
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 1997.254
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 2021.255 At the same time, the German government announced a package
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.256
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.257
On July 17, the European Commission met to approve the proposed €750 billion support fund to
assist European countries address the economic effects of the pandemic. Initially, the Commission
was unable to agree on various aspects of the program, but talks continued over the weekend and
resumed on July 20. European leaders announced on July 21 they had approved a €750 billion
(about $859 billion) pandemic relief package and a multi-year EU budget, referred to as the
Multiannual Financial Framework (MFF), with a combined value of over €2 trillion. The

253 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.
254 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.
255 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.
256 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.
257 Miller, Joe, Germany Flexes its Muscles on Foreign Investment, Financial Times, June 25, 2020.
https://www.ft.com/content/54f92ca5-5380-466b-95f8-3e98b40ebc82.
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pandemic plan is aimed at funding post-pandemic economic recovery with the European
Commission set to borrow an unprecedented amount of funds on European capital markets.258
The €750 billion relief fund reportedly includes a Recovery and Resilience Facility of €672.5
billion, which includes €360 billion in loans and €312.5 billion in grants and half a dozen other
initiatives to assist economically weakened member states. The relief fund was coupled with
rebates on EU budget contributions for so-called “frugal” states, or EU members with stronger
fiscal balances. Austria, the Netherlands, Denmark, and Sweden reportedly will receive such
budget rebates.259
On September 3, 2020, French Prime Minister Jean Castex announced that France would
implement a €100 billion (about $130 billion) spending plan to speed the economy’s recovery
from the economic effects of the COVID-19 pandemic. Reportedly, the plan includes funding for
green energy (including hydrogen energy), transportation (state railways), and industrial
innovation.260
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.261
 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
increased the stock of asset purchases by £200 billion to a total of £645 billion

258 Special Meeting of the European Council-Conclusions, EUCP 10/20, July 21, 2020.
259 Fleming, Sam, Mehreen Khan and Jim Brunsden, EU Leaders Strike Deal on €750bn Recovery Fund After
Marathon Summit, Financial Times, July 21, 2020. https://www.ft.com/content/713be467-ed19-4663-95ff-
66f775af55cc.
260 Mallet, Victor, France Launches €100 Billion Coronavirus Recovery Plan, Financial Times, September 3, 2020.
https://www.ft.com/content/0921c871-17b5-4e2e-bdea-aab78c2d0090.
261 Romei, Valentina, “Covid-19 Fallout: Bank of England Launches 4 Key Measures,” Financial Times.
https://www.ft.com/content/4e60c08e-6380-11ea-b3f3-fe4680ea68b5.
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financed by issuing UK government bonds and some additional nonfinancial
investment-grade corporate bonds.262
 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.263
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 2020.264 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.265 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.266
On July 8, Chancellor Sunak proposed additional fiscal measures to support the UK economy.267
The measures include raising threshold tax levels on home purchases, reducing taxes for the
hospitality industry, and a “job retention bonus” of £1.000 (around $1,200) per worker to
companies that bring employees out of furlough, estimated at around 9 million workers, and a
subsidy of £2.000 for firms that hire new apprentices. In addition, the proposed plan includes a
50% discount on meals and non-alcoholic drinks eaten at restaurants and cafes during August,
with some restrictions.

262 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.
263 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.
264 Parker, George, 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.
265 Ibid.
266 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.
267 Pickard, Jim and Chris Giles, Sunak’s Summer Statement: UK Government to Pay Companies to Bring Workers
Back From Furlough, Financial Times, July 7, 2020. https://www.ft.com/content/ad1688ee-3d8d-4e52-9b16-
a3632eed8be9.
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On August 12, the UK Government announced that UK GDP in the second quarter of 2020 has
contracted by 20.4% from the previous quarter, as indicated in Figure 16. The contraction, driven
by lower levels of activity in services (-19.9%), production (16.9%)-primarily manufacturing, and
construction (35%) and constituted the largest quarterly since 1955.268 In addition, household
consumption contracted by 23.1%, reportedly the largest quarterly contraction on record. In other
areas, business investment fell by 31.4% and government consumption fell, reflecting school
closures, and declines in both imports (23.4%) and exports (11.3%). The Bank of England’s
August Monetary Policy Report projected that fourth quarter 2020 UK GDP would recover from
the steep drop in activity in the second quarter by posting an overall year-over-year decline of
5.6%, based primarily on an anticipated recovery in personal consumption. The forecast also
indicated that GDP was projected to grow at a rate of 8.6% in 2021, although the Bank indicated
that there was higher than usual uncertainty surrounding the forecast, given the uncertainty
concerning the course of the pandemic.269 The Bank also conducted stress tests on UK banks and
concluded the banks had sufficient capital buffers to absorb the losses that could arise under the
Bank’s main projections. 270
Figure 16. UK Month Over Month Quarterly Percentage Change in GDP

Source: GDP First Quarterly Estimate, UK: April; to June 2020, Office for National Statistics, August 12, 2020.
Created by CRS.
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.271 On March 24, 2020, Japan announced that the Summer Olympics set to take
place in Tokyo would be postponed by a year, delaying a projected boost to the Japanese

268 GDP First Quarterly Estimate, UK: April to June 2020, Office for National statistics, August 12, 2020.
269 Monetary Policy Report, August 2020, Bank of England, August 2020, p. 3.
270 Financial Stability Report, August 2020, Bank of England, August 2020, p. ii.
271 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.
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economy that was expected from the event. Japan adopted an emergency fiscal package of about
$1.1 trillion, 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.272
The Japanese Cabinet proposed a second supplemental appropriation measure that included $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.273
In terms of monetary policy, the Bank of Japan (BOJ) has maintained its low interest rates policy
of -0.1%, even as it increased its coronavirus lending facility from $76 trillion to $1 trillion and
stated it would continue purchasing commercial paper, corporate bonds, and exchange traded
funds at the rate of $12 trillion a year.274 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 and providing dollars through swap
arrangements with the U.S. Federal Reserve. Japan reported on August 17 that its economy
contracted by 7.8% in the second quarter of 2020, compared with the previous quarter, or at an
annual a rate of 27.8%. This drop in economic activity was precipitated by a drop in exports of
18.5% from the preceding quarter (56.0% at an annual rate) and a decline in personal
consumption of 8.6% (30.1% at an annual rate).275
China
According to a recent CRS In Focus,276 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.277
The International Monetary Fund (IMF) is providing funding to poor and emerging market
economies that are short on financial resources.278 If the economic effects of the virus persist,

272 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.
273 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.
274 Harding, Bank of Japan Pledges $1 trillion in Coronavirus Lending.
275 Quarterly Estimates of GDP for April - June 2020 (First Preliminary Estimates), Cabinet Office, August 17, 2020.
276 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.
277 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.
278 Politi, James, “IMF Sets Aside $50bn for Covid-19-Hit Countries,” Financial Times, March 4, 2020,
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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.
Multilateral Response279
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,280 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.281 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.282
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.283 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.

https://www.ft.com/content/83c07594-5e3a-11ea-b0ab-339c2307bcd4.
279 For more information, see CRS Report R46342, COVID-19: Role of the International Financial Institutions, by
Rebecca M. Nelson and Martin A. Weiss.
280 Remarks by IMF Managing Director Kristalina Georgieva During the G20 Finance Ministers and Central Bank
Governors Meeting, International Monetary Fund, April 15, 2020.
281 IMF Managing Director Kristalina Georgieva’s Statement Following a G20 Ministerial Call on the Coronavirus
Emergency, March 23, 2020. Some policy experts estimate the IMF’s current maximum lending capacity is about $787
billion.
282 IMF Lending Tracker, https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker.
283 “IMF Adds Liquidity Line to Strengthen COVID-19 Response,” International Monetary Fund, April 15, 2020.
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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
during the COVID-19 pandemic.284 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.285
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.286
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).287 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-19.288 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.289
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

284 Remarks by World Bank Group President David Malpass on G20 Finance Ministers Conference Call on COVID-19,
March 23, 2020.
285 https://maps.worldbank.org/. Accessed on June 1, 2020.
286 World Bank, “World Bank Group Launches First Operations for COVID-19 (Coronavirus) Emergency Health
Support, Strengthening Developing Country Response,” Press Release, April 2, 2020.
287 World Bank, “World Bank Group to Launch New Multi-donor Trust Fund to help Countries Prepare for Disease
Outbreaks,” Press Release, April 17, 2020.
288 David Malpass, “Remarks to G20 Finance Ministers,” World Bank, April 15, 2020.
289 World Bank Group President David Malpass: Remarks to G20 Finance Ministers, April 15, 2020.
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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
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.”290 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.291
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.292 The G-20 is a broader group of economies, including the
G-7 countries and several major emerging markets.293 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.294
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-19.295 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.296 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.297 Their concerns focus on the Trump Administration’s prioritization of an

290 White House, G-7 Leaders’ Statement, March 16, 2020, https://www.whitehouse.gov/briefings-statements/g7-
leaders-statement/.
291 Ibid.
292 “Spain Says Saudi Arabia to Cal G-20 to Meet on Covid-19 in Coming Days,” Reuters, March 16, 2020.
293 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).
294 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.
295 See for example, Jennifer Rankin, “EU Leaders Divided on How to Protect Economies after Covid-19,” The
Guardian
, March 14, 2020.
296 Jack Ewing and Jeanna Smialek, “Economic Powers Vow to Fight Crisis,” New York Times, March 3, 2020.
297 Matthew Goodman and Mark Sobel, “Time to Pull the G-20 Fire Bell,” Center for Strategic and International
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“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-19.298 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.299 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.300 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
2020.301
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 2020.302
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

Studies, March 18, 2020.
298 “FSB Coordinates Financial Sector Work to Buttress the Economy in Response to Covid-19,” Financial Stability
Board, Press Release 6/2020, March 20, 2020.
299 OECD Interim Economic Assessment, p. 7.
300 Ibid., p. 5.
301 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.
302 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.
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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 17).303
Figure 17. 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 18). Oil importers, such as South Africa and Turkey, have also been hit hard;
South Africa’s rand has fallen 18%304 against the dollar since the beginning of 2020 and the
Turkish lira has lost 8.5%.305 Some economists are concerned that the depreciation in currencies

303 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.
304 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.
305 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.
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could lead to rising rates of inflation by pushing up the prices of imports and negatively economic
growth rates in 2020.306
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.307 (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.308)
Figure 18. 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.309 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

306 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.
307 “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.
308 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/.
309 Jack Ewing and Jeanna Smialek, “Economic Powers Vow to Fight Crisis,” New York Times, March 3, 2020.
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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.”310 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.311 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.312
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.313 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.314
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.315 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-19.316 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,

310 White House, G-7 Leaders’ Statement, March 16, 2020, https://www.whitehouse.gov/briefings-statements/g7-
leaders-statement/.
311 Ibid.
312 “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.
313 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).
314 Matthew Goodman and Mark Sobel, “Time to Pull the G-20 Fire Bell,” Center for Strategic and International
Studies, March 18, 2020.
315 Matthew Goodman, Stephanie Segal, and Mark Sobel, “Assessing the G20 Virtual Summit,” Center for Strategic
and International Studies, March 27, 2020.
316 “FSB Coordinates Financial Sector Work to Buttress the Economy in Response to Covid-19,” Financial Stability
Board, Press Release 6/2020, March 20, 2020.
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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.317 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.318 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.319 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.320
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

317 John Plender, “The Seeds of the Next Debt Crisis,” Financial Times, March 4, 2020.
318 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.
319 “Covid-19 Worsens Debt Crisis in Poor Countries,” Jubilee Debt Campaign, March 22, 2020.
320 Trieu Pham, “EM Sovereign Debt Issuance: Encouraging Signs but Not Yet Back to Business as Usual,” ING, May
26, 2020.
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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.321 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.322 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.323
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

321 Davide Barbuscia, Marwa Rashad, and Andrea Shalal, “G20 Countries Agree Debt Freeze for World’s Poorest
Countries,” Reuters, April 15, 2020
322 Patrick Bolton, Lee Buchheit, Pierre-Olivier Gourinchas, et. al, “Sovereign Debt Standstills: An Update” VoxEU,
May 28, 2020.
323 Jevans Nyabiage, “All Eyes on China as Africa Spurns G20 Debt Relief Plan,” South China Morning Post, May 26,
2020.
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Die”).324 School closures are affecting 1.5 billion children worldwide, challenging parental leave
policies.325 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.326
Microsoft and Amazon have instructed all of their Seattle-based employees to work from home
until the end of March 2020.327
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),328 while
airports in Europe estimate they could lose $4.3 billion in revenue due to fewer flights.329 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.330 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.331 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

324 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/.
325 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/.
326 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.
327 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/.
328 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/.
329 “Airlines Slash Flights to Cut Costs as Covid-19 Hits Travel Demand,” Financial Times. https://www.ft.com/
content/c28b5790-62c6-11ea-a6cd-df28cc3c6a68.
330 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.
331 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.
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most oil producing countries.332 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.333 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.334 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.335
Disruptions to industrial activity in China reportedly caused delays in shipments of computers,
cell phones, toys, and medical equipment.336 Factory output in China, the United States, Japan,
and South Korea all declined in the first months of 2020.337 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.338 Disruptions in the
movements of goods and people reportedly caused some companies to reassess how international
they want their supply chains to be.339 According to some estimates, nearly every member of the
Fortune 1000 has been affected by disruptions in production in China.340
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?

332 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.
333 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.
334 “Texas Oil Groups: Panhandling Ahead,” The Financial Times, January 20, 2020.
335 Ibid.
336 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.
337 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.
338 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
339 Ibid.
340 Ibid.
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 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?
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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
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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
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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.
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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.