By Justinas Baltrusaitis
As the effects of the Coronavirus pandemic continue to manifest in different sectors, the G20 member states have been responding through fiscal packages. Data gathered and calculated by Buyshares.co.uk indicates that the cumulative fiscal package to the pandemic now stands at $4.68 trillion.
From the data, Japan has the highest fiscal response to the COVID-19 outbreak at $996.45 billion. Compared to the country’s 2019 Gross Domestic Product (GDP) of $5.110 the package is 19.5%. The United States has the second-highest fiscal response of $562.1 billion to mitigate the effects of the coronavirus pandemic. The amount represents 11% of the country’s GDP of $21.2 trillion. Australia with a GDP of $1.45 trillion has a fiscal response stands at $495.67 billion. On the other hand, Canada’s fiscal response is the fourth highest at $429.24 billion, representing 8.4% of the country’s $2.8 trillion. Brazil closes the top five categories of the G20 countries with a fiscal response package of $332.15 billion or 6.5% of the country’s GDP of $2.02 trillion.
Other G20 countries with notable responses to the virus crisis include Poland ($316.82 billion), Germany ($250.39 billion), France ($204.4 billion), China ($194.18 billion), and Saudi Arabia ($163.52 billion) and the United Kingdom ($153.3 billion). On the other hand, among this category of countries, South Africa has the least fiscal response of $5.11 billion, representing only 0.1% of the $350 billion GDP. Mexico had the second least fiscal response of $35.77 billion representing 0.7% of $1.2 trillion.
A fiscal package refers to economic measures put in place by a state to stimulate the struggling economy. The objective of such packages is to prevent a recession by boosting employment and spending. Governments usually introduce fiscal stimulus packages by cutting taxes or increasing spending in a bid to revive the economy. When taxes are low, people have more income at their disposal.
Coronavirus pandemic fiscal packages eats into GDP unlike before
Our research also overviewed the size of fiscal packages announced by G20 countries in response to the financial and COVID-19 crisis in 2009 and 2020. In general, the response fiscal package for the Coronavirus outbreak accounted for a big chunk of the GDP for the surveyed group of countries.
For Japan, the country’s fiscal response to the financial crisis was 2.2% of the GDP compared to the Coronavirus pandemic which 19.5% of the GDP. For the United States, the fiscal package to the financial crisis and the Coronavirus was 11% and 5.9% of the GDP respectively. Australia’s response to the current pandemic is 9.7% of the GDP while for the financial crisis the rate stood at 1.8%.
In 2020, Canada’s response to the pandemic represented 8.4% of the GDP while in 2009, such a fiscal response was 2.8% of the GDP. For Brazil, the fiscal package released to mitigate the financial crisis in 2009 represented 0.5% of the GDP compared to Coronavirus’s rate of 6.5%. On the other hand, South Africa’s fiscal package response to the financial crisis and the coronavirus pandemic compared to GDP was the least at 2.6% and 0.1% respectively.
The world focuses on G20 for guidance on Coronavirus response
The rest of the world has been watching responses made by the G20 countries for guidance. With the lockdowns due to the virus, most economies have stalled since it is dangerous for people to cooperate in the same physical space as before. In this case, the world needs a new policy mechanism and G20 is among the bodies expected to come up with one.
With the Coronavirus pandemic, there resulted in a health crisis that directly led to a drop in economic activity. It is worth mentioning that the current fiscal packages are not final because the pandemic is yet to be contained. Notably, the full economic impact of the pandemic cannot be predicted because such a situation has not been witnessed in recent history.
Containing and mitigating the spread of the virus has been the priority of authorities by preparing for a stronger rebound as mitigation measures are eased. Most countries were forced to act and limit the economic hardship caused by the direct effects of containment measures such as the lockdown.
It is worth noting that the Coronavirus pandemic is projected to hit the developing world the hardest. Analysts have argued that the response needs a global approach and the G20 countries should give guidance. With a focus on economic recovery, countries are seeking to offer liquidity support to businesses to help them stay afloat and availing income support to vulnerable individuals.