Global Economic Effects of COVID-19

Global Economic Effects of COVID-19
December 23, 2020
In the months since the COVID-19 outbreak was first diagnosed, it has spread to over 200
countries and all U.S. states. The pandemic has negatively affected global economic growth
James K. Jackson,
beyond anything experienced in nearly a century. Estimates so far indicate the virus could reduce
Coordinator
global economic growth to an annualized rate of -4.5% to -6.0% in 2020, with a partial recovery
Specialist in International
of a rate of 2.5% to 5.2% in 2021. Compared with the synchronized nature of the global
Trade and Finance
economic slowdown in the first half of the year, the global economy showed signs of a two-track

recovery in the third quarter with developed economies experiencing a nascent recovery, while
Martin A. Weiss
growth rates in developing economies lagged behind. However, a resurgence in infectious cases
Specialist in International
in Europe, the United States, and various developing economies since September renewed calls
Trade and Finance
for lockdowns and curfews and threatened to weaken or delay a sustained economic recovery.

The economic fallout from the pandemic could risk continued labor dislocations as a result of
Andres B. Schwarzenberg
lingering high levels of unemployment not experienced since the Great Depression of the 1930s
Analyst in International
and high levels of debt among developing economies. Job losses have been concentrated more
Trade and Finance
intensively in the services sector where workers have been unable to work offsite. The human

costs in terms of lives lost will permanently affect global economic growth in addition to the cost
Rebecca M. Nelson
of rising levels of poverty, lives upended, careers derailed, and increased social unrest. Some
Specialist in International
estimates indicate that 100 million to 110 million people globally could enter extreme poverty as
Trade and Finance
a result of the contraction in the global economy. In addition, some estimates indicate that global

trade could fall by an annual amount of 9.2%, depending on the depth and extent of the global
Karen M. Sutter
economic downturn, exacting an especially heavy economic toll on trade-dependent developing
Specialist in Asian Trade
and emerging economies. The full economic impact of the pandemic likely will remain unclear
and Finance
until the negative health effects peak. This report provides an overview of the global economic

costs to date and the response by governments and international institutions to address these
effects.
Michael D. Sutherland
Analyst in International
Trade and Finance


Congressional Research Service


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Contents
Overview ......................................................................................................................................... 1
Economic Policy Responses ........................................................................................................... 11
Fiscal Measures ........................................................................................................................ 11
Fiscal Deficits ................................................................................................................... 12
Worker Assistance Programs ............................................................................................ 14
Monetary and Prudential Measures ......................................................................................... 15
Economic Forecasts ....................................................................................................................... 17
Global Growth ......................................................................................................................... 17
The OECD Forecast .......................................................................................................... 19
The IMF Forecast .............................................................................................................. 24
The World Bank Forecast ................................................................................................. 26
Global Trade ............................................................................................................................ 27
Global Foreign Investment ...................................................................................................... 31
Economic Policy Challenges ......................................................................................................... 33
Major Economic Developments .................................................................................................... 34
Financial Markets .................................................................................................................... 35
International Role of the Dollar .............................................................................................. 36
March 2020 ............................................................................................................................. 40
April 2020 ............................................................................................................................... 47
May 2020 ................................................................................................................................ 50
June 2020 ................................................................................................................................ 51
July 2020 ................................................................................................................................. 54
August 2020 ............................................................................................................................ 54
September 2020 ....................................................................................................................... 55
October 2020 ........................................................................................................................... 55
November 2020 ....................................................................................................................... 56
December 2020 ....................................................................................................................... 57
Policy Responses ........................................................................................................................... 58
The United States .................................................................................................................... 59
Monetary Policy ................................................................................................................ 64
Fiscal Policy ...................................................................................................................... 66
Personal Income and Outlays ............................................................................................ 69
Europe ..................................................................................................................................... 74
The United Kingdom ............................................................................................................... 82
Japan ........................................................................................................................................ 84
China ....................................................................................................................................... 85
Multilateral Response .................................................................................................................... 86
International Monetary Fund ................................................................................................... 86
World Bank and Regional Development Banks ............................................................................ 87
International Economic Cooperation ...................................................................................... 88
Estimated Effects on Developed and Major Economies ............................................................... 89
Asian Development Bank 2020 Forecast .......................................................................... 90
Emerging Markets ......................................................................................................................... 91
International Economic Cooperation ............................................................................................. 93
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Looming Debt Crises and Debt Relief Efforts .............................................................................. 94
Other Affected Sectors .................................................................................................................. 96
Conclusions ................................................................................................................................... 98

Figures
Figure 1. Initial U.S. Weekly Claims for Unemployment Insurance, 2020 ..................................... 6
Figure 2. IMF Projected Government Fiscal Deficits Relative to GDP ........................................ 13
Figure 3. Unemployment Rates Among Major OECD Countries ................................................. 20
Figure 4. Major Economic Forecasts ............................................................................................. 21
Figure 5. IMF Forecast, Gross Domestic Product ......................................................................... 26
Figure 6. WTO Estimates of Quarterly Global Exports and Imports, Volumes and Values .......... 28
Figure 7. Global Foreign Direct Investment Inflows .................................................................... 32
Figure 8. U.S. Direct Investment; Inflows and Outflows .............................................................. 32
Figure 9. Dow Jones Industrial Average Index .............................................................................. 36
Figure 10. U.S. Dollar Trade-Weighted Broad Index, Goods and Services .................................. 37
Figure 11. International Role of the Dollar ................................................................................... 38
Figure 12. Price and Quantity Indexes, U.S. Exports and Imports ................................................ 39
Figure 13. Brent Crude Oil Price Per Barrel in Dollars ................................................................. 45
Figure 14. U.S. GDP, Percentage Change From Preceding Quarter.............................................. 60
Figure 15. U.S. Exports and Imports of Goods and Services 2020 ............................................... 61
Figure 16. Change in Total Monthly U.S. Nonfarm Employment ................................................ 62
Figure 17. Change in U.S. Employment by Major Industrial Sector ............................................ 63
Figure 18. U.S. Personal Income, Consumption, and Saving ....................................................... 70
Figure 19. UK Month Over Month Quarterly Percentage Change in GDP ................................... 84
Figure 20. Asian Development Bank 2020 GDP Forecasts ........................................................... 91
Figure 21. Capital Flows to Emerging Markets in Global Shocks ................................................ 92
Figure 22. Depreciation Against the Dollar Since January 1, 2020 ............................................... 93

Tables
Table 1. Seasonally Adjusted Weekly Unemployment Insurance Claims ....................................... 6
Table 2. Elements of Announced Fiscal Measures to Address COVID-19 .................................... 11
Table 3. Developed Economy Worker Support Programs During COVID-19 .............................. 14
Table 4. Selected Central Bank and Prudential Measures to Address COVID-19 ........................ 16
Table 5. Major Economic Forecasts, Differing Assessments ........................................................ 18
Table 6. OECD, IMF and World Bank Economic Forecasts ......................................................... 21
Table 7. WTO Forecast: Merchandise Trade Volume and Real GDP 2020-2021.......................... 29
Table 8. Dow Jones Industrial Average Market Changes by Month ............................................. 35
Table 9. Federal Reserve Economic Projections, December 2020 ................................................ 71
Table 10. European Commission Economic Forecast ................................................................... 75
Table 11. EU Real GDP Growth Rates, Third Quarter 2020 ......................................................... 76
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Appendixes
Appendix. Table A-1. Select Measures Implemented and Announced by Major
Economies in Response to COVID-19 ....................................................................................... 99

Contacts
Author Information ...................................................................................................................... 127


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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; on March 11 it announced the viral outbreak was officially a pandemic, the highest
level of health emergency.1 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. The virus has been detected in over 200 countries and all U.S. states.2 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 more than 78 million people, about one-fifth in the United States, with
over 1.7 million 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.3
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 have maintained high rates of saving relative to pre-
pandemic rates 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.
 Intervening in sovereign debt and corporate bond markets by central banks and
monetary authorities to stabilize markets and insure liquidity, while also raising
concerns among some analysts that this intervention is compromising the ability
of the markets to perform their traditional functions of pricing risk and allocating
capital.
 Adopting fiscal and monetary policies 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.
 Differing national approaches to providing government-funded economic support
to workers that vary between short-term unemployment insurance programs to
sustain workers incomes, although not directed at maintaining employment in

1 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.
2 “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.
3 “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.
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their previous jobs, and programs that delay labor market adjustments by
supporting workers in their pre-COVID-19 jobs, identified as job-retention
programs, even as those jobs could disappear once the support ends.4
A growing list of economic indicators makes it clear the COVID-19 pandemic continues to
negatively affect global economic growth on a scale not experienced since at least the global
financial crisis of 2008-2009.5 U.S. and European economies experienced the beginnings of a
recovery in the third quarter with the U.S. economy growing by 7.4%, or an annual rate of 33%,
and the Eurozone economy growing by 12.7%. That recovery may be weakened by a resurgence
of infectious cases that began in September and led to a return to lockdowns. Japan also indicated
on November 25 that its GDP grew by 4.7% in the third quarter, reportedly better than
government Ministers and economists had projected. Despite the improved rate of economic
growth, Japanese officials and economists remained cautious over prospects for the fourth quarter
rate of growth.6
According to analysis prepared by the International Monetary Fund (IMF) for the November 21-
22 G-20 Leaders’ Summit Meeting, the global economy had started recovering in the third
quarter, but “there are signs that the recovery may be losing momentum, and the crisis is likely to
leave deep, unequal scars.”7 The IMF also concluded that: (1) per capita incomes will remain
below the pre-pandemic levels for several years, adversely affecting productivity; (2) the
demands placed on national health systems to address the pandemic could hinder the treatment of
other diseases; (3) business bankruptcies could reduce productivity; and (4) rising debt levels
could crowd out potential borrowing and investment.8 In addition, the IMF urged G-20 leaders to
maintain accommodative monetary policies characterized by low interest rates and central bank
programs to facilitate credit availability and continue to provide fiscal support for individuals and
firms and then engage in a synchronized infrastructure investment program to promote growth.
According to an IMF analysis, all other things being equal, an increase in infrastructure spending
by G-20 countries of one-half percent of their GDP in 2021 and 1% in 2022 through 2025 would
increase global GDP by 2% in 2025, compared with under 1.2% growth for an unsynchronized
approach.9
In remarks before the Senate and House on December 1 and 2, respectively, Federal Reserve
Chairman Jerome Powell commented on the rebound in U.S. economic activity in the third
quarter, but indicated that the outlook was “extraordinarily uncertain,” and would depend on the
success of efforts to keep the contagion in check. Chairman Powell also indicated that despite the
positive implications of a vaccine for the economy, “….significant challenges and uncertainties
remain, including timing, production and distribution, and efficacy across different groups.” As a
result of these challenges, he indicated that it remains difficult to estimate the timing and scope of
the impact of the vaccine with “any degree of confidence.”10

4 Job Retention Schemes During the COVID-19 Lockdown and Beyond, Organization for Economic Cooperation and
Development, August 3, 2020.
5 Mapping the Spread of the COVID-19.
6 Harding, Robin, Japan’s Economy Rebounds 5% in the Third Quarter, Financial Times, November 24, 2020.
https://www.ft.com/content/2ec0b9b3-ecc4-4056-bacf-cb45c83e4629.
7 G-20 Surveillance Note, International Monetary Fund, November 2020, p. 2.
8 Ibid., p. 6.
9 Ibid., p. 10.
10 Powell, Jerome H., Coronavirus Aid, Relief, and Economic Security Act, December 1 and 2, 2020.
https://www.federalreserve.gov/newsevents/testimony/powell20201201a.htm.
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On December 2, IMF Managing Director Kristalina Georgieva indicated the global financial
system had been resilient enough to withstand the impact of the global pandemic, but she urged
policymakers to “act quickly” to return economic growth to its re-pandemic levels and to avoid
widespread financial distress.11 The Director reportedly also urged policymakers to take “urgent,
coordinated steps” to deliver investment in digital technology, infrastructure and the environment.
She also indicated the IMF had projected that the loss of global economic output between 2020
and 2025 as a consequence of the pandemic would total $28 trillion and that 120 million jobs
would be lost permanently in the tourism industry alone. The pandemic-related economic
recession has also raised concerns over the growing debt problems in developing, where the IMF
projected that as much as 40% of banks assets were in danger of becoming distressed.
To date, the global pandemic has affected 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. In particular, the health crisis is negatively affecting the
economies of developing countries that are constrained by limited financial resources and where
health systems can quickly become overloaded. The IMF estimated in October 2020 the
economic fallout from the pandemic could push 100 million to 110 million people in Sub-Saharan
Africa and South Asia into extreme poverty, reversing a decades-long trend.12 However, the IMF
also concluded that spending on social programs to limit the impact of the pandemic could reduce
the number of people falling into extreme poverty to 80 to 90 million.
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 three quarters of 2020
to incorporate additional data, initially reflecting worsening global and national economic growth
estimates, but also reflecting more positive data in the third quarter.
Efforts to reduce social interaction to contain the spread of the virus have disrupted the daily lives
of most Americans and added to the economic costs. Increased rates of unemployment have
raised the prospects of social unrest in developed economies where lost incomes and health
insurance threaten living standards and in developing economies where populations reportedly
are concerned over access to basic necessities and the prospects of rising levels of poverty.13 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.14

11 Wheatley, Jonathan, IMF Chief Warns Against Complacency on Global Economy, Financial Times, December 2,
2020. https://www.ft.com/content/fda34b47-33d2-457e-a0b6-45be6001920d.
12 Fiscal Monitor, International Monetary Fund, October 2020, p. 10.
13 Sly, Liz, “Stirrings of Unrest Around the World Could Portend Turmoil as Economies Collapse,” Washington Post,
April 19, 2020; Ingraham, Christopher, “Coronavirus Recession Could Plunge Tens of Millions Into Poverty, New
Report Warns,” Washington Post, April 20, 2020. https://www.washingtonpost.com/business/2020/04/20/coronavirus-
recession-could-plunge-tens-millions-into-poverty-new-report-warns/.
14 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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Policymakers and financial and commodity market participants generally had estimated that a
global economic recovery would take hold in the third quarter of 2020. A resurgence in infectious
cases in developed and developing countries starting in September, however, appears to be
shifting more of the recovery to 2021. Various indicators in the third quarter suggested the worst
of the economic crisis has passed, although the extent and strength of any global economic
recovery remains difficult to predict. Estimates indicate that China’s economy grew by 4.9% in
the third quarter, driven by an increase in industrial production and consumer demand, marking it
as one of the few economies likely to post an overall positive rate of growth for 2020.15 At the
same time, an economic recovery appeared to be stalling in Europe and the United States. Some
forecasts indicate the pandemic could negatively affect global economic growth more extensively
and for a longer period of time than had originally been estimated.
On Monday, November 9, the Dow Jones Industrial Index (DJIA), along with other market
indices, rose nearly three percentage points reportedly on news that a COVID-19 vaccine had
been developed.16 During the period November 3 through the 24th, the DJIA rose over 9%. On
November 24, the DJIA, along with global equities markets, increased by 1.5%, and reached an
index milestone of 30,000 for the first time and surpassed the previous high value recorded on
February 14 prior to the pandemic-related economic shutdown. Reportedly, the rise in market
indices reflected a positive assessment by investors of announcements of effective vaccines
against COVID-19, political developments in the United States, potential additional fiscal
measures by governments to stimulate economic activity, and prospects of stronger economic
growth in 2021.17
Prospects of a vaccine may signal an eventual end to the business lockdowns and social
restrictions and reduce demands on policymakers to weigh implementing additional fiscal and
monetary policies. Until a vaccine can be broadly employed, however, policymakers may have to
weigh continuing efforts that balance the competing requirements of households, firms, and state
and local governments. Various U.S. states reversed course in late June to impose or re-impose
social distancing guidelines and close businesses that had begun opening as a result of a rise in
new confirmed cases of COVID-19, raising the prospect of a delayed recovery. A prolonged
recovery could also increase the financial strains on small and medium-sized firms that face
liquidity constraints and the prospects of insolvency.18
Differences in policy approaches between countries initially slowed a coordinated response,
potentially inflicting longer-term damage to the global economy by impairing international
political, trade, and economic relations, particularly between countries that promoted nationalism
and those that argued for a coordinated international response to the pandemic. Policy differences
have also strained 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.

15 Hale, Thomas, Tom Mitchell, Christian Shepherd, and Emma Zhou, “Chinese Economy Expands 4.9% in Third
Quarter,” Financial Times, October 19, 2020. https://www.ft.com/content/22108ddd-3280-4013-bcd8-1adc9e6ae13d.
16 Telford, Taylor, and Hamza Shaban, “Dow Climbs More Than 800 Points as Vaccine News, Biden Victory Rev Up
Markets,” Washington Post, November 9, 2020. https://www.washingtonpost.com/business/2020/11/09/stocks-
markets-biden-trump-coronavirus/.
17 Smith, Colby, Camilla Hodgson, and Hudson Lockett, US Stocks Set Record High as Investors Look to New
Administration, Financial Times, November 24, 2020. https://www.ft.com/content/433048a5-c489-4ddd-aebd-
d56fb8f3edfc.
18 Global Financial Stability Report, International Monetary Fund, October 2020, p. 1.
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In some countries, the pandemic elevated the importance of public health as a national security
issue and as a national economic priority on a par with traditional national security concerns such
as terrorism, cyberattacks, and proliferation of weapons of mass destruction.19 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
have inadvertently worsened income and wealth disparities. Within some countries, the economic
fallout may have widened racial and socio-economic cleavages and increased 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.20
In the United States, over the 40-week period from mid-March to mid-December 2020, over 71
million Americans had filed for unemployment insurance, as indicated in Table 1.21 On a
seasonally adjusted basis, the number of insured unemployed individuals was 5.5 million in early-
December, down from a peak of 25 million in mid-May. As indicated in Figure 1, weekly claims
have fallen from the sharp increases recorded in April and May. On a week-over-week basis, new
claims totaled 885,000 in the week ending December 12, increasing by 23,000 from the previous
week’s total of 862,00, four times higher than the average number of weekly claims of about
200,000 recorded prior to the COVID-19 pandemic. In the week ending November 28, 20.6
million people claimed benefits in all programs, up from 1.5 million in the comparable week in
2019. The insured unemployment rate for the week ending December 5 was 3.8%, also down
from the peak reached in early May. As some workers approach the 26-week maximum for
receiving standard unemployment benefits they may be applying for benefits under the Pandemic
Emergency Unemployment Compensation (PEUC) program or the Pandemic Unemployment
Assistance (PUA) program.22 Between November 21 and November 28, claims under the PEUC
program increased by 269,000 to 4.8 million, while claims under the PUA program increased by
689,000 to 9.2 million, up from 8.6 million the previous week.

19 Harris, Shane and Missy Ryan, To Prepare for the Next Pandemic, the U.S. Needs to Change its National Security
Priorities, Experts Say, 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.
20 Powell, Jerome H. Coronavirus and CARES Act, Testimony before the Committee on Banking, Housing and Urban
Affairs, U.S. Senate, May 19, 2020.
21 Unemployment Insurance Weekly Claims, Department of Labor, December 12, 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, Washington Post, May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment-
claims-coronavirus/
22 Both programs were authorized under P.L. 116-136, March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security (CARES) Act, with benefits ending by December 31, 2020. The PUA program provides 39 weeks of
unemployment assistance, including $600 weekly benefits (expired in August 2020), under certain conditions, for
workers who have exhausted regular unemployment benefits, were not eligible for regular benefits, or were not eligible
for benefits under the PEUC program. The PEUC program provides 13 weeks of additional benefits to individuals who
have exhausted standard unemployment assistance and meet other eligibility requirements. DOL, Unemployment
Insurance Program Letter No. 17-20
, April 10, 2020; DOL, Unemployment Insurance Program Letter No. 16-20, April
5, 2020.
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Figure 1. Initial U.S. Weekly Claims for Unemployment Insurance, 2020
In millions of individual claims

Source: Department of Labor. Created by CRS.
On May 8, 2020, the Bureau of Labor Statistics (BLS) reported that 20 million Americans lost
their jobs in April 2020 as a consequence of business lockdowns, pushing the total number of
unemployed Americans to 23 million,23 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.24 In contrast, on December 4, BLS reported that nonfarm
employment increased by 245,000 638,000 in November, down from the previous month’s
increase of 610,000, but that the total number of unemployed Americans had been reduced to 10.7
million25 and that the unemployment rate had fallen to 6.7%, again with some caveats.26
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
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

23 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.
24 The Employment Situation-April 2020, Bureau of Labor Statistics, May 8, 2020. https://www.bls.gov/.
25 This total does not include 6.7 million workers who were working part time not by choice and 7.1 million individuals
who were seeking employment.
26 The Employment Situation-November 2020, Bureau of Labor Statistics, December 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
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
884
-127
13,544
9.3
59,296
5-Sep-20
893
9
12,747
8.7
60,189
12-Sep-20
866
-27
12,747
8.7
61,055
19-Sep-20
873
7
11,979
8.2
61,928
26-Sep-20
849
-24
10,594
7.2
62,777
3-Oct-20
767
-82
9,398
6.4
63,544
10-Oct-20
842
75
8,472
5.8
64,386
17-Oct-20
791
-45
7,823
5.3
65,183
24-Oct-20
758
-39
7,222
4.9
65,941
31-Oct-20
757
-1
6,801
4.6
66,698
7-Nov-20
711
-46
6,370
4.3
67,409
14-Nov-20
748
37
6,089
4.2
68,157
21-Nov-20
787
39
5,527
3.8
68,944
28-Nov-20
716
-71
5,781
3.9
69,660
5-Dec-20
862
146
5,508
3.8
70,522
12-Dec-20
885
23


71,407
Source: Department of Labor, CRS calculations.
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Revised data also indicate that U.S. GDP fell by 9.0% in the second quarter of 2020 from the
previous quarter, or at an annualized rate of 31%, the largest quarterly decline in U.S. GDP
recorded over the past 70 years.27 Preliminary data, however, indicate that U.S. GDP grew by
7.4% in the third quarter, or at an annualized rate of 33%, based primarily on gains in personal
consumption, reflecting an increase in income and continued government income support.28 In its
December 2 Beige Book analysis, the Federal Reserve (Fed) reported that economic activity had
increased modestly in each of the 12 Federal Reserve districts during the third quarter, although
economic activity remained below average levels. Four of the Districts reported little or no
growth, while five indicated that economic activity remained below pre-pandemic levels for at
least some sectors. The manufacturing, distribution and logistics, residential housing, and
homebuilding sectors reported positive increases in economic activity. Businesses, however,
raised concerns over renewed infections, actual and prospective restrictions, and expiring
unemployment benefits and evictions or foreclosures.29
In Europe, governments attempted a phased reopening of businesses over the summer.30 As a
result of these efforts, the Eurozone experienced a 12.7% increase in GDP in the third quarter.
After several months of data indicating an economic rebound had begun in the Eurozone, surveys
of business activity in August reportedly indicated the recovery had slowed amid an increase in
new COVID-19 cases and countries had begun reimposing new quarantines and lockdowns in
various parts of the Euro area, although most lockdowns have not include schools or some
manufacturing firms.31 Such lockdowns became more widespread in September and October as
infections cases began rising in Germany, France, the United Kingdom, the Czech Republic, the
Netherlands, Spain, and Poland.32 By mid-October, Greece and Belgium also had begun
implementing business lockdowns and social distancing measures. Germany reportedly closed
bars, restaurants, and most public entertainment, France closed bars and restaurants and imposed
travel restrictions, and on October 3,1UK Prime Minister Boris Johnson announced a month-long
lockdown across the UK.33 Given these actions, various economist forecasted the Eurozone
economy could shrink by 2.3% in fourth quarter 2020.34

27 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.
28 Gross Domestic Product, Third Quarter 2020 (Advance Estimate), Bureau of Economic Analysis, October 29, 2020.
29 The Beige Book: Summary of Commentary on Current Economic Conditions by Federal Reserve District, the Federal
Reserve System, December 2, 2020. https://www.federalreserve.gov/monetarypolicy/beige-book-default.htm.
30 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.
31 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.
32 Lockdown 2.0: Europe Imposes Painful Curbs as Infections Surge, Financial Times, October 16, 2020.
https://www.ft.com/content/b1a7d1e8-4bb9-41cf-be5b-2f7f04bdb9bb.
33 Peel, Michael, European Countries Impose Shutdowns as Covid-19 Cases Rise, Financial Times, October 30, 2020.
https://www.ft.com/content/a89f89ba-08be-44e2-8d21-3e9ada605e17; Packard, Jim, Boris Johnson Announces Second
Lockdown for England, Financial Times, October 31, 2020, https://www.ft.com/content/8c2ede22-9dcf-4d31-81ef-
82ae4ee76e10.
34 Arnold, Martin, Eurozone Economic Forecasts Slashed as Fresh Lockdowns Imposed, Financial Times, November 2,
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The European Commission’s (EC) November forecast projected that EU economic growth in
2020 could contract by 7.4% and only partially recover in 2021 with a projected rate of growth of
4.1%.35 The EC forecast indicates a smaller drop in gross domestic product (GDP) in 2020 among
European economies than it had forecasted in its summer report, as a result of a third quarter
rebound in growth before an anticipated slows down in the fourth quarter as a result of the
resumption of business lockdowns. The autumn forecast was published prior to the announcement
of potential COVID-19 vaccines and incorporates assumptions of lockdowns extending into 2021.
The forecast also concludes that the speed of an economic recovery in 2021 will vary across the
EU members, reflecting differences in the severity of the pandemic and the extent of containment
measures but also differences in economic structures and policy responses.36 Third quarter data
indicate that economic growth in the EU increased by 11.5% from the second quarter of 2020, but
was down and by 4.2% compared with the same quarter in 2019.37 Growth was broad-based,
reflecting a rebound in consumer spending (13.2%), business investment (11.7%), and increased
exports (17.2%). Third quarter data also indicated the UK economy grew by 15.5% in the third
quarter, after falling by 19.8% in the second quarter, the largest quarterly decline on record.
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. Draft budget
estimates submitted by Eurozone governments in the fall of 2020 indicate the countries could
experience a combined budget deficit of nearly €1 trillion, or equivalent to about 9% of their
annual GDP.38 The rise in budget deficits reflects the growing cost to governments of supporting
their economies to sustain economic activity and a marked change in attitudes toward budget
deficits also reflected in statements by the IMF and World Bank. Second quarter data also
indicated that employment among EU countries fell by 2.6%, or 5.5 million jobs in 2020. The
jobs data, however, do 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.39 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%.40
On September 10, 2020, European Central Bank (ECB) President Christine Lagarde indicated the
Eurozone economy could contact by 8% in 2020, but would partially recover in 2021 by growing
at an annual rate of 5.0%.41 In the early stages of the pandemic, foreign investors 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 also expressed concern that Africa, after escaping the

2020, https://www.ft.com/content/3269f590-1cac-411f-8320-110c91c1f12e.
35 European Economic Forecast Autumn 2020, European Commission, November, 2020.
36 Ibid, p. 2.
37 Newsrelease, Eurostat, December 8, 2020.
38 Arnold, Martin and Sam Fleming, Eurozone Budget Deficits Rise Nearly Tenfold to Counter Pandemic, Financial
Times
, October 19, 2020. https://www.ft.com/content/5579361f-5aac-4cd3-9e93-190fffdc0baf.
39 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.
40 Quarterly Estimates of GDP for April - June 2020 (First Preliminary Estimates), Cabinet Office, August 17, 2020.
41 Remarks by ECB President Christine Lagarde, press conference, September 10, 2020.
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initial spread of infections, could face a sharp increase in rates of infection outside South Africa,
Egypt, Nigeria, Algeria, and Ghana, where most of the initial infections had occurred.42
In October 2020, the Bank of Canada indicated that Canada’s quarterly rate of growth declined by
13.0% in the second quarter of 2020, but by 4.4% in the third quarter as business and other
restrictions were relaxed and by a rebound in home sales. The Bank also estimated that growth
for 2020 would decline on an annual basis of 4.3% 2020, but could increase by about 3.8% in
2021. On December 1, the Canadian government adopted a C$1 trillion spending package to
support economic growth, reportedly the largest such fiscal stimulus package adopted in the post-
World War II period.43 The package provided relief to provinces and territories to improve
infection in long-term care facilities, industries hard hit by the pandemic such as tourism, travel
and arts, loans to eligible businesses, and lower and middle income families.
On August 31, 2020, India reported the second quarter GDP growth rate fell by 23.9% compared
with the first quarter, raising concerns that the country could experience its most severe economic
contraction on record.44 Preliminary forecasts indicate that India’s economy contracted by 8.6%
in the third quarter of 2020, reportedly reflecting increased consumer activity.45 On November 12,
India’s finance minister announced a new package of fiscal measures totaling $35 billion to
increase consumer spending and to assist manufacturing, agriculture, and exports. The move
followed an announcement by India’s cabinet that it had approved a spending package of $27
billion to provide incentives over five years to manufacturing firms, including automobiles, auto
parts, pharmaceuticals, textiles, and food products.46
As a consequence of the resurgence in cases and renewed lockdowns in economies, the IMF
argued that advanced economies need to sustain fiscal support for consumers and businesses as
the most effective means of stimulating their economies. The IMF argued this support is
necessary because the global economy is experiencing what economists term a Keynesian
liquidity trap, named after economist John Maynard Keynes. In theoretical terms, a liquidity trap
exists when central banks’ key interest rates are so low they have little impact through traditional
means to affect business and consumer activity. According to the IMF, in 60% of the global
economy, central banks have pushed key interest rates below 1% and in one-fifth of the global
economy, interest rates are below zero. In these circumstances, adjusting fiscal policy, or
government taxing and spending, is more effective in raising the rate of economic growth.47 The
IMF concluded that, “Fiscal policy must play a leading role in the recovery.”

42 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.
43 Canada Unveils Largest Economic Relief Package Since WW2, BBC News, December 1, 2020.
https://www.bbc.com/news/world-us-canada-55139229.
44 Slater, Joanna, India’s Economy Contracts by Nearly 24%, It’s Sharpest Drop On Record, 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.
45 RBI Bulletin – November 2020, Reserve Bank of India, November 2020.
46 Sharma, Ashok, India Announces $35 Billion Economic Stimulus Package, ABCNews, November 12, 2020.
https://abcnews.go.com/International/wireStory/india-announces-35-billion-economic-stimulus-package-74165709.
47 Gopinath, Gita, Global Liquidity Trap Requires a Big Fiscal Response, Financial Times, November 3, 2020,
https://www.ft.com/content/2e1c0555-d65b-48d1-9af3-825d187eec58.
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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) 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 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.”48
Fiscal Measures
As indicated in Table 2, central governments adopted various fiscal measures to provide financial
support to the health sector, households, and firms, although the size and scope of the programs
vary by country.49 These measures broadly include tax cuts and tax deferrals for individuals and
businesses, wage and income supplements to individuals, including expanding unemployment
insurance, and other payments to businesses. The U.S. Congress also 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.50
In developed economies, however, as governments adopted fiscal packages to assist households,
consumers sharply increased their savings as they faced limited spending opportunities, or a form
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
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

48 Annual Economic Report 2020, Bank for International Settlements, June 2020, p. ix.
49 Ibid.
50 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
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.
Fiscal Deficits
As one measure of the global fiscal and monetary responses, the IMF estimated that government
spending and revenue measures to sustain economic activity adopted through September 2020
amounted to $5.4 trillion and that loans, equity injections and guarantees totaled an additional
$5.4 trillion, or a total of $10.8 trillion.51 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 12.7% 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.52

51 World Economic Outlook Update, International Monetary Fund, June 24, 2020. p. 16.
52 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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Figure 2. IMF Projected Government Fiscal Deficits Relative to GDP
In percentage shares of Gross Domestic Product

Source: Fiscal Monitor, International Monetary Fund, October, 2020, Table 1.1. Created by CRS.
Notes: Data for 2020 are estimates.
Among developed economies, the fiscal deficit to GDP ratio is projected to rise from 3.3% in
2019 to 14.4% in 2020; the ratio for the United States is projected to rise from 6.3% to 18.7%,
respectively, the highest ratio for any country or region.53 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.54 For developing economies, the fiscal
deficit to GDP ratio is projected to rise from 4.9% to 10.7%, significantly increasing their debt
burden and raising prospects of defaults or debt rescheduling.55 According to some estimates, the
most fiscally vulnerable countries are Argentina, Venezuela, Lebanon, Jordan, Iran, Zambia,
Zimbabwe, and South Africa.56 The IMF concluded that among developing countries high debt
levels could become “unmanageable” and test the resilience of banks in some countries.57
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.58 In addition to
central banks’ actions, the IMF concludes that a number of preexisting vulnerabilities could affect
the timing and the rate of the economic recovery. These vulnerabilities include corporate and
household debt levels in developed and some emerging 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

53 Fiscal Monitor, International Monetary Fund, October 2020, Table 1.1.
54 Global Financial Stability Report Update. International Monetary Fund, June 2020, p. 2.
55 Ibid., p. 6.
56 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.
57 Global Financial Stability Report Update, p. 2.
58 Ibid, p. 4.
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institutions; and the prospect of some developing economies facing high external financing
requirements.59
Worker Assistance Programs
As part of their fiscal policy measures, governments in advanced economies either enhanced
existing worker support programs, or adopted new programs. As indicated in Table 3, the OECD
categorized the various job retention programs into six major groups, which the OECD estimated
that by May 2020 had supported 50 million workers in developed economies. The programs
consisted of short-term support that subsidized hours not worked, or wage subsidies that also
subsidized hours worked. Some countries also eased qualification requirements to facilitate
workers or businesses gaining access to support funds. Although programs varied across
countries, programs to assist workers generally were comprised of subsidies to support workers
for work hours lost or extended wage subsidies to maintain pre-pandemic employment levels.
Other programs assisted individual firms in retaining workers with the objective of facilitating a
quick return to full activity once pandemic-related restrictions are lifted.60 In some cases, benefits
were increased by extending the length of time benefits are available and benefits were extended
to workers in non-standard jobs such as temporary and self-employed workers. New programs
adopted by some OECD members were designed to assist some temporary and non-standard
workers quickly gain access to support funds.61
Table 3. Developed Economy Worker Support Programs During COVID-19
Increased
access for

Preexisting
workers in
short-time
Increased
Increased
non-
New short-
New wage
work
access and
benefit
standard
time work
subsidy
scheme
coverage
generosity
jobs
scheme
scheme

Australia
x





Austria
x
x
x



Belgium
x
x
x



Canada
x
x




Chile*
x
x
x
x


Czech Republic
x
x
x



Denmark
x
x
x



Estonia
x





Finland
x
x
x
x


France
x
x
x
x


Germany
x
x
x
x


Greece
x





Hungary
x





Iceland
x






59 Ibid, p. 6-7.
60 Job Retention Schemes During the COVID-19 Lockdown and Beyond, Organization for Economic Cooperation and
Development, August 3, 2020, p. 2.
61 Ibid, p. 5-6.
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Increased
access for

Preexisting
workers in
short-time
Increased
Increased
non-
New short-
New wage
work
access and
benefit
standard
time work
subsidy
scheme
coverage
generosity
jobs
scheme
scheme

Ireland*
x
x




Italy
x
x
x



Japan
x
x
x
x


Korea
x
x
x



Latvia
x





Lithuania
x





Luxembourg
x
x
x



Netherlands*
x
x




New Zealand
x




Norway
x
x
x



Poland
x





Portugal
x
x
x



Slovak Republic
x
x
x



Slovenia
x





Spain
x
x
x
x


Sweden
x
x
x



Switzerland
x
x
x



Turkey
x
x
x



United Kingdom




x

United States
x
x
x



Source: Job Retention Schemes During the COVID-19 Lockdown and Beyond, Organization for Economic
Cooperation and Development, August 3, 2020, p. 7.
Monetary and Prudential Measures
Among central banks, the Federal Reserve initiated extraordinary steps not experienced since the
2008-2009 global financial crisis to address the economic effects of COVID-19. Simultaneously,
as indicated in Table 4, various central banks and monetary authorities 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,62 adopted after the 2008-2009 financial crisis, potentially freeing
up an estimated $5 trillion in funds.63

62 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/.
63 Arnold, Martin, “Regulators Free up $500bn Capital for Lenders to Fight Virus Storm,” Financial Times, April 7,
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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.64 As a result of these
activities, the BIS argued that central banks effectively managed the initial liquidity crisis, the
first of three phases often identified with financial crises. The second and third phases, insolvency
and recovery, are being navigated in some cases 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. Some
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 worked to contain the financial and economic impact of the pandemic so
far, although the crisis is not over.65
Table 4. 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
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


interven-
line
tion
FX






x
x

x
x
x
x


interven-
tion
Prudent-
Capital
x
x
x
x
x
x
x
x
x
x
x
x
x

x
ial rules
require-
and
ments

2020. https://www.ft.com/content/9a677506-a44e-4f69-b852-4f34018bc45f.
64 For a review of monetary policies of the Federal Reserve, the ECB, the Bank of Japan, and the Bank of England, see:
Haas, Jacob, Christopher J. Neely, William B. Emmons, Responses of International Central Banks to the COVID-19
Crisis, Federal Reserve Bank of St. Louis Review, Fourth Quarter 2020.
65 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.
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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
Regula-
Liquidity
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
tions
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,
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 move around $40 to
$45 per barrel, in part reflecting the decline in global economic activity. 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.”66
Before the COVID-19 outbreak, the global economy was struggling to regain a broad-based
recovery as a result of a number of issues, including: 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

66 Federal Reserve Issues FOMC Statement, Board of Governors of the Federal Reserve System, April 29, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200429a.htm.
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flexibility of many national leaders, especially among the leading developed economies. 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.67 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 5, 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 October
2020, for instance, the IMF lowered its global economic growth forecast from a positive 3.4% to
a negative 4.4%. Similarly, the OECD lowered its forecast from 2.9% in November 2019
to -4.5% in September 2020. In its June forecast, the OECD forecasted the effects of a single
wave and double wave of infections, as indicated in Table 5. 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 were projected to experience the steepest declines in
economic growth from 2019 to mid-June 2020.
Table 5. 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
October 2020
–4.4
5.2
–5.8
3.9
–3.3
6.0
–4.3
3.1
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
Sept. 2020
-4.5
5.0
NA
NA
NA
NA
-3.8
4.0
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

67 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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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) released an updated
forecast in September that projects global economic growth will decline by 4.5% in 2020,
compared with a June forecast of a 6.9% decline under a single-wave scenario and 7.6% in under
a second wave scenario in 2020.68 The forecast reflects the OECD’s continued 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.69 Under both scenarios, the OECD estimated the global
economic recovery could be slow and gradual.70 The OECD also estimated that the average
unemployment rate among OECD countries could rise to 9.2% under a single wave scenario and
10.0% under the second wave scenario. Through the third quarter of 2020, however, most OECD
countries had not experienced extended periods of high rates of unemployment, in part due to
national income and wage maintenance programs, as indicated in Figure 3. The main 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. By October, most OECD economies had
unemployment rates in the 7.0% to 8.0% range with some exceptions: Japan (3.1%) and Germany
(4.5%) had rates below the OECD average of 7.1%, while Colombia (16.3%), Spain (16.2%), and
Italy (9.8%) had rates that were higher than the OECD average. 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.

68 OECD Economic Outlook, Interim Report: Coronavirus (COVID-19): Living With Uncertainty, Organization for
Economic Cooperation and Development, September 2020.
69 OECD Economic Outlook, Organization for Economic Cooperation and Development. June 10, 2020; p. 12.
http://www.oecd.org/economic-outlook/#resources.
70 Ibid., p. 23.
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Figure 3. Unemployment Rates Among Major OECD Countries
In percentage terms

Source: OECD Dataset: Short-term Labor Market Statistics, Organization for Economic Cooperation and
Development. 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 6 reflect the single wave scenario.71
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 was projected in September to fall by 7.9%,
compared with the June forecast of a decline of 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 3.8% -- about half the June forecast of a decline of 7.3% -- but rebound by 3.5% in 2021.
The UK is projected to experience a contraction in GDP growth in 2020 of 10.1%, slightly
outpacing the earlier forecast of a decline of 11.5%.

71 Ibid., p. 13.
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Figure 4. Major Economic Forecasts

Sources: OECD Economic Outlook, Interim Report, Organization for Economic Cooperation and Development.
September, 2020; World Economic Outlook, International Monetary Fund, October 13, 2020; Global Economic
Prospects
, World Bank Group, June 2020, Created by CRS.
Note: The OECD estimated rates of growth as a result of two scenarios, indicated as OECD1 and OECD2. The
first scenario assumes there is a single wave of infections from COVID-19, while the second scenario estimates
the effect of a two-wave scenario. An interim OECD forecast published in September did not include developed
and developing economies as separate entries; a more comprehensive forecast is expected to be published in
November.
Table 6. OECD, IMF and World Bank Economic Forecasts
Percentage change in Real GDP Growth
World
OECD Sept
IMF Oct.
Bank June
2020
2020
2020


Projections


Projections


Projections
2019
2020 2021
2019
2020
2021
2019
2020
2021


World
2.7%
-4.5%
5.0%
World
2.9%
–4.4
5.2
World
2.4%
-5.2% 4.2%
Adv.
Adv.
–5.8
3.9
Adv.
Economies
1.7
NA
NA
Economies
1.7
Economies
1.6
-7.0
3.9
-4.1
2.5
United
–4.3
3.1
United
Australia
1.8
States
2.3
States
2.3
-6.1
4.0
Canada
1.7
-5.8
4.0
Euro Area
1.2
–8.3
5.2
Euro Area
1.2
-9.1
4.5
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World
OECD Sept
IMF Oct.
Bank June
2020
2020
2020


Projections


Projections


Projections
2019
2020 2021
2019
2020
2021
2019
2020
2021


Euro area
1.3
-7.9
5.1
Germany
0.6
–6.0
4.2
Japan
0.7
-6.1
2.5
Germany
0.6
-5.4
4.6
France
1.3
–9.8
6.0
Emerging
3.5
-2.5
4.6
France
1.5
-9.5
5.8
Italy
0.3
–10.6
5.2
E. Asia
5.9
0.5
6.6
Italy
0.3
-10.5
5.4
Spain
2.0
–12.8
7.2
China
6.1
1.0
6.9
Japan
0.7
-5.8
1.5
Japan
0.7
–5.3
2.3
Indonesia
5.0
0.0
4.8
Korea
2.0
-1.0
3.1
United
1.4
–9.8
5.9
Thailand
2.4
-5.0
4.1
Kingdom
Mexico
-0.1
-10.2
3.0
Canada
1.6
–7.1
5.2
Cen. Asia
2.2
-4.7
3.6
Turkey
0.9
-2.9
3.9
China
6.1
1.9
8.2
Russia
1.3
-6.0
2.7
United
1.4
-10.1
7.6
India
4.2
–10.3
8.8
Turkey
0.9
-3.8
5.0
Kingdom
United
2.3
-3.8
4.0
Russia
1.3
–4.1
2.8
Poland
4.1
-4.2
2.8
States
Argentina
-2.2
-11.2
3.2
Latin
0.1
–8.1
3.6
Brazil
1.1
-8.0
2.2
America
Brazil
1.1
-6.5
3.6
Brazil
1.1
–5.8
2.8
Mexico
-0.3
-7.5
3.0
China
6.1
1.8
8.0
Mexico
–0.1
–9.0
3.5
Argentina
-2.2
-7.3
2.1
India
4.2
-10.2
10.7
Mid. East
1.2
–4.1
3.0
Mid. East
-0.2
-4.2
2.3
Indonesia
5.0
-3.3
5.3
Saudi
0.3
–5.4
3.1
Saudi
0.3
-3.8
2.5
Arabia
Arabia
S. Africa
0.2
-7.3
5.0
Africa
3.1
–3.0
3.1
Iran
-8.2
-5.3
2.1




Nigeria
2.2
–4.3
1.7
Egypt
5.6
3.0
2.1




S. Africa
0.2
–8.0
3.0
S. Asia
4.7
-2.7
2.8
World
–10.4
8.3




Trade
0.9
India
4.2
-3.2
3.1
Volume




Oil prices
–32.1
12.0
($)
–10.2
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, Interim Report, Organization for Economic Cooperation and Development.
September, 2020; World Economic Outlook, International Monetary Fund, October 13, 2020; Global Economic
Prospects
, World Bank Group, June 2020,
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.72
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.”73 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.74
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.

72 Ibid., p. 31.
73 OECD Interim Economic Assessment: COVID-19: The World Economy at Risk, Organization for Economic
Cooperation and Development. March 2, 2020, p. 2.
74 Ibid., p. 4.
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 Economic effects likely will vary across countries reflecting differences in the
timing and degree of containment measures.75
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.76 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 in October 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.”77 In addition, the IMF estimated in its baseline projection that the
global economy could decline by 4.4% in 2020, slightly less than its June forecast of -4.9%,
before growing by 5.2% in 2021; global trade was projected to fall in 2020 by 10.4% and oil
prices were projected to fall by 32%, also shown in Table 6.78 According to the IMF,
While the global economy is coming back, the ascent will likely be long, uneven, and
uncertain. Indeed, compared to our forecast in June, prospects have worsened significantly
in some merging market and developing economies where infections are rising rapidly.
Consequently, emerging market and developing economies, excluding China, are projected
to incur a greater loss of output over 2020-21 relative to the pre-pandemic projected path
when compared to advanced economies.79
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.

75 Evaluating the Initial Impact of COVID Containment Measures on Activity, Organization for Economic Cooperation
and Development, March 27, 2020.
76 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.
77 World Economic Outlook, International Monetary Fund, October, 2020.
78 The IMF database indicates that global GDP fell by 0.075% in 2009 during the height of the global financial crisis.
79 World Economic Outlook, International Monetary Fund, October 2020, p. xiii.
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 The ability of displaced workers to secure employment, possibly in different
sectors.
 The long-term impact of firm closures and unemployed workers leaving the
workforce, compounding the ability of the economy to recover.
 The impact of changes to strengthen workplace safety—such as staggered work
shifts, enhanced hygiene and cleaning between shifts, new workplace practices
relating to proximity of personnel on production lines—which incur business
costs.
 Global supply chain reconfigurations that affect productivity as companies try to
enhance their resilience to supply disruptions.
 The extent of cross-border spillovers from weaker external demand as well as
funding shortfalls.
 A resolution of the current disconnect between rising asset values, as reflected in
market indices, and forecasts of a synchronized downturn in global economic
activity.
Advanced economies as a group were forecast to experience an economic contraction in 2020 of
8.0% of GDP, with the U.S. economy also projected by the IMF to decline by 8.0%, about four
times the rate of decline experienced in 2009 during the financial crisis, as indicated in Figure 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.80
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.81

80 World Economic Outlook, p. 9.
81 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, International Monetary Fund, October, 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.82
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.83 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 2020.84 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

82 World Economic Outlook, p. v.
83 Global Economic Prospects, World Bank Group, June 8, 2020, p. 15.
84 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 preexisting challenges such as
widespread poverty, and the degree to which debt levels constrain the fiscal response.”85
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 2020.86
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.87 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 an October 6 forecast update, the World Trade Organization (WTO) estimated that
global trade volumes could fall by 9.2% in 2020.88 Global trade volumes are projected to partially
recover in 2021 by increasing at an annual growth rate of 7.2%. This forecast reflects a marked
revision from the WTO’s April 8, 2020 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 7.
The updated forecast also indicates that the recovery in global trade in 2021 could be noticeably
slower than the WTO had projected in April, primarily reflecting expectations of a slower
recovery in global GDP in 2021. The WTO also estimated that global merchandise trade fell by
21% in the second quarter of 2020, while some sectors were affected more than others: trade in
fuels and mineral products fell by 38%, while trade in agricultural products fell by 5%.
In the first quarter of 2020, global exports and imports fell by 7.7% and 6.7%, respectively, in
volume terms and 10.4% and 8.6% in value terms, reflecting the global economic impact of the
pandemic, as indicated in Figure 6. In the second quarter, global exports and imports dropped by

85 Ibid., p. 115.
86 Ibid., p. 33.
87 Ibid., p. 118.
88 Trade Shows Signs of Rebound From COVIC-19, Recovery Still Uncertain, World Trade Organization, October 6,
2020.
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11.7% and 11.4%, respectively, in volume and by 13.4% and 14.2%, in value terms. In the third
quarter, however, export and import volumes increased by 15.7% and 13.1%, respectively, while
export and import values increased by 20.6% and 18.3%, respectively. Although the WTO has no
comprehensive data on trade in services, it concluded that the trend in trade in services likely
matched that experienced in trade in merchandise goods. The updated forecast also projects that
global GDP could decline at an annual rate of 4.8% in 2020, but recover in 2021 with an annual
growth rate of 4.9%.
The WTO indicated in its forecast update that renewed economic lockdowns in response to a
resurgence of COVID-19 cases in the fall of 2020 could shave 2 to 3 additional percentage points
off the annual global GDP growth rate in 2021 and negatively affect global trade. In addition, the
WTO estimated that uncertainty over additional fiscal measures and relatively high rates of
unemployment could reduce global merchandise trade growth by up to 4% in 2021. By region,
the WTO forecast indicates that Europe and North America will experience the largest declines in
the rate of growth of trade volumes, while Asia would experience the smallest decline in the
growth rate of trade volumes, primarily based on a projected increase in trade by China.
The WTO 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-19.89 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.90
Figure 6. WTO Estimates of Quarterly Global Exports and Imports,
Volumes and Values

Source: World Trade Organization, December 18, 2020. Created by CRS.
In its April forecast, the WTO presented two estimates of global growth, reflecting the high
degree of uncertainty concerning the length and economic impact of the pandemic. According to

89 WTO Report on G20 Shows Moves to Facilitate Imports Even as Trade Restrictions Remain Widespread, World
Trade Organization,
June 29, 2020. https://www.wto.org/english/news_e/news20_e/trdev_29jun20_e.htm.
90 Report on G20 Trade Measures (Mid-October 2019 to Mid-May 2020), World Trade Organization, June 29, 2020.
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the WTO, the more optimistic scenario assumed that trade volumes would recover quickly in the
second half of 2020 to their pre-pandemic trend, or that the global economy experiences a V-
shaped recovery. In comparison, the more pessimistic scenario assumed there would be a partial
recovery in global trade that lasted into 2021, or that global economic activity would experience 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 both of the scenarios in its April forecast.
The WTO concluded, however, that the impact on global trade volumes could exceed the drop in
global trade during the height of the 2008-2009 financial crisis.91
Table 7. WTO Forecast: Merchandise Trade Volume and Real GDP 2020-2021
Annual percentage change
Optimistic scenario
Pessimistic scenario
Forecast scenario

(April 2020
(April 2020)
(October 2020)

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






North America
-17.1
23.7
-40.9
19.3
-14.7
10.7
South and Central America
-12.9
18.6
-31.3
14.3
-7.7
5.4
Europe
-12.2
20.5
-32.8
22.7
-11.7
8.2
Asia
-13.5
24.9
-36.2
36.1
-4.5
5.7
Other regions
-8.0
8.6
-8.0
9.3
-9.5
6.1
Imports






North America
-14.5
27.3
-33.8
29.5
-8.7
6.7
South and Central America
-22.2
23.2
-43.8
19.5
-13.5
6.5
Europe
-10.3
19.9
-28.9
24.5
-10.3
8.7
Asia
-11.8
23.1
-31.5
25.1
-4.4
6.2
Other regions
-10
13.6
-22.6
18.0
-16.0
5.6
Real GDP at market exchange rates
-2.5
7.4
-8.8
5.9
-4.8
4.9
North America
-3.3
7.2
-9.0
5.1
-4.4
3.9
South and Central America
-4.3
6.5
-11
4.8
-7.5
3.8
Europe
-3.5
6.6
-10.8
5.4
-7.3
5.2
Asia
-0.7
8.7
-7.1
7.4
-2.4
5.9
Other regions
-1.5
6.0
-6.7
5.2
-5.5
3.5
Source: Trade Shows Signs of Rebound From COVID-19; Recovery Still Uncertain, World Trade Organization,
October 6, 2020.
Note: Data for 2020 and 2021 are projections; GDP projections are based on scenarios simulated with the
WTO Global Trade Model.
The October 2020 forecast indicates that all geographic regions could experience a drop in trade
volumes, while North America and Europe could experience a double-digit drop in trade
volumes. The forecast also projects that sectors with extensive value chains, such as automobile

91 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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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
that 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. According to a December 2020 report by DHL and the New York University Stern
Scholl of Business, global interconnectedness is comprised of four distinct types of transactions:
trade, capital, information, and people.92 This analysis concludes that the pandemic affected
cross-border movements of people in response to travel restrictions and in trade through a sharp
contraction in the global economy. Capital flows also dropped during 2020 as a result of lower
corporate earnings, business travel restrictions, negative business prospects, and concerns over
global supply chains.93
In some cases, businesses are reassessing their exposure to the risks posed by extensive supply
chains that potentially are vulnerable to numerous points of disruption. Also, some governments
are assessing the risks supply chains pose to national supplies of items considered to be important
to national security as a result of firms shifting production offshore. For multinational businesses,
changing suppliers and shifting production locations can be especially costly for some firms and
can introduce additional risks.94 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.95
Beyond the current challenges the pandemic poses to global supply chains, a recent report
catalogues a number of risks that can disrupt supply chains.96 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.”97 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.”98 Instead of

92 Altman, Steven A. and Phillip Bastian, DHL Global Connectedness Index 2020, 2020
93 Ibid, p. 32.
94 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.
95 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.
96 Risk, Resilience, and Rebalancing in Global Value Chains, McKinsey Global Institute, August 2020, p. 1
97 Ibid., p. 2.
98 Ibid., In Brief.
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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.99
Amidst the decline in global trade, 15 countries, including Brunei, Colombia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam. Australia, China, Japan, New
Zealand, and South Korea, signed the Regional Comprehensive Economic Partnership (RCEP) on
November 15, 2020, to create potentially one of the largest free trade agreements.100 The
agreement will need to be ratified by the signatory governments. This agreement follows by two
years the conclusion of negotiations over the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CPTPP) that replaced the proposed Trans-Pacific Partnership
agreement after the United States pulled out of the negotiations. The agreement includes
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and
Vietnam.
Global Foreign Investment
According to analyses by the United Nations Conference on Trade and Development (UNCTAD),
global foreign direct investment inflows fell by 49% in the first half of 2020 compared with the
same period in 2019, as indicated in Figure 7.101 Inflows to developed economies fell by 75%,
while inflows to Europe fell from $203 billion in the first half of 2019 to -7 billion in the first half
of 2020. In contrast, inflows to developing economies fell by 16% over the period, buoyed in
large part by inflows to China. Inflows to developing Asia, at $217 billion, accounted for more
than half of the total $399 billion global direct investment inflows in the first half of 2020.
All major geographic areas except Asia experienced a drop in investment activity in the first half
of 2020 compared with the comparable period in 2019 in the three major types of foreign
investment: cross-border investments; greenfield investment, or investment in new business
activity; and international project finance. In the three types of investment activity, global activity
fell by 15%, 37%, and 25%, respectively in the first half of 2020 compared with the first half of
2019. Cross-border merger and acquisition (M&A) activity increased by 60% and 84%,
respectively, in Asia and Transition economies, but declined by 21% in developed economies.
International project finance, reportedly an important source of infrastructure finance, fell
globally by 25%, but rose by 8% in Asia.

99 Risk, Resilience, and Rebalancing in Global Value Chains, p. 16.
100 Shih, Gerry, and Simon Denyer, As Trump Era Ends, Massive New Asian Trade Deal Leaves U.S. on the Sidelines,
Washington Post, November 16, 2020. https://www.washingtonpost.com/world/asia_pacific/trade-china-trump-obama-
asia/2020/11/16/f02f43e4-27b7-11eb-9c21-3cc501d0981f_story.html.
101 Investment Trends Monitor, United Nations Conference on Trade and Development, October 27, 2020.
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Figure 7. Global Foreign Direct Investment Inflows
In billions of dollars and percentage change; first half of year totals

Source: United Nations Conference on Trade and Development. Created by CRS.
For the United States, BEA reported that U.S. direct investment abroad (outflows) and foreign
direct investment in the United States (inflows) fell by 74% and 89%, respectively, in the first
half of 2020 compared with the first half of 2019, as indicated in Figure 8.102 The lower
investment numbers reflect, in part, the lower values for equity, signaling the declines in major
equity markets in the first half of 2020.
Figure 8. U.S. Direct Investment; Inflows and Outflows

Source: Bureau of Economic Analysis, Created by CRS.

102 U.S. International Transactions, Bureau of Economic Analysis, September 18, 2020.
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Notes: In the balance of payments, direct investment outflows are represented as a negative value, indicating an
outflow and direct investment inflows are represented as positive values. For presentation purposes, the signs
for direct investment abroad, or outflows, have been reversed.
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, have been overwhelmed by the
quickly changing nature of the global health crisis that 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 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,103 nations are competing for medical supplies, and some nations
reportedly are stoking conspiracy theories that shift blame to other countries.104
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 experienced supply chain shocks, reduced consumer activity through social
distancing has affected the services sector of the economy, which accounts for two-thirds of
annual U.S. economic output. In this environment, manufacturing and services firms initially
tended to hoard cash, which affected market liquidity. In response, the Federal Reserve, along
with other central banks, lowered interest rates where possible and expanded lending facilities to
provide liquidity to financial markets and to firms potentially facing insolvency.
The longer the economic effects persist, the greater the economic impacts have been as the effects
were spread through trade and financial linkages to an ever-broadening group of countries, firms
and households. These growing economic effects potentially increased liquidity constraints and
credit market tightening in global financial markets as firms hoarded cash, with negative fallout
effects on economic growth. At the same time, financial markets have been factoring in an
increase in government bond issuance in the United States, Europe, and elsewhere as government
debt levels began rising 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,

103 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/.
104 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/.
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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 at the time to question if
these events mark the beginning of a full-scale global financial crisis.105
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 have been 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
dropped sharply. However, as unemployment numbers rose, job losses have resulted in defaults
on mortgages and delinquencies on rent payments, requiring some financial institutions to
provide loan forbearance or other 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.106 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.107 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, 2020.108 In response to concerns
that the global economy was in a freefall, the Federal Reserve lowered key interest rates on

105 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.
106 Armstrong, Robert, “Mortgage Investment Funds Become ‘Epicenter’ of Crisis,” Financial Times, March 24, 2020.
https://www.ft.com/content/18909cda-6d40-11ea-89df-41bea055720b.
107 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.
108 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.
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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).109
Financial Markets
Reflecting investors’ uncertainties, the DJIA lost about one-third of its value between February
14, 2020, and March 23, 2020, as indicated in Figure 9. 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 trended upward, but moved erratically at times as investors weighed
news about the human cost and economic impact of the pandemic and the prospects of various
medical treatments. Between March 23 and July 1, the DJIA regained 70% of the value lost
during the February to March decline. On Monday, November 9, the DJIA gained over 800
points, or nearly three percentage points, as markets responded positively to press reports that an
effective COVID-19 vaccine had been developed. On November 10, the DJIA rose above 29,400
for the first time since the index fell in February 2020. November data indicate the DJIA
increased nearly 12% during the month, the largest monthly gain in value since April 2020 as a
consequence of various factors, including the prospect of an available COVID-19 vaccine before
year-end 2020 and the gradual end to business lockdowns.
As indicated in Table 8, 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 October 23, the DJIA had
recovered most of the value lost in February and March. During the final week of October, the
DJIA lost more than 1,800 points, the largest weekly loss since March 2020 as Germany, France
and other European countries reinstituted lockdowns in response to a resurgence of COVID-19
cases. In the first three days of November, however, the Index regained three-fourths of the value
it lost the previous week. For some policymakers, the drop in equity prices in February and
March 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.110
Table 8. 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%

109 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/.
110 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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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%
September
12
9
28,439.61
27,781.70
-657.91
-2.31%
October
10
12
27,816.90
26,501.60
-1,315.30
-4.73%
November
12
8
26,691.28
29,638.64
2,947.36
11.04%
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.
Figure 9. Dow Jones Industrial Average Index
February 14, 2020, through December 22, 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 10, 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 exchange value of the dollar has
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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, about where it was in mid-
March. By mid-October, the trade-weighted value of the dollar had declined by 8% from the
highest values reached in March and nearly matched the value it recorded at the beginning of
2020. On November 5, the dollar index returned to the value reported on January 2, 2020 and
remained below that value since. Going forward, the reported development of a COVID-19
vaccine could affect the value of the dollar in various ways, including factors that tend to
appreciate the dollar as a result of renewed economic growth in the United States and opposing
forces that tend to depreciate the dollar if demand declines for the dollar as a safe-haven currency.
Figure 10. U.S. Dollar Trade-Weighted Broad Index, Goods and Services
January 2, 2020, through December 18, 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 2019 triennial survey of currency markets.111 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 11. 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.112 In comparison, the
United States accounts for about one-fourth of global GDP and about one-fifth of global trade
(exports plus imports).

111 Foreign Exchange Turnover in April 2019, Bank for International Settlements, September 16, 2019.
https://www.bis.org/statistics/rpfx19_fx.htm.
112 See CRS In Focus IF10112, Introduction to Financial Services: The International Foreign Exchange Market.
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Figure 11. International Role of the Dollar

Source: U.S. Dollar Funding: An International Perspective, CGFS Papers No. 65, Bank for International Settlements,
June 2020. Created by CRS.
Notes: (1) Data refer to 2019. (2) Data refer to 2019. (3) US dol ar-denominated cross-border loans by banks
to counterparties in all countries; data refer to Q4 2019 (excluding interoffice claims but including interbank
claims on account of loans and deposits); loans comprise 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).
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.113
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.114 Traditionally, most economic models are based
on the assumption that countries set their prices in their home currencies. As a result,
domestically produced goods and services 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

113 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.
114 Dominant Currencies and External Adjustment, IMF Staff Discussion Note 20/05, International Monetary Fund,
July 2020.
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other than the United States is invoiced in U.S. dollars.115 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.
Together, these effects translate into movements in the exchange value of the dollar that at times
contrasts with traditional theory, since such movements do not affect trade volumes as might be
expected. For instance, after appreciating in March 2020, the trade-weighted value of the dollar
steadily depreciated through December. In standard models, the depreciation in the dollar would
be expected to lower export prices and, in turn, increase demand for U.S. exports, or increase the
volume of exports, while imports would be expected to decline. GDP data through the third
quarter indicate, however, that U.S. trade dropped sharply in real, or index terms, in both the
quantity of goods exported or imported and in the value of those goods, as indicated in Figure 12.
The data show the sharp drop in U.S. trade volumes for both exports and imports in the first and
second quarters, largely reflecting the global lockdown due to policy actions to contain the spread
of the viral pandemic. In quantity terms, U.S. exports fell by 25%, while imports fell by 15% in
the second quarter compared with the preceding quarter. In value terms, the price of U.S. exports
fell by 6%, while the price of imports fell by 3.7% compared with the first quarter. In the third
quarter, both exports and imports increased by about 20% in volume terms, while export and
import prices rose by 3.7% and 2.4%, respectively, despite a depreciation in the dollar.
Figure 12. Price and Quantity Indexes, U.S. Exports and Imports

Source: Bureau of Economic Analysis. Created by CRS.
Notes: 2012 = 100.
The international role of the dollar and the well-developed U.S. capital markets also provides the
United States with greater latitude in financing its trade deficit. For some trade specialists, the
widely accepted characterization of the current account as a product of a domestic saving-
investment relationship fails to distinguish between a country’s domestic saving-investment
balance, its ability to finance its trade deficit, and the role of cross-border capital flows. These

115 Ibid., p. 8.
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flows suggest that the ability of the United States to finance its trade imbalances through capital
inflows eases the constraint imposed by the domestic saving-investment balance.
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.116 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.
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.117 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.118 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.119
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.120 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

116 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.
117 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.
118 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.
119 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.
120 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.
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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.121
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.122 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.123 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.124 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.125 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.

121 Smith, Colby and Brendan Greeley, “Fed Pumps Extra Liquidity Into Overnight Lending Markets,” Financial
Times
, March 9, 2020. https://www.ft.com/content/e8c7b5f0-6200-11ea-a6cd-df28cc3c6a68.
122 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.
123 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.
124 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.
125 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.
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Credit rating agencies began reassessing corporate credit risk, including the risk of firms that had
been considered stable.126
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%.127 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.128 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.129 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.”130 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.131
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.132 The DJIA dropped nearly 3,000 points, or about 13%. Most
automobile manufacturers announced major declines in sales and production;133 similarly, most

126 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.
127 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.
128 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/.
129 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.
130 Federal Reserve Releases FOMC Statement, Board of Governors of the Federal Reserve System, March 15, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm.
131 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.
132 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.
133 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.
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airlines reported they faced major cutbacks in flights and employee layoffs due to diminished
economic activity.134 Economic data from China indicated the economy would slow markedly in
the first quarter of 2020, potentially greater than that experienced during the global financial
crisis.135 The Bank of Japan announced that it would double its purchases of exchange traded
funds and the G-7 countries136 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.137
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.138 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).139 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.140 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.141 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

134 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.
135 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.
136 The G-7 is comprised of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
137 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.
138 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.
139 “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.
140 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.
141 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.
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volatility.142 During the week, more than 22 central banks in emerging economies, including
Brazil, Turkey, and Vietnam, lowered their key interest rates.
By March 19, 2020, investors were selling sovereign and other bonds as firms and other financial
institutions attempted to increase their cash holdings, although actions central banks took during
the week appeared to calm financial markets. Compared to previous financial market dislocations
in which stock market values declined while bond prices rose, stock and bond values fell at the
same time in March 2020 as investors reportedly adopted a “sell everything” mentality to build
up cash reserves.143 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 13. As a result of the steep drop in oil prices, oil producers agreed in April to
reduce global supply by 10%, or 9.6 million barrels per day. Since the low prices recorded in
April, the price of Brent crude oil generally moved within a range of $40 to $44 per barrel
through late November, when it began edging closer to $50 per barrel. In trading December 10,
the price of Brent crude oil breached the $50 per barrel mark for the first time since March 2020.
As energy demand showed some signs of recovering, the cuts in oil production that began in
April were trimmed to 7.7 million barrels per day and were expected to be trimmed by an
additional 2 million barrels per day in January 2021.
On December 3, OPEC and Russia agreed to increase oil production by 500,000 barrels per day
starting in January 2021, despite concerns over continued weak global demand.144 According to
the International Energy Agency (IEA), expectations about a COVID-19 vaccine tended to boost
markets prices in November and December, although oil market fundamentals -- primarily weak
demand in Developed economies, slightly stronger demand in developing economies, and
production increases in Libya, Iraq, and the United States -- raised questions about the viability of
oil price increases.145 The IEA also attributed the rise in oil prices since late spring to increased
demand in China and India as those economies regained strength.

142 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.
143 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.
144 Raval, Ranjli, OPEC and Russia Agree to Raise Oil Supply From January, Financial Times, December 3, 2020.
https://www.ft.com/content/18279043-f2ef-40a8-b65d-b68ea0bf21ba.
145 Oil Market Report June 2020, International Energy Agency, June 2020. https://www.iea.org/reports/oil-market-
report-november-2020.
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Figure 13. Brent Crude Oil Price Per Barrel in Dollars
January 9, 2020, through December 21, 2020

Source: Markets Insider. Created by CRS.
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.146 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.
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
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.147 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.148

146 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.
147 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.
148 Gurria, Angel, COVID-19: Joint Actions to Win the War, Organization for Economic Cooperation and Development,
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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.149 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-19.150 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.151
Japan announced that it would adopt an emergency spending package worth $238 billion, or
equivalent to 10% of the country’s annual GDP.152 Despite the various actions, global financial
markets turned lower 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.153
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.154 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.155 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.

March 23, 2020. https://www.oecd.org/coronavirus/#op-ed.
149 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.
150 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.
151 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.
152 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.
153 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.
154 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.
155 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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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.156
On April 9, OPEC and Russia agreed to cut oil production by 10 million barrels per day.157 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.158 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.159 G-7 finance ministers and central bank governors agreed to support the G-20 proposal
to suspend debt payments by developing countries.160 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.161
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.162 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-19.163 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.164
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

156 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.
157 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.
158 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.
159 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.
160 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.
161 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.
162 Politi, James, “IMF Boosts Emergency Lending Capacity to $100bn,” Financial Times, April 9, 2020.
https://www.ft.com/content/e46faadc-456b-4cf8-a2fd-2017702747ab.
163 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.
164 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.
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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.165 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.166
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.167
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.168 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.169 Leaders of emerging economies in Latin America
and Africa argued that the G-20 call for suspension of interest payments fell short of what is
needed. National leaders from Columbia, Brazil, Mexico, and Chile encouraged the World Bank,
the InterAmerican Development Bank, and the IMF to double their net lending to Latin America,
arguing that, “The Covid-19 pandemic is a shock of unprecedented magnitude, uncertain duration
and catastrophic consequences that, if not properly addressed, could lead to one of the most tragic
episodes in the history of Latin America and the Caribbean.”170
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.171 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.172 The World
Bank confirmed that its “pandemic bonds” would pay out $133 billion to the poorest countries
affected by the pandemic.173
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

165 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/.
166 Unemployment Insurance Weekly Claims, Department of Labor, April 16, 2020. https://www.dol.gov/ui/data.pdf.
167 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.
168 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.
169 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.
170 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.
171 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.
172 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.
173 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.
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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.”174
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 provided $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.175 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.176 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.177 The Saudi Presidency of the G-20 called on
international organizations on April 24 to fund an emergency response to the pandemic. The Bank
of Japan announced on April 27 that it would purchase unlimited amounts of government bonds
and quadruple its purchases of corporate debt to keep interest rates low and stimulate the
Japanese economy.178
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.”179 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%).180
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.181 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

174 G20 Extraordinary Agriculture Ministers Meeting: Statement on COVID-19, G-20, April 21, 2020. https://g20.org/
en/media/Pages/pressroom.aspx.
175 Unemployment Insurance Weekly Claims, April 23, 2020. https://www.dol.gov/ui/data.pdf.
176 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.
177 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.
178 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.
179 Federal Reserve Issues FOMC Statement, Board of Governors of the Federal Reserve System, April 29, 2020.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200429a.htm.
180 Gross Domestic Product, First Quarter 2020 (Advance Estimate), Bureau of Economic Analysis, April 29, 2020.
https://www.bea.gov/.
181 Unemployment Insurance Weekly Claims, April 30, 2020. https://www.dol.gov/ui/data.pdf.
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program. In addition, the Fed lowered the minimum loan amount for small businesses and
announced a loan program to assist riskier businesses.182 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.”183 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.184 House Speaker Pelosi stated that House Democrats were considering a $1
trillion spending bill to support state and local governments.185 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 1987.186
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.187 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.188
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

182 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.
183 Introductory Statement, European Central Bank, April 29, 2020. https://www.ecb.europa.eu/press/pressconf/2020/
html/ecb.is200430~ab3058e07f.en.html.
184 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.
185 Werner, Erica, Pelosi Points to $1 Trillion Need for State and Local Governments in Next Coronavirus Bill,
Washington Post, April 30, 2020. https://www.washingtonpost.com/us-policy/2020/04/30/congress-coronavirus-
economy/.
186 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.
187 European Economic Forecast Spring 2020, European Commission, May 2020. https://ec.europa.eu/commission/
presscorner/detail/en/ip_20_799.
188 Unemployment Insurance Weekly Claims, May 5, 2020. https://www.dol.gov/ui/data.pdf.
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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.189
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.190 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.191
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.192
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.193
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.194
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.195
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.196 In addition, the Labor Department announced that
an additional 1.9 million Americans filed for unemployment insurance, increasing the 11-week

189 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.
190 GDP Monthly Estimate, UK: March 2020, Office for National Statistics, May 13, 2020. https://www.ons.gov.uk/
economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/march2020.
191 Unemployment Insurance Weekly Claims, May 14, 2020. https://www.dol.gov/ui/data.pdf.
192 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.
193 Unemployment Insurance Weekly Claims, May 21, 2020. https://www.dol.gov/ui/data.pdf.
194 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.
195 Unemployment Insurance Weekly Claims, May 29, 2020. https://www.dol.gov/ui/data.pdf.
196 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.
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total to 44 million.197 The European Central Bank announced that it would double to $1.5 trillion
its Pandemic Emergency Purchase Program to stimulate the European economy.198 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.199 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.200
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.201 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.202
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.203 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.204 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.205 The Federal Reserve released its semi-annual
Monetary Policy Report.206
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.207

197 Unemployment Insurance Weekly Claims, June 4, 2020. https://www.dol.gov/ui/data.pdf.
198 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.
199 Telford, Taylor, and Thomas Heath, Dow Soars 1,000 Points as Wall Street Closes in on Pre-Pandemic Levels,
Washington Post
, June 5, 2020. https://www.washingtonpost.com/business/2020/06/05/stocks-market-today-
coronavirus-economy/.
200 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.
201 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.
202 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.
203 Seigel, Rachel and Thomas Heath, Dow Slides More Than 1,800 Points on Fears of Coronavirus Resurgence, More
Economic Pain, Washington Post, June 11, 2020. https://www.washingtonpost.com/business/2020/06/11/markets-
today-fed-coronavirus/.
204 Unemployment Insurance Weekly Claims, Department of Labor, June 11, 2020. https://www.dol.gov/ui/data.pdf.
205 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.
206 Board of Governors of the Federal Reserve System, Monetary Policy Report, June 12, 2020.
https://www.federalreserve.gov/monetarypolicy/2020-06-mpr-summary.htm
207 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.
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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.208
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.209 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.210
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.211
During May, U.S. retail sales increased by 17.7% as some businesses began reopening and
increasing optimism in financial markets that economic activity was on course for a quick
recovery. Concerns over trade disputes and a rise in new coronavirus cases, however, reportedly
overcame the optimism of increased sales and were factors in DJIA losses on June 24 of more
than 700 points. In addition, the IMF issued its updated economic outlook, forecasting that global
economic growth would contract by 4.9% in 2020, compared with an April forecast of a decline
of 3.0%.212
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.213 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.214 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.215 Also on June 25, the Federal Reserve announced the result of stress tests
on 33 U.S. banks under 3 scenarios216 to ascertain their capital sufficiency given the strains to the
financial system caused by COVID-19.217 The Fed reported that all large U.S. banks are
“sufficiently capitalized” to survive the three scenarios.218 Both the IMF and the WTO released

208 Powell, Jerome H., Semiannual Monetary Report to the Congress, June 16, 2020. https://www.federalreserve.gov/
newsevents/testimony/powell20200616a.htm.
209 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.
210 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.
211 Unemployment Insurance Weekly Claims, Department of Labor, June 18, 2020. https://www.dol.gov/ui/data.pdf.
212 World Economic Outlook Update, p. 5.
213 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.
214 Unemployment Insurance Weekly Claims, Department of Labor, June 25, 2020. https://www.dol.gov/ui/data.pdf.
215 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.
216 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.
217 Ibid.
218 Ibid., pp. 1-2.
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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.219 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%. 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.220
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.221 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
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.222 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.

219 Unemployment Insurance Weekly Claims, July 1, 2020. https://www.dol.gov/ui/data.pdf.
220 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.
221 Unemployment Insurance Weekly Claims, July 9, 2020. https://www.dol.gov/ui/data.pdf.
222 Unemployment Insurance Weekly Claims, Department of Labor, August 20, 2020. https://www.dol.gov/.
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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.223
September 2020
On September 17, the Department of Labor announced that over the 26-week period from mid-
March to mid-September 2020, 61 million Americans filed for unemployment insurance.224 On a
seasonally adjusted basis, the number of insured unemployed workers was 12.6 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 29, totaled 29.7 million, up from 1.6 million
in the comparable week in 2019. The insured unemployment rate was 8.6%, also down from the
peak reached in early May. 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 million225
and pushing the unemployment rate down to 8.4%, again with some caveats.226
October 2020
On October 1, IMF Managing Director Kristalina Georgieva warned there was a risk of a rise in
sovereign bankruptcies unless temporary debt relief measures adopted early in the year were
extended and sovereign debt contracts and processes are overhauled.227
On October 2, BLS reported that nonfarm employment increased by 661,000 in September,
reducing the total number of unemployed Americans to 13.6 million228 and pushing the
unemployment rate down to 7.9%, again with some caveats.229 President Trump announced that
he had tested positive for COVID-19.
On October 29, DOL reported that over the 32-week period from mid-March to late October
2020, about 66 million Americans filed for unemployment insurance.230 On a seasonally adjusted

223 Monetary Policy Report August 2020, Bank of England, August 6, 2020.
224 Unemployment Insurance Weekly Claims, Department of Labor, September 17, 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, Washington Post, May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment-
claims-coronavirus/
225 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.
226 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.
227 Smith, Colby, IMF Calls for Urgent Action to Prevent Debt Crisis in Emerging Economies, Financial Times,
October 1, 2020. https://www.ft.com/content/b61c8dea-58bc-476d-ae9f-c2de104808de.
228 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.
229 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.
230 Unemployment Insurance Weekly Claims, Department of Labor, October 29, 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, Washington Post, May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment-
claims-coronavirus/
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basis, the number of insured unemployed individuals was 7.8 million in late October, down from
a peak of 25 million in mid-May. On October 30, UK Prime Minister Boris Johnson announced
the resurgence of coronavirus cases in the UK and called for another countrywide business
lockdown. In response the resurgence of coronavirus cases across Europe, financial markets lost
value; the Dow Jones Industrial Average lost more than 1.800 points in the last week of October,
or more than 4% of its value.
November 2020
In the first three days of November, the DJIA regained three-fourths of the value lost during the
previous week as congressional leaders and the Trump Administration signaled the possibility of
a new stimulus package to support the U.S. economy.
Preliminary forecasts indicate that India’s economy contracted by 8.6% in the third quarter of
2020, reportedly reflecting increased consumer activity.231 On November 12, India’s finance
minister announced a new package of fiscal measures totaling $35 billion to increase consumer
spending and to assist manufacturing, agriculture, and exports. The move followed an
announcement by India’s cabinet that it had approved a spending package of $27 billion to
provide in incentives over five years to manufacturing firms, including automobiles, auto parts,
pharmaceuticals, textiles, and food products.232
On November 12, the DOL reported that over the 35-week period from mid-March to the first
week of November 2020, about 67.4 million Americans had filed for unemployment insurance.233
On a seasonally adjusted basis, the number of insured unemployed individuals was 6.8 million in
late October, down from a peak of 25 million in mid-May. Weekly claims have fallen from the
sharp increases recorded in April and May, declining to 709,000 in the week ending November 7,
after totaling 751,00 the previous week, four times higher than the average number of weekly
claims of about 200,000 recorded prior to the COVID-19 pandemic.
On November 15, 15 countries, including Brunei, Colombia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand, Vietnam. Australia, China, Japan, New Zealand,
and South Korea, signed the Regional Comprehensive Economic Partnership (RCEP) to create
potentially one of the largest free trade agreements. The agreement will need to be ratified by the
signatory governments.
On November 19, 2020, the DOL reported that over the 36-week period from mid-March to mid-
November 2020, about 68.2 million Americans had filed for unemployment insurance. 234 Weekly
claims rose to 742,000 in the week ending November 14, increasing from 711,000 the previous
week, marking the first increase in weekly claims since October 10, 2020.

231 RBI Bulletin – November 2020, Reserve Bank of India, November 2020.
232 Sharma, Ashok, India Announces $35 Billion Economic Stimulus Package, ABCNews, November 12, 2020.
https://abcnews.go.com/International/wireStory/india-announces-35-billion-economic-stimulus-package-74165709.
233 Unemployment Insurance Weekly Claims, Department of Labor, November 12, 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, Washington Post, May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment-
claims-coronavirus/
234 Unemployment Insurance Weekly Claims, Department of Labor, November 19, 2020. https://www.dol.gov/.
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December 2020
On December 3, OPEC and Russia agreed to increase oil output by 500,000 barrels per day
starting in January 2021, below a previously discussed increase of 2 million barrels per day, as
pandemic-related lags in global economic recovery curtail global oil demand.
On December 4, the BLS indicated that the U.S. economy added 245,000 jobs in November,
nearly half the 610,000 jobs added in October, raising concerns that the U.S. economic recovery
had stalled.235
The DOL reported on December 10 that over the 39-week period from mid-March to the
beginning of December 2020, over 70 million Americans had filed for unemployment
insurance.236 Week-over-week new claims totaled 863,000 in the week ending December 5,
increasing by 146,000 from the previous week’s total of 716,00, four times higher than the
average number of weekly claims of about 200,000 recorded prior to the COVID-19 pandemic.
Also, in trading December 10, the price of Brent crude oil breached the $50 per barrel mark for
the first time since March 2020.
On December 14, the United States began administering the COVID-19 vaccine. U.S. equity
market values fell as investors reportedly debated the prospects for a new stimulus package in the
United States and a resurgence in COVID-19 cases in New York, Boston, and London raised
concerns over a resumption of lockdowns.237
On December 17, the DOL announced that on a week-over-week basis, new claims for
unemployment insurance totaled 885,000 in the week ending December 12, increasing by 23,000
from the previous week’s total of 862,00. In the week ending November 28, 20.6 million people
claimed benefits in all programs. The insured unemployment rate for the week ending December
5 was 3.8%.




235 The Employment Situation-November 2020, Bureau of Labor Statistics, December 4, 2020, https://www.bls.gov/.
BLS
236 Unemployment Insurance Weekly Claims, Department of Labor, December 5, 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, Washington Post, May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment-
claims-coronavirus/
237 Platt, Eric, Naomi Rovnick, and Camilla Hodgson, S&P Slides for Fourth Straight Day, Financial Times, December
14, 2020. https://www.ft.com/content/898ca316-9bbf-3c20-b137-2dbdba93c800; Rovnick, Naomi, and Camilla
Hodgson, Equities and Sterling Lifted by Extension to EU-UK Trade Talks, Financial Times, December 14, 2020,
https://www.ft.com/content/4f65ee35-9957-4bab-91c4-9f76c0a44a2b; Cameron-Chileshe, Jasmine, Alice Hancock,
Sebastian Payne, and George Parker, London to Enter Toughest Coronavirus Restrictions, Financial Times, December
14, 2020, https://www.ft.com/content/626f2e3a-ac8f-401d-818a-01120cab3284.
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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.238 The Finance Ministers also pledged
fiscal support to ensure health systems can sustain efforts to fight the outbreak.239 In most cases,

238 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/
03/economy-COVID-19-rate-cuts/.
239 Giles et al., “Finance Ministers Ready to Take Action.”
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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.”240 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.241
The United States
Recognizing the growing impact the pandemic has had on financial markets and economic
growth, the Federal Reserve (Fed) took a number of steps to promote economic and financial
stability involving the Fed’s monetary policy and “lender of last resort” roles. Some of these
actions were intended to stimulate economic activity by reducing interest rates; other actions were
intended to provide liquidity to financial markets so firms would have access to needed funding.
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.242” 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.243 In
October, Congress and the Trump Administration negotiated over the substance of an additional
spending package to support the U.S. economy.
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 14. 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.

240 Federal Reserve Releases FOMC Statement, March 3, 2020, https://www.federalreserve.gov/newsevents/
pressreleases/monetary20200303a.htm.
241 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.
242 Federal Reserve Issues FOMC Statement, March 15, 2020. https://www.federalreserve.gov/newsevents/
pressreleases/monetary20200315a.htm.
243 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 14. U.S. GDP, Percentage Change From Preceding Quarter
Seasonally adjusted at annual rate

Source: Bureau of Economic Analysis. Created by CRS.
On December 4, the U.S. Census Bureau reported an increase in the overall U.S. goods and
services trade deficit in October to $63.1 billion, or an increase on a month-to-month basis of
$1.0 billion, reflecting higher nominal values of exports and imports of goods and services, as
indicated in Figure 15.244 Exports and imports of both goods and services rose from the previous
month. The rate of growth of exports was faster than that of imports, but the nominal value of
imports was greater than that for exports, thereby increasing the goods trade deficit. According to
the data, the deficit in goods trade decreased from $80.8 billion in September to $81.4 billion in
October; the surplus in services trade fell from $18.7 billion to $18.3 billion. Through October,
U.S. exports of goods and services had fallen by 16.4% in nominal value terms compared with
the comparable period in 2019; imports of goods and services had fallen by 11.5%, also reflecting
the overall decline in global trade.

244 Monthly U.S. International Trade in Goods and Services, October 2020, Census Bureau, December 4, 2020.
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Figure 15. U.S. Exports and Imports of Goods and Services 2020
In billions of dollars

Source: Census Bureau. Created by CRS.
On December 4, the BLS released data on the employment situation in November, indicating that
nonfarm payroll rose by 245,000 from the previous month, about half the number of jobs added in
October, but lowering the unemployment rate to 6.7% from 6.9% the previous month.245 The data
also indicate that 14.8 million persons reported in November that they did not work at all or
worked fewer hours at some point in the last 4 weeks because their employer closed or lost
business due to the pandemic.
As indicated in Figure 16, the U.S. economy has experienced monthly gains in jobs since the loss
of more than 20 million jobs in April. The gains, however, have declined on a monthly basis and
have not equaled the number of jobs lost, raising concerns that the U.S. economic recovery has
stalled. The number of unemployed fell to 10.7 million in November, down from 11.1 million the
previous month. Over the seven–month period from May through November, 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, while employment in
government (mostly state and local governments) fell.

245 The Employment Situation-November 2020, Bureau of Labor Statistics, December 4, 2020. https://www.bls.gov/.
The unemployment number does not include 6.7 million workers who were working part time not by choice and 7.1
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 0.3
percentage points.
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Figure 16. Change in Total Monthly U.S. Nonfarm Employment

Source: Bureau of Labor Statistics. Created by CRS.
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 17, 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.
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Figure 17. 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 reported that Federal Reserve
analyses 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.”246 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 monetary and fiscal response to the economic downturn, Chairman Powell
said in a speech on October 6, the monetary response included, “the full range of tools at our
disposal,” including cutting key interest rates, “unprecedented” asset purchases, establishing
emergency lending facilities to support households, businesses and state and local governments,
and implementing targeted and temporary measures for banks to support their customers.247 In
addition, the fiscal response accomplished three objectives, it provided support to: households,
businesses through the Paycheck Protection Program, and financial markets. Chairman Powell
concluded his remarks arguing the necessity of continued fiscal support for the economy:
The expansion is still far from complete. At this early stage, I would argue that the risks of
policy intervention are still asymmetric. Too little support would lead to a weak recovery,
creating unnecessary hardship for households and businesses. Over time, household

246 Current Economic Issues; Speech at the Peterson Institute for International Economics, Jerome H. Powell, May 13,
2020.
247 Recent Economic Developments and the Challenges Ahead, Jerome H Powell, Remarks at the National Association
for Business Economists, October 6, 2020.
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insolvencies and business bankruptcies would rise, harming the productive capacity of the
economy, and holding back wage growth. By contrast, the risks of overdoing it seem, for
now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they
will not go to waste.248
Monetary Policy249
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

248 Ibid., p. 7.
249 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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announced it would offer a three-month repo of $500 billion and a one-month repo of $500
billion on a weekly basis through the end of the month in addition to the shorter-term repos it had
already been offering. These repos would be larger and longer than those offered since
September. On March 31, the Fed announced the Foreign and International Monetary Authorities
(FIMA) Repo Facility, which works like the foreign repo pool in reverse. This facility allows
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.250
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,

250 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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which is akin to a discount window for primary dealers. Like the discount
window, it provides short-term, fully collateralized loans to primary dealers.
 On March 19, the Fed created the Money Market Mutual Fund Liquidity Facility
(MMLF), similar to a facility created during the 2008 financial crisis. The
MMLF makes loans to financial institutions to purchase assets that money
market funds are selling to meet redemptions.
 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,251 and extended of the tax filing deadline.252 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.253
 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.254
 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.255
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.

251 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/.
252 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.
253 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.
254 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/.
255 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.256
 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
Development Authority; the Food and Drug Administration; community health
centers; rural health clinics; and testing for the uninsured.

256 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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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 December 2, the Federal Reserve released its “Beige Book”—a mostly qualitative assessment
of the U.S. economy produced 8 times a year by the 12 regional Federal Reserve banks—that
provides an assessment of economic activity across the various regions of the country. The
assessment indicated that economic activity in November had improved modestly, although was
negligible in some Districts.257
Personal Income and Outlays
The Bureau of Economic Analysis (BEA) reported on May 29 that U.S. personal income rose by
10.5% in April, primarily reflecting a 100% increase in government payments to individuals from
federal economic recovery programs, as indicated in Figure 18. During the same period, personal
consumption fell by 13% as consumers curtailed spending. The lower level of spending combined
with income transfers, which households apparently deposited into saving accounts, raised the
personal savings rate to 33% in April at an annual rate, compared to an annual rate of 8.2% in
February. In November, BEA reported that personal income fell by 0.7% in October after rising
by 0.7% in September, in part reflecting a drop of 6.2%, as government transfer payments fell
from $6.6 trillion in April to $3.8 trillion in October. Also, personal consumption recovered
somewhat, rising by 0.5% in October, down from an increase of 1.2% in the previous two
months. As a result of the increase in spending, the personal savings rate fell to 13.6% in October,

257 The Beige Book: Summary of Commentary on Current Economic Conditions by Federal Reserve District, December
2, 2020, the Federal Reserve System.
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