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An overview of global fiscal responses to COVID-19 pandemic

by Najlaa Ramli for Young Digital Leaders


Earlier in March 2020, International Monetary Fund (IMF) has recommended priority areas in which the government must uphold in the time of COVID-19 pandemic. The mentioned areas are:

  1. Prevention of people from contracting the disease, containment & suppression of the disease, and treatment to those who are affected;
  2. Provide timely, targeted and temporary cash flow relief to those who are most vulnerable/affected in the time of crisis; and
  3. Prepare a protection and continuity plan for individuals and businesses during the crisis and easing out afterward.

The priority of every government is to protect the wellbeing of its people. In facing the serious global pandemic crisis, governments around the world are reacting to limit the human and economic impacts of the COVID-19 outbreak. Here is an overview of the magnitude of fiscal measures that have been announced by some governments so far:

Picture 1 Source: IMF, government announcements of stimulus packages

Following the surge of positive cases of COVID-19 recorded worldwide, governments started announcing their intervention measures. Whilst containment and suppression measures via social distancing and lockdown are deployed, fiscal policies or government’s spending and tax instruments are being expanded.

Taking the amount of fiscal stimulus as a percentage of a country’s GDP, Malaysia seems at the forefront at over 15%. Prihatin Economic Stimulus Package (ESP) announced on 27 March 2020, altogether with an economic stimulus package for vulnerable sectors announced earlier in late February, fiscal stimulus package in Malaysia amounted to RM250 billion (~US$58 billion).

However, it is too premature to claim the interventions taken by our country are either enough, or effective. Other governments are also reacting to the crisis actively by continuously reviewing and preparing for additional stimulus as the situation needed. For example, Singapore initially announced its fiscal package to deal with economic slowdown on 18 February 2020. A supplementary budget was announced on 26 March 2020 that includes the expansion of subsidies and cash payouts to households. United States of America (USA) also has announced its stimulus package in three phases since early March.

Healthcare expenditure: A Priority during public health crisis

COVID-19 pandemic is first and foremost a public health crisis. Hence, the priority of government responses should lie on health care systems to contain and suppress the outbreak. In the absence of medical countermeasure such as vaccines, the alternative approach involves rigorous testing, treatments for all infected patients, readiness of intensive care units, and adequate support to healthcare workers.

In general, all healthcare systems are undergoing capacity constraints during the outbreak. The existing number of hospital beds and intensive care units will not be sufficient with the spread of the outbreak. The stockpile of medical gear, such as ventilators, medicines, and personal protective equipment (PPE), are depleting. Additionally, support and protection for frontline healthcare staff are essential in tackling the outbreak.

Picture 2Source: IMF, government announcements of stimulus packages

Hong Kong allocated about HK$30 billion or 1 percent of its GDP for its newly created Anti-Epidemic Fund. The allocation is to provide additional resources to its Hospital Authority and sufficient protection for frontline healthcare staff. Hong Kong is allocating the fund for the deployment of additional manpower, procurement of additional PPE and other services related to medical, such as for cleaning, security, transportation, storage, clinical waste disposal, and hospital supplies.

Social aid: Cushioning the economic shocks and uncertainties

COVID-19’s containment and suppression measures require some degree of social distancing and movement restrictions of the general public. The trade-off from this measure is curtailed economic activities that introduce shocks to supply and demand in the economy.

It is also a task on hand for the government to cushion the impact of the inevitable economic fallout and ensure proper measures are prepared for the subsequent need to get the economy up and running again. Heightened uncertainties during this crisis lead to a drop in consumption and investment, in which it triggers a chain reaction that worries the household and businesses.

Picture 3Source: IMF, government announcements of stimulus packages

For households, objective of fiscal policy should be focusing on income support, especially during the quarantine or in the time of temporary laid-off. Households who are considered as the more vulnerable group are those dependent on daily wages, who have low income, disabled and homeless people. Many households are also expected to be on temporary unemployment because of the COVID-19 shock. Social assistance ranging from cash transfers, discounts, or unemployment insurance are amongst the temporary support that can be offered by governments to protect their distressed populations from the economic repercussions of COVID-19 crisis. In general, most governments are providing and delivering this assistance for the next three to six months for their resident, with the hope that the pandemic situation will ease out soon.

For businesses, their concern is having adequate cash flows to pay workers and suppliers. Tax relief, subsidies, deferment of loan payment, flexibility in lending to small and medium-sized enterprises and credit guarantees are amongst offer that government may present as options.

Australia has announced several stimulus packages in March 2020. They started with an announcement of wage subsidies for businesses. Subsequent measures include payments to jobseekers and payment for employers to pass on to employees for them to stay in work. Reserve Bank of Australia also announced a three-year funding facility to help banks continue to lend to businesses.

Expect evolving reactions from the governments

Unprecedented interventions by the governments at this junction are needed, without a doubt. Under this COVID-19 circumstance, governments are actively figuring and accommodating to their best to cushion the impact of this health emergency and economic downturn. Enhancements to stimulus packages are being announced as we navigate through this unprecedented crisis. Ambitious interventions to mitigate this episode are important for everyone – young and old, low and high income, individuals and businesses.

0 thoughts on “An overview of global fiscal responses to COVID-19 pandemic

  • So this means, in terms of stimulus packages, malaysia gov is handling it well, but not so much for our healthcare staff, and for households and businesses, they are giving almost pretty much the same amount. Right?

  • Hi! Thanks for your feedback.

    In regards to expenditure on healthcare, the proportion differs according to their national containment strategies, the growth rate of the outbreak, and also to their existing healthcare system capabilities. For example, France is allocating the resource to support its public hospitals that are overwhelmed by large number of COVID-19 positive patients who require intensive care promptly. They are also focusing on relieving congested hospitals and shuffle hundreds of patients and medical personnel in and out of COVID-19 hotspots.

    You may read more here:

    Same goes to social aid for households and businesses. From observation, most governments are offering assistance and facilities for the businesses to stay afloat. This is done to minimise the adverse impact of high unemployment.

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