The combined effort dwarfs the response to the 2008 financial crisis, which set a record at that time. But economists worry even the Herculean efforts made so far will not be sufficient if the crisis extends beyond June.
“The [$2 trillion US] The stimulus package is probably the absolute minimum required to offset the current draw from the outbreak, “Bank of America economist Joseph Song told clients Thursday.” The economy will probably need close to $ 3 [trillion] in fiscal stimulus, if not more. “
The last time global economic growth was depressed during peacetime was 1938, according to Chetan Ahya, Morgan Stanley’s chief economist.
G20 leaders, representing the world’s largest economies, said on Thursday that they are ready to do “what it takes” to minimize the economic damage from the pandemic and restore global growth.
“The scale and scope of this response will get the global economy back on its feet and set a strong foundation for job protection and growth recovery,” the leaders said in a joint statement following a video conference. They say their countries have committed to stimulating worth $ 5 trillion.
“It will not be possible to return to the same level of production and activity immediately,” Ahya said, noting the long-term effects of a sharp rise in unemployment and abusive corporate balance sheets.
Here are the highlights from the first wave of central bank and government measures.
- US lawmakers are expected to pass a $ 2 trillion stimulus package later in the week. The legislation includes direct payments to individuals, an increase in unemployment benefits and a $ 500 billion loan program.
- Congress has already approved more than $ 112 billion to raise vaccine research and provide two weeks of paid sick leave for those being tested or treated for Covid-19, the disease caused by the new coronavirus.
- The Federal Reserve has released a tsunami of stimulus measures in recent days. That includes an initial pledge to buy $ 700 billion US government bonds and securities-backed securities, which now have no ceiling and may include corporate bonds and bonds traded funds. The Fed also announced $ 300 billion in new funding to keep credit flows to businesses and consumers.
- The UK government has disclosed £ 330 billion ($ 397 billion) in loan guarantees and suspended local taxes for retail, hospitality and leisure for 12 months. It will also cover 80% of workers’ wages for at least the next three months, up to a maximum of £ 2,500 ($ 2,900) per month. It is unclear how much that initiative will cost.
- In addition, the British government on Thursday promised to give the self-employed a cash allowance of 80% of their average monthly profit, up to £ 2,500 ($ 3000) per month over the next quarter.
- The Bank of England has said it will increase its holding of UK government and corporate bonds by £ 200 billion ($ 242 billion).
- Germany has unveiled a rescue package worth up to € 750 billion ($ 825 billion) which includes measures to stimulate corporate lending and take direct action in companies.
- France has approved € 45 billion ($ 50 billion) in relief for small businesses and unemployed workers. It also guarantees € 300 billion ($ 330 billion) in corporate borrowing.
- Italy has greenlighted € 25 billion ($ 27.5 billion) to help workers and support the country’s health system, while Spain has raised € 200 billion ($ 220 billion).
- The European Central Bank has said it will spend 750 billion euros ($ 824 billion) buys government debt and private securities before the end of 2020 and is ready to do more if needed. It is on top of € 120 billion ($ 133 billion) in extra purchases, as announced earlier.
- So far, China has announced at least 116.9 trillion yuan ($ 16.4 billion) in financial relief and stimulus, plus 800 billion yuan ($ 112.5 billion) in tax rates and tax cuts. But if necessary, the country could very well spend trillions of dollars and incur enormous amounts of debt to boost its economy.
- People’s Bank of China has taken various credit simplification measures and distributed at least 1.15 trillion yuan ($ 162 billion) to help companies affected by the virus.
- The Japanese government is expected to consider a financial stimulus package in the coming weeks, which would likely include cash disbursements and measures to help SMEs access loans. The package can amount to 30 trillion yen ($ 274.2 billion).
- The Bank of Japan has said it will raise the annual rate for its purchases of exchange-traded funds by 6 trillion yen ($ 55 billion) and increase the annual rate of purchase for real estate investment by 90 billion yen ($ 822 million). It also raised the threshold for the purchase of corporate securities and corporate bonds by 2 trillion yen ($ 18 billion).
- The Indian government revealed a $ 22.6 billion relief package just 36 hours after the country’s lockdown was introduced. It includes health coverage and food assistance as well as subsidies and benefits for workers.
– Laura He, Manveena Suri, Kaori Enjoji, Yoko Wakatsuki, Ya Chun Wang, Fanny Bobille, Benjamin Berteau and Hada Messia contributed with the report.