Also in March, at the beginning of the pandemic, the leaders of the 20 largest economies in the world (G20) pledged to “spare no effort” against the Covid-19 pandemic and said they would inject $ 5 trillion into the world economy to protect lives, safeguard jobs and people’s income and preserve financial stability.
However, the extent of the pandemic and the economic damage resulting from it has forced countries to establish a much more robust response. Second lifting the think tank American Center for Strategic and International Studies (CSIS), countries announced, until June, a fiscal response of US $ 7.6 trillion, equivalent to 11.2% of the GDP of all G20 nations.
This amount ranges from policies for the temporary distribution of income to citizens, such as the well-known “coronavoucher” in Brazil and the US $ 1,200 aid that the US government gave to a good portion of its population, to the temporary reduction of some taxes and contributions and credit improvement, a bet mainly adopted by the countries of the European Union.
Worldwide, Covid-19 cases have gone from 10 million in six months. During this period, the epicenter of the pandemic passed from Asia to Europe and is now in America, with the United States and Brazil being the countries with the most cases and deaths from the disease. The prediction of the International Monetary Fund is that the global economy will contract 4.9% this year, while the indebtedness of the countries, especially the rich ones, should increase considerably, since they are the ones that are spending the most in this pandemic. Another study, by the OECD (Organization for Economic Cooperation and Development), revealed that the fiscal response is expected to cost the countries of the organization $ 17 trillion in increase in public debt.
The emerging economies of the G20, such as Argentina, China, Mexico, India and Russia, are experiencing a different situation and are not compromising so much of their GDPs. The CSIS highlighted the situation in Mexico and Russia, which announced “only” 1% and 2.5% of GDP in fiscal support, despite the forecast of an economic contraction of 10% and 6.6%, respectively. Among the emerging countries, Brazil is the country that announced a more comprehensive tax package, equivalent to 8.6% of GDP – although emergency aid has not yet reached all applicants and micro-enterprises are struggling to access credit lines. to cover payroll costs.
Based on the CSIS survey and countries’ fiscal response information compiled by the IMF, we list the G20 countries that are spending the most on this pandemic, considering direct government spending and not the entire announced fiscal package, which also includes loan guarantees.
Australia is one of the countries where the government is spending the most on the pandemic. Some 122 billion Australian dollars, equivalent to 8.9% of the country’s GDP, were committed to the fight against coronavirus, with measures ranging from salary subsidies, support to family income, free daycare for about one million families and support for the education system. The Australian government has also pledged to spend around 5 billion to improve the health care system and protect the people most vulnerable to Covid-19. Adding to the credit enhancement and tax cuts, the tax package is 10.1% of Australia’s 2019 GDP.
2. United States
The United States’ fiscal response to the pandemic is impressive because of the huge numbers: almost $ 3 trillion was directed to emergency aid for American citizens earning less than $ 5,000 a month, to guarantee unemployment benefit payments, to provide a network of food security for the most vulnerable, provide support for small businesses not to lay off employees. In addition, the US government approved $ 510 billion in loans and guarantees to prevent company bankruptcy and about $ 50 billion for international aid. Testing, drug and vaccine development and money transfers to states are also part of the US response to the pandemic. The United States is the country that has most reduced taxes due to the pandemic: the equivalent of 2.3% of GDP. The total American fiscal response is 13.6% of the country’s GDP. Government direct spending so far is 8.6% of GDP.
However, as noted by the CSIS, the country has not announced fiscal stimulus measures since April and several assistance programs are expected to expire at the end of July. Despite a resumption of jobs in May and June, a further increase in Covid-19 cases is already hampering plans to reopen the country’s economy.
Japan’s fiscal package for responding to the pandemic is 18.4% of the country’s GDP, about one trillion yen. Most of this amount is materializing in credit expansion, but government spending is still considerable: more than 400 billion yen. This money is being invested in preventive measures against the spread of Covid-19, strengthening the capacity to treat the disease, helping companies that had to close during the pandemic and to improve preparedness for the future. People and companies received financial assistance from the government, payment of social security contributions and taxes and loans were postponed.
Canada’s fiscal response, considering direct government spending, is greater than the United Kingdom and Italy, which in total have a broader fiscal package in proportion to GDP. But Canada has so far invested the equivalent of 7.6% of GDP in tests for Covid-19, medical equipment, prevention efforts, vaccine development, aid to indigenous communities and direct aid to families and businesses. Also considering the increased credit supply and tax relief, Canada committed 9.5% of its GDP.
Germany is the country that most improved the supply of credit in the pandemic, with a loan guarantee structure that reaches 15.4% of GDP. An economic stabilization fund has been created which, together with the public development bank KfW, is expanding the volume and access to public financing for companies of different sizes and credit insurers, increasing the total volume to 757 billion euros in credit. German government spending on health care equipment, hospital capacity, vaccine development, aid to companies to prevent layoffs, among other measures, total 290 billion euros, equivalent to 7.5% of German GDP in 2019.