International COVID-19 Stimulus and Relief

As of October 18, 2023, more than 771 million people have been infected with COVID-19 and nearly 7 million people have died worldwide. This has been further compounded by an economic crisis caused by the disease’s disruption to the world economy, resulting in millions of people losing their livelihoods, exacerbating global poverty and inequality.

The International Monetary Fund (IMF) estimates that the world economy, as measured by real gross domestic product (real GDP), shrank by as much as 3.5% in 2020, the first year that the World Health Organization declared the disease a pandemic. In response to this crisis, governments and central banks worldwide have enacted sweeping and sizable stimulus measures to counteract the disruption caused by the coronavirus and provide relief to those suffering from it.

We have compiled below a list of what countries in various regions did in 2020. For each, we outlined monetary policy, managed by central banks, and fiscal policy, managed by central governments. In this article, due to the international nature of the conversation, all currencies are represented with their currency symbol, even the USD.

Asia and Oceania

China

China, the world’s second-largest economy, responded with stimulus and relief efforts earlier than most other countries. Partially, as a result, it was the only major economy that expanded in 2020.

The People’s Bank of China (PBOC) cut several key interest rates at the beginning of the pandemic to facilitate borrowing. It lowered bank reserve requirements and engaged in significant repo operations and its medium-term lending facility to inject liquidity into the economy. The PBOC expanded re-lending and rediscounting facilities to increase lending, especially to micro-, small-, and medium-sized firms and the agricultural sector.

In the spring of 2020, the Chinese government unveiled a Renmini 3.6 trillion stimulus package, which also contained funding for local governments to stop the spread of COVID-19 and business tax cuts. This was accompanied by the issue of special treasury bonds by Beijing for the first time since 2007, along with increasing the limit on special bonds that local governments can issue.

The key measures to maintain economic stability included tariff and fee cuts, loan guarantees to small- and medium-sized businesses, increased expenditure on epidemic prevention production of medical equipment, moving up unemployment payments, issuing consumer subsidies to compensate for lost income and social security tax relief.

Hong Kong

While not technically a central bank, the Hong Kong Monetary Authority (HKMA) sets monetary policy for Hong Kong. In March 2020, it announced reductions in the benchmark interest rate following the Fed’s interest rate reductions to maintain its currency peg. Around the same time, the HKMA lowered capital requirements to allow banks to lend more.

Hong Kong released multiple major stimulus and relief packages. The first, released in February 2020, established the HK$30 billion Anti-Epidemic Fund, including subsidies to the retail, restaurant, and transportation sectors; increased hospital funding; and increased funds for mask production and purchasing.

As part of its 2020–2021 budget, it released another round of relief that included cash subsidies to residents, rent support for those living in public housing, tax cuts, and low-interest loans for businesses, among other measures. Later packages also included wage subsidies, tax deferrals, new spending on preventative health measures, and more.

Japan

The Bank of Japan (BOJ), the nation’s central bank, launched a raft of major stimulus provisions. Throughout the year, it substantially increased quantitative easing (QE), doubled the rate at which it was purchasing exchange-traded funds (ETFs), increased purchases of corporate bonds and commercial paper, and announced a new program of zero-interest loans to increase lending to businesses impacted by the virus. According to the BOJ, these combined efforts provided over ¥110 trillion ($773 billion) in liquidity.

Japan passed a slate of spending bills to provide relief for workers and businesses. These included increased funding for business loans, preventive health measures, cash payments, tax deferments, and rent subsidies. As of November 2021, Japan’s total spending to support its economy in the aftermath of the COVID-19 pandemic was estimated at $3.58 trillion.

India

India experienced one of the largest economic contractions during the pandemic, seeing a GDP decline of 7.3% in the 2020-2021 financial year.

In March 2020, India’s central bank, the Reserve Bank of India (RBI), lowered its benchmark interest rate, the interest rate of its Marginal Standing Facility (MSF), its repo rate, and the reverse repo rate, all to avoid liquidity concerns and credit constraints.

The bank also loosened capital restrictions and reserve ratios for banks. It launched “targeted long-term repo operations” (TLTRO), which allowed repo agreements on investment-grade bonds, commercial paper, and other debt instruments. The RBI allowed all banks to permit three-month deferments of payment for loans and allowed a moratorium on classifying assets as nonperforming, which typically occurs after 90 days of being overdue on payments.

India's fiscal support measures included above-the-line spending on relief to help the nation’s poor cope and below-the-line spending intended to extend credit to businesses. Key provisions included free grain and staples for poor families, cash payments to senior citizens, cash payments to farmers, free cooking gas to women, and more. Business-support measures included loan and credit extensions, tax incentives, business subsidies, and economic reforms.

Australia

Australia’s central bank, the Reserve Bank of Australia (RBA), lowered its three-year Australian government bond yield target rate, cut its target cash rate, and launched a new QE program to purchase bonds, efforts aimed at lowering interest rates, making it easier to borrow and to encourage spending.

The RBA also announced significantly expanded repo operations. It also started an AUD$90 billion term funding facility to make loans to banks to allow them to expand business lending, especially to small- and medium-sized businesses.

On the fiscal end, the Australian government launched multiple relief packages. The first, announced on March 12, 2020, contained spending on payments to small- and medium-sized businesses to encourage hiring; payments to people collecting benefits, including the elderly, the poor, and veterans; and subsidies to businesses in industries, such as tourism, that had been hit hardest by COVID-19. Later packages authorized payments to help small businesses cover wages, loan guarantees, additional welfare payments, tax cuts, guaranteed home loans, and infrastructure spending.

South Korea

In 2020, the Bank of Korea (BOK), the South Korean central bank, cut its base interest rate and lowered the interest rate on its bank-intermediated lending support facility–the loan facility for small- and medium-sized enterprises–to promote lending. The BOK adopted wide flexibility in repo operations to avoid a liquidity crunch, including broadening collateral options, expanding the list of institutions to which it would offer repo agreements, and not imposing a limit on how much liquidity it would supply.

It launched a new corporate bond-backed lending facility and authorized lending up to ₩10 trillion ($7.7 billion) to banks, using corporate bonds as collateral. It also lowered the capital and reserve requirements for South Korean banks.

Fiscal support began with a ₩11.7 trillion ($9 billion) stimulus and relief package announced in March 2020. It included medical funding for hospitals and quarantine efforts, small- and medium-sized business subsidies to help companies pay workers, child care subsidies, and job training.

Later, South Korea launched additional funding for loan guarantees and low-interest loans to domestic companies and funding for asset purchases and loans to stabilize the stock and bond markets. The South Korean government also made payments to low-income families and deferred or exempted payments for pension and health industry contributions, as well as electrical bills for low-income families, small- and medium-sized enterprises, and some self-employed people.

Europe

European Union (EU)

The European Central Bank (ECB) had little room to lower interest rates, meaning it had to rely on other monetary tools to respond to the pandemic. While its benchmark interest rates remained the same, the ECB lowered the interest rate on its targeted longer-term refinancing operations (TLTRO III), a program of long-term loans, to banks to keep liquidity steady.

It announced a new series of longer-term refinancing operations called “pandemic emergency longer-term refinancing operations” (PELTROs) to boost credit further to provide additional lending liquidity. To further protect liquidity, the ECB temporarily lowered the level of capital banks need to hold to allow them to increase lending. It broadened what could be used as collateral for refinancing operations.

In March 2020, the ECB announced an asset-purchase program called the Pandemic Emergency Purchase Program (PEPP), eventually purchasing roughly €1850 billion ($2 billion) in bonds and commercial paper. On December 16, 2021, the Governing Council of the EBC "decided to discontinue net asset purchases under the PEPP at the end of March 2022 and to reinvest the principal payments from maturing securities purchased under the PEPP until at least the end of 2024."

Throughout the spring and summer of 2020, the ECB activated or created currency swaps with the central banks of Bulgaria, Croatia, Denmark, and Romania, which helped ensure there were enough euros available for those countries for euro-denominated financing; it later created the Eurosystem repo facility (EUREP), which provided euro-denominated liquidity for central banks outside the eurozone, in addition to the earlier swaps.

In December 2020, the European Union also passed a landmark fiscal stimulus proposal, funded by bonds issued by the EU rather than by the governments of its member states, called "Next Generation EU." It included €338 billion ($368 billion) in grants and €385.8 billion ($420 billion) in loans to support COVID-19 recovery plans.

In addition to EU-wide monetary and fiscal policies, eurozone countries also introduced individual fiscal policies outlined below.

Germany

Germany rolled out a broad series of aggressive fiscal stimulus and relief measures that were by far the largest of any country in Europe in overall size and as a percent of the country’s overall GDP. Its largest relief measure was its €600 billion ($650 billion) Economic Stabilization Fund, which offered funding for loan guarantees, the purchase of equity stakes in struggling companies, and loan refinancing.

Germany also passed a supplementary budget that suspended existing government debt rules to help fund additional COVID-19-related spending, including an emergency liquidity program for small businesses, self-employed people, freelancers, and farmers; increased health care spending; expanded childcare benefits; and extended wage subsidies.

A later stimulus package included a value-added tax (VAT) cut, cash payments to parents, reductions to renewable energy fees; business tax cuts, aid to small- and medium-sized businesses to make up for virus-related losses and aid targeted to cultural and nonprofit organizations, local governments, and schools.

France

France’s biggest COVID-19 relief measure was a package of loan guarantees for businesses to survive the crisis. In March 2020, French finance minister Bruno Le Maire also announced an aid package that included spending on health care, direct payments for the self-employed and very small businesses, extensions of unemployment benefits, and bailout loans to businesses. This was later expanded to provide additional funding for wage supports, tax deferrals, and to support sectors that have been hurt particularly badly by the pandemic, such as tourism and aerospace.

Italy

Italy's first stimulus and relief package was the Cura Italia (Care Italy) law, which focused on four main “pillars": strengthening the health care system; protecting workers, including by raising unemployment benefits and extending paid leave and mortgage payment suspensions; supporting businesses through increased loan access and a moratorium on loan repayments; and tax relief via suspended tax payments and issuence of tax incentives. Subsequent stimulus packages offered additional funding for loan guarantees, more benefits for workers and the self-employed, issuance of temporary work papers for undocumented migrants, regional tax cuts, and wage supports.

United Kingdom (U.K.)

As the U.K. tightened restrictions on the population and the economy in the face of rising COVID-19 cases, it also had Brexit to grapple with. When the pandemic began, the U.K. was still renegotiating its trade relationship with the EU and undergoing a massive change to its laws and trading relations, further complicating its response. This took a heavy toll on the U.K.’s economy, which shrank by 10% in 2020, the largest decline over three centuries.

Regarding monetary policy, the Bank of England (BoE) took several steps to mitigate the pandemic and the resulting economic crisis. In March 2020, the BoE cut its benchmark interest rate to 0.1%, where it stayed until December 2021. BoE launched Contingent Term Repo Facilities (CTFR) to provide liquidity to a market impacted by stress; a QE program to purchase government and nonfinancial, investment-grade corporate bonds to maintain low interest rates; many additional lending and asset-purchasing programs to extend credit; and the Covid Corporate Financing Facility (CCFF) to purchase commercial paper.

U.K. fiscal policy has come in multiple packages. The first, announced in March 2020, allocated nearly £30 billion ($38 billion) in fiscal stimulus and relief in the U.K. budget, including a tax cut for retailers, cash grants to small businesses, sick pay mandates and subsidies, and expanded access to government benefits. Later rounds included business loans and loan guarantees, business tax cuts and grant funding, salary supports, housing benefits, cash grants, job programs, and infrastructure funding.

In March 2021, the U.K. government announced that there would be £65 billion ($82 billion) in new COVID-19 stimulus and relief over the 2021–2022 fiscal year, including the following: boosts to social security and welfare payments, business grants, VAT reductions, and job retention support.

Russia

On the monetary end, in April 2020, the Russian central bank, the Bank of Russia, began to cut its benchmark interest rate, steadily dropping it throughout the year. It also implemented regulatory changes to increase lending, including allowing banks to hold a lower capital buffer, broadening what collateral banks could use, and suspending some enforcement actions. To encourage lending to small- and medium-sized enterprises, the Bank of Russia allocated emergency funding to its SME lending facility and lowered its interest rate significantly.

In terms of fiscal policy, in March 2020, Russia announced the creation of a RUB 300 billion ($33 million) fund to help its economy during the COVID-19 crisis, which included child support payments for parents; payments to small and medium enterprises to retain workers; funding for regional governments and airlines; loan guarantees; and infrastructure spending. That year, it borrowed a record RUB 5.3 trillion ($58 billion) from its sovereign wealth fund.

Americas

Brazil

On the monetary end, beginning in March 2020, the Central Bank of Brazil (BCB) lowered the benchmark interest rate multiple times, eventually bringing it down to 2.00% in August 2020, a record-low number. It also announced a series of measures that would add BRL 1.2 trillion ($242 billion) in liquidity to credit markets. These included lowering reserve requirements, expanding one-year repo operations, announcing a set of dollar-denominated repo operations, and issuing new lines of credit to banks.

Brazil adopted a range of fiscal measures to address the economic fallout of the COVID-19 pandemic. Early on, it announced it would move up payments for retirees, expand cash aid for low-income families, and defer loans for small- and medium-sized businesses. It would go on to announce suspended payments for small businesses and funding for state and local governments, including public health services.

It enacted further relief policies, including electricity bill exemptions, housing credits, tax and mortgage payment deferrals, funding for indigenous communities, and credit for small- and micro-sized entrepreneurs.

Canada

Canada’s central bank, the Bank of Canada (BOC), cut its benchmark interest rate to 0.25%, which it remained at for two years. It added six- and 12-month repo operations and its existing one- and three-month repo agreements and expanded and launched various flexible bank lending programs to support liquidity.

The BOC also announced its first-ever QE programs to stimulate the economy. In addition, the Office of the Superintendent of Financial Institutions (OSFI), Canada’s financial regulatory body, lowered bank reserve requirements, thus allowing banks to lend an additional CAD$300 billion.

Canada launched an escalating series of fiscal stimulus and relief measures. The first contained CAD$1.1 billion to support research, help provincial governments, and invest in public health measures such as mask purchases.

Later, the government announced a CAD$10 billion business loans program and a CAD$107 billion relief package, which contained monthly payments to replace lost income, child benefit payments, cash assistance to low-income individuals, loan payment deferrals for certain mortgages, wage subsidies, rent relief, among other things.

International Efforts

In March 2020, the U.S. Fed announced the establishment of U.S. dollar liquidity swap lines with numerous central banks across the globe, including Canada, Japan, Switzerland, the European Central Bank, Australia, Singapore, and more. These are a type of foreign currency swap that helps central banks ensure money is available for people and businesses wanting to take out loans denominated in dollars, making it easier and cheaper to borrow USD outside the U.S.

The International Monetary Fund increased access to its financial assistance programs for member states to obtain emergency funding; offered debt service relief to poorest member nations; called on bilateral creditors to allow the poorest countries to suspend debt service payments; and established a short-term liquidity line for additional lending. In March 2020, the World Bank announced a package of up to USD$14 billion in loans for countries to help cope with the effects of the coronavirus.

The World Bank Group (the World Bank and its affiliate organizations) also said it would provide over USD$157 billion in financing to help developing countries respond to the pandemic's health, social, and economic effects and alleviate economic shutdowns in advanced countries.

Bottom Line

In 2020, countries and regions worldwide rapidly responded to the emergence of the COVID-19 pandemic with a range of economic measures intended to stabilize markets. On the monetary side, central banks cut interest rates, engaged in repo operations, lowered bank reserve requirements, and launched quantitative easing programs, among other tools, to maintain liquidity and encourage lending.

On the fiscal end, many governments introduced and extended social safety net programs, including cash subsidies, child credits, housing supports, unemployment insurance, and more, to keep individuals and families afloat. To support businesses, policymakers looked to enact tax deferrals or cuts, salary subsidies, and increased credit, among other measures. Together, these policies softened the economic blow of unprecedented lockdown and social distancing measures.