Commentary

Breaking down the G20 Covid-19 Fiscal Response: May 2020 Update

June 5, 2020

Confirmed cases of the novel coronavirus (Covid-19) exceed 6 million as of June 3 and continue to climb. To combat the virus’ spread, governments have implemented restrictions on economic activity unprecedented in peacetime. The Organisation for Economic Co-operation and Development estimates that containment measures will cause an initial decline in the level of output of 20 to 25 percent in many economies, and the International Monetary Fund (IMF) projects negative global growth for 2020 with “the worst economic fallout since the Great Depression.”

In response to this unprecedented shock, governments have pledged massive economic support, from direct payments to individuals to “limitless” loans for struggling businesses. At a March 26 virtual summit, leaders of the Group of Twenty (G20) major economies said they were spending over $5 trillion, equivalent to 7.4 percent of 2019 G20 countries’ gross domestic product (GDP), to “counteract the social, economic, and financial impacts of the pandemic.” Since then, G20 governments have added to this figure as the extent of the economic fallout has become clearer.

Developed by the CSIS iDeas Lab. Data updated through May 29, 2020, and available for download here.

The CSIS Economics Program has been analyzing and categorizing major fiscal actions taken by G20 countries to respond to the economic shock. Updated data as of May 29 show several key trends:

We estimate fiscal support from G20 countries now exceeds 10 percent of 2019 G20 GDP. As of May 29, we estimate G20 countries are providing $7.0 trillion in fiscal support, representing 10.3 percent of 2019 G20 GDP. Of the total, $3.5 trillion will support direct government spending (5.2 percent of 2019 G20 GDP), up from $3.2 trillion (4.8 percent of GDP) as of April 29 and $2.1 trillion (3.1 percent of GDP) as of April 10. Credit enhancements contribute $2.4 trillion and tax relief another $1 trillion (non- itemized spending accounts for $0.1 trillion).

Emerging market (EM) economies continue to boost spending but still lag advanced economy (AE) peers by a wide margin. We estimate that G20 countries, on average, are providing 8.3 percent of their 2019 GDP in fiscal support. G20 EM fiscal support averages 4.6 percent of GDP, an increase of 1.4 percentage points since April 29 and 2.6 percentage points since April 10 but still well below the average of 12.4 percent for AEs.

Among emerging markets, China, India, and Indonesia have announced major fiscal responses since our last update. We now estimate that China’s total fiscal response amounts to 5.6 percent of GDP, an increase from 3.7 percent of GDP in the April 29 tracker update but still below the level of support provided during the 2008-2009 global financial crisis (roughly 13 percent of GDP).

G20 loan guarantee frameworks exceed $2 trillion. G20 economies, led by European countries and Japan, have announced loan guarantee frameworks worth $2.2 trillion, representing 3.2 percent of 2019 G20 GDP. Given that many guarantee frameworks do not quantify ex ante fiscal outlays, we assign a 50 percent “fiscal cost” to guarantee figures resulting in our headline fiscal support figure of $7.0 trillion. Assigning a 100 percent “fiscal cost” to loan guarantees would boost our headline figure to $8.1 trillion, or 11.9 percent of G20 GDP. Conversely, assigning zero “fiscal cost” to loan guarantees would lower our headline figure to $5.9 trillion, or 8.7 percent of GDP.

While not included in our analysis of individual country responses, on May 27 the European Union also announced a landmark fiscal support package worth 750 billion euros ($843 billion). The measures include 500 billion euros ($562 billion) in grant aid to member states and 250 billion euros ($281 billion) available in loans. Of the total, 560 billion euros will go toward the Recovery and Resiliency Facility, which will support national “investments and reforms, including in relation to the green and digital transitions and the resilience of national economies.” Financing will be available to all EU members but will be concentrated in countries most affected by the pandemic, with Italy and Spain set to receive the largest portion of aid. The package still requires the support of all 27 member states, and European leaders will discuss the proposal at their next scheduled summit on June 19.

Notes:

The European Union has announced several fiscal responses in addition to the 750 billion package listed above: a 37 billion euro ($40 billion) Coronavirus Response Investment Initiative and a 540 billion euro ($586 billion) aid package to support member states. Both are not included in the $7.0 trillion G20 total. As of May 29, about $73 billion of G20 fiscal support was not itemized as credit enhancement, government spending, or tax relief.
This analysis focuses on major, national, discretionary responses in G20 countries and thus does not reflect the full extent of support deployed by these countries in response to Covid-19, such as monetary and regulatory tools (rate cuts, repurchase operations, quantitative easing), automatic spending mechanisms, and additional support from subnational government. We include tax cuts and cancellations in tax relief but do not assign a monetary value to tax deferrals, where possible. For further information on economic responses from 193 countries, please see the IMF’s tracker.

Foreign currency conversions are based on average 2019 exchange rates; all GDP calculations use the IMF’s October 2019 World Economic Outlook figures for 2019. The data are updated through May 29, 2020 and reflect publicly available information and are subject to ongoing revision. We welcome feedback and additional inputs at Economics@csis.org.

The CSIS Economics Program would like to thank the medical professionals, health care personnel, volunteers, delivery and grocery store workers, and others at the front line of the Covid-19 pandemic who work tirelessly to provide essential services to the public.

Stephanie Segal is a senior fellow with the Economics Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Dylan Gerstel is a research assistant with the CSIS Economics Program. Canghao Chen, CSIS Economics Program research intern, contributed to the data collection for this analysis.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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