Economic interventions to ameliorate the impact of COVID-19 on the economy and health: an international comparison

Abstract

Background

The COVID-19 pandemic continues to challenge governments and policymakers worldwide. They have rightfully prioritised reducing the spread of the virus through social distancing interventions. However, shuttered business and widespread restrictions on travel and mobility have led to an economic collapse with increasing uncertainty of how quickly recovery will be achieved.

Methods

The authors carried out a review of publicly available information on the economic intervention’s countries have put in place to ameliorate the impact of COVID-19.

Results

The strategies and scale of economic interventions have been broad, ranging from 2.5% to a reported 50% of Gross Domestic Product.

Conclusions

Numerous countries are beginning to ease lockdown restrictions and restart economies in different ways. There is therefore evolving, real-world data that should be used dynamically by governments and policymakers. The strategies on restarting the economy must be balanced against the uncertainty of a possible second wave of COVID-19. A nuanced approach to easing restrictions needs to take into account not only immediate risk to life but longer-term risks of widening inequalities and falling life expectancy.

COVID-19, communicable diseases, economic interventions, public health

Introduction

Countries have introduced measures including social distancing and infection testing to decrease the immediate risk to life.¹ Economic interventions are also crucial in this response as the World Health Organization defines one of the biggest determinants of health is income² with lives significantly shortened by socioeconomic inequality.³ Therefore, alleviating financial pressures will allow people to follow government advice leading to reduced infectious spread and ultimately also save lives in both the immediate and medium time frame.

Methods

The authors carried out a review of publicly available information on the economic interventions countries have put in place to ameliorate the impact of COVID-19.

Table 1

Summary of countries’ GDP expenditure and fiscal interventions

Country	% GDP equivalent fiscal response	Financial Interventions
China	2.50%	1. Income support measures for individuals and households excluding tax and contribution changes
		2. Tax and contribution policy changes
		3. Deferral of taxes and social security contributions
		4. Loan guarantees by the state
		5. Medical equipment and pharmaceuticals related to the new
		6. Coronavirus are exempt from registration fees
Ireland	4.00%	1. State guarantees on loans taken by businesses: SMEs, mid-caps, etc. from banks
		2. Advanced payments/repayments
		3. Income support measures for individuals and households excluding tax and contribution changes
		4. Public sector subsidies to businesses
		5. Defer business rates payments due from the most immediately affected businesses, primarily in the retail, hospitality, leisure and childcare sectors
		6. Public sector loans or capital injections to businesses
New Zealand	4.00%	1. Income support measures for individuals and households
		2. An increase in the provisional tax threshold and the reintroduction of depreciation charges for commercial buildings
		3. NZD 600 million will be spent on support for the aviation industry
		4. The Business Finance Guarantee Scheme
		5. Six-month interest and principal payment holiday for mortgage holders and SMEs who have lost income
Hong Kong	10.00%	1. Employment support scheme
		2. 100% guarantee product under the SME Financing Guarantee Scheme
		3. Tax and fee reliefs
Australia	10.50%	1. Income support measures for individuals and households
		2. Movement restrictions and self-isolation for tourists
		3. Increasing the threshold for assets eligible for instant tax write-off
		4. Firms that are affected by the pandemic to defer payment of tax liabilities for up to 4 months
		5. The government will guarantee 50% of new loans issued by eligible lenders to SMEs
USA	11.00%	1. Income support measures for individuals and households excluding tax and contribution changes
		2. Tax reductions and deferrals
		3. Public sector subsidies to businesses
		4. Public sector loans or capital injections to businesses
South Korea	11.40%	1. Income support measures for individuals and households
		2. Relief checks to households in the bottom 70% income bracket
		3. Introduction of temporary special tax reduction for SMEs located in Corona-related special disaster areas
		4. VAT reduction and exemptions
		5. 30% contribution rate deduction for social security for small business and low-income households
		6. Public sector loans or capital injections
Spain	12.00%	1. Obligatory shutdown of economic activitiesx
		2. Income support measures for individuals and households
		3. Specific program for victims of gender violence, homeless people and others who are especially vulnerable
		4. Exemption of social security contributions by impacted firms
		5. Reduction of VAT applicable to the supply of medical equipment from national producers to public entities
		6. Deferral of taxes and social security contributions
		7. Public sector loans or capital injections to businesses
		8. Loan guarantees by the state
Sweden	14.90%	1. Income support measures for individuals and households
		2. Removal of the income ceiling for student aid
		3. Tax and contribution policy changes
		4. Public sector subsidies to businesses
		5. Government covering 50% of the rental reduction up to 50% of the fixed rent
		6. Deferral of taxes and social security contributions
		7. Public sector loans or capital injections to businesses
		8. Loan guarantees by the state
France	19.00%	1. Employment protection: furlough, short-time working, temporary leave
		2. Shutdown of economic activities (easing initiated)
		3. Suspension/postponement on payments: tax, VAT, business rates, etc.
		4. Direct compensation to businesses and/or consumers for damages caused by COVID-19
		5. Aid to support particular industries, e.g., airports
		6. State guarantees on loans taken by businesses: SMEs, mid-caps, etc. from banks
		7. Credit insurance
Japan	21.70%	1. Income support measures for individuals and households
		2. Provides SMEs and large corporations a financial support
		3. Public sector subsidies to businesses
		4. Deferral of taxes and social security contributions
		5. Public sector loans or capital injections
		6. Loan guarantees by the state
UK	22.10%	1. Obligatory shutdown of economic activities (some easing In place)
		2. Income support measures for individuals and households excluding tax and contribution changes (now extended)
		3. Deferral of income tax and VAT payments
		4. In England, 100% relief of business rates on property for all properties in retail, hospitality or leisure
		5. Universal Credit (UC) for self-employed
		6. Public sector loans or capital injections to businesses
		7. Loan guarantees by the state benefiting private borrowers
		8. Welfare support
Germany	27.00%	1. Employment protection: furlough, short-time working, temporary leave
		2. State guarantees on loans taken by businesses: SMEs, mid-caps, etc. from banks
		3. Subsidies on loan/interests
		4. Direct grants
		5. Credit insurance
		6. Obligatory shutdown of economic activities (easing has initiated)
		7. Child allowance (Kinderzuschlag)
		8. Reduced VAT rate of 7% will be applicable to restaurants
		9. Public sector subsidies to businesses
		10. Cover 100% of social security contributions for lost hours of short-time workers
Italy	50.00%	1. Income support measures for individuals and households excluding tax and contribution changes
		2. Moratorium on debt payments, including mortgages
		3. 60% tax credit on commercial rents
		4. Fund to provide fee-free guarantee for SMEs loans
		5. Deferral of taxes and social security contributions
		6. Loan guarantees by the state
		7. One-year suspension in the repayment of real estate mortgages

Results

Government strategies have differed. The UK extended restrictions on the movement of people; as did other countries when numbers of deaths continued to increase. Sweden in contrast has favoured ‘herd immunity’, having notably less restrictions on the population, but specific guidance to protect the most vulnerable. The scale of economic interventions too has differed. Initially measures such as statutory sick pay from the first day of absence were put in place to ensure people self-isolated immediately when displaying symptoms. Latterly economic measures served to mitigate the financial pressure on businesses and employees as countries went into lockdown. The size of fiscal input has been relatively large but varied within each country⁴ (see Table 1). The number of deaths and Gross Domestic Product (GDP) expenditure however do not seem to be directly proportionate; e.g. New Zealand have spent 4% of their GDP with 21 deaths as of 20 May 2020, the USA spent 11% with 91 664 deaths,⁵ and Sweden (14.9% GDP) has recorded 3 831 deaths.⁶

Discussion

Main finding of this study

Internationally, there is clear intention from governments to protect its people and businesses amidst what is likely to be the biggest recession of our time. The strategies and scale of economic interventions have been broad, ranging from 2.5% to a reported 50% of Gross Domestic Product.

Governments have subsidised from 80%, 70% to 50% of an employee’s salary in the UK, France and the USA, respectively.⁷ This aims to temporarily protect businesses and jobs whilst affording people to pay for necessities. Governments are providing support on mortgage repayments; in Spain and Italy, mortgage payments are suspended for 6 and 12 months, respectively.⁸ Protection for businesses is provided through loans and grants.

What is already known on this topic

The COVID-19 pandemic, caused by severe acute respiratory syndrome-associated coronavirus type-2 (SARS-CoV-2), is putting healthcare systems across the world under severe strain. Although COVID-19 is a mild to moderate febrile respiratory infection in most people, viral infection can trigger potentially fatal lung inflammation. We know that both COVID-19 and measures to reduce the spread of COVID-19 have disproportionately affected some populations groups including the elderly, ethnic minority groups, those with underlying health conditions and those on lower incomes.⁹

What this study adds

As major economies pass the peak of infections fear of spiralling unemployment loom, KPMG, the global accountancy firm, estimates approximately 20 million job losses in the USA by the second quarter of 2020.¹⁰ Europe has responded to EU hardships by releasing billions of euros to ameliorate the situation.⁸ Japan injected a further 8.9 trillion yen ($82.6 billion) to cover the crisis.¹¹ The UK estimates 12 million people could be unemployed in the next quarter.¹² Political nervousness therefore seems justified.

Establishing strategies on restarting the economy must be balanced against the uncertainty of a possible second wave and overwhelming the healthcare system. Researchers highlight that saving lives through social distancing far outweighed economic damage. The analysis showed benefits outweighed the economic costs by $5.2 trillion.¹³ There is no trade-off between saving lives and livelihood.¹⁴ However, this next phase requires a more nuanced strategy taking into account not only immediate risk to life but longer-term risks of widening inequalities and falling life expectancy.

Numerous countries are beginning to ease lockdown restrictions and restart economies in different ways. There is therefore evolving, real-world data. This intelligence should be used dynamically by governments. Leaders are recommended to strategise for the long game whilst building in agility to respond to international learnings. A disproportionate economic intervention package should be put in place to match the disproportionate impact of COVID-19 on lower socioeconomic groups and ensure the opportunity of ‘levelling up’ is not lost. Dialogue and collaboration with business leaders and public and population representative bodies should inform the strategy, and this should be underpinned by investment in public health as restarting the economy in full depends on easily accessible testing and tracing, vaccination, treatment and care.

Limitations of this study

This study is limited to publicly available information. The COVID-19 pandemic and countries’ responses are an evolving situation, and the information presented here was correct as of 24 May 2020.

Shaun Danielli, Mr

Raman Patria, Mr

Patrice Donnelly, Ms

Hutan Ashrafian, Dr

Ara Darzi, Lord Professor