Coronavirus update: Global economy is in crisis. Here’s what the world is doing
The coronavirus pandemic has led to a lockdown in large parts of the world. The lockdown, has, in turn, caused a major disruption to the economy with sectors such as tourism, aviation and hospitality being among the worst affected.Updated: Mar 24, 2020 20:11 IST
The rapid spread of coronavirus (Covid-19) disease around the world has severely affected the global economy causing economic distress to companies and individuals. It has caused disruptions in both supply and demand chain for goods and services around the world.
The pandemic has led to a lockdown in large parts of the world. The lockdown, has, in turn, caused a major disruption to the economy with sectors such as tourism, aviation and hospitality being among the worst affected. Major equity markets have lost around quarter of their value since the beginning of the crisis.
As India grapples with the consequences of the economic crisis due to Covid-19, here is a look at steps that major countries have taken to deal with the same.
The United States
The United States (US) is working on its third stimulus package of more than $1 trillion to support its industries as well as workers. As a part of this package, the government is planning to give $1200 per adult and $500 per child in direct money transfer. The package includes provisions of over $50 billion for airlines industry as well as enhanced unemployment insurance for workers.
In its earlier coronavirus relief package of around $100 billion approved last week, the US government had included provisions for free testing for Covid-19 and paid emergency leave. This also included unemployment benefits for its laid off workers.
The US Federal Reserve has cut down its interest rates twice in March, first by 50 basis points and then by 100 basis points in mid March to nearly zero. 100 basis points equals to one percentage point. It has also announced measures to inject $700 billion into the US economy by buying government bonds.
The United Kingdom
The Bank of England has cut the bank rate by 50 basis points to 0.25%. It has announced a scheme that would pay grants to firms to cover up to 80% of the salary of workers (up to 2500 pounds per month) to avoid mass layoffs. It has also deferred the next quarter of VAT payments of companies.
The UK government had earlier announced 330 billion pound ($398 billion) package of government- backed loan and guarantees. The package offered support to businesses that are paying sick pay to employees and also granted funds to smaller businesses up to 25000 pound.
Germany is planning a €150billion ($1600billion) rescue package to support its economy. The government is also setting up a 500-billion-euro bailout fund to take stakes in critical industries, according to reports.
The French government has announced a 45 billion euro ($50 billion) aid for small businesses and employees mainly through deferral of tax payments. It has also announced to guarantee bank loans up to 300 billion euros to avoid any risk of bankruptcy by small and medium companies.
The People’s bank of China (PBOC) announced in early February its decision to inject 1.2 trillion yuan ($174 billion) into the markets through open market operations (reverse repo operations) in order to maintain “reasonable and abundant liquidity” in the banking system. To lower the cost of financing, the PBOC has also cut the amount of cash that banks have to set aside as reserves (reserve requirement ratio) from mid March.
In mid February, the PBOC bank had lowered the interest rate on around $29 billion worth of one year loans to its banks by 10 basis points so that they could help businesses by lowering costs for them. Earlier this month, the Chinese financial regulators had offered relief to its small and medium-sized businesses by allowing them to delay loan or interest payments until the end of June, as per a Bloomberg report.