$11.7 trillion- close to 12 percent – of global GDP expended on COVID-19 pandemic and associated lockdowns, says IMF

The Fiscal Monitor 2020 report released by the International Monetary Fund (IMF) has shown that a whopping sum of $11.7 trillion, or close to 12 percent of global GDP, was expended in fiscal actions on COVID-19 pandemic-related interventions and associated lockdowns.

According to the report, a half of the fiscal actions consisted of additional spending or forgone revenue, including temporary tax cuts, while the other half was in form of liquidity support, including loans, guarantees, and capital injections by the public sector.

It said that this forceful response by governments had saved lives, supported vulnerable people and firms, and mitigated the fallout on economic activity.

However, according to report, the consequences of the crisis for public finances, combined with the revenue loss from the output contraction, had been massive.

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In 2020, government deficits were set to surge by an average of 9 percent of GDP and global public debt was projected to approach 100 percent of GDP, a record high.

The COVID-19 pandemic had prompted an unprecedented fiscal response worldwide to support health systems and provide lifelines to vulnerable households and firms.

Fiscal measures announced as of September 11, 2020, were estimated at $11.7 trillion globally, or close to 12 percent of global GDP.

The size and composition of fiscal support had varied vastly by country reflecting in part countries’ available fiscal space.

Advanced economies and large emerging markets accounted for the bulk of the global fiscal response.

▪︎What you should know

Nairametrics, in a report, highlighted the fact that advanced and large emerging markets had a large chunk of the global fiscal response, as they were the first to be hit by the health crisis.

It said that also their central banks had the capacities to provide the required massive monetary stimulus to avoid crisis and as well their treasuries were able to finance the deficits at lower interest rates.

The fiscal response in low-income developing countries, which were later hit by the pandemic, according to it, was largely based on the available budget which was smaller because of the subsisting tighter financing constraints.

It stated that the debt build-ups in several countries added to global debt vulnerabilities that existed before the pandemic.

According to the 2020 Fiscal Monitor report, 54 percent of low-income countries were deemed to be in debt distress or at high risk of debt distress as of September 2020, up from 51 percent at the end of 2019.

▪︎Why this matters

Nairametrics reports that massive fiscal support undertaken since the start of the COVID-19 crisis had saved lives, livelihoods and impacted positively on the economy.

“No amount is too huge to be expended to save lives and several economies from imminent collapse or crisis by way of fiscal interventions.

“Several central banks implemented palliative measures aimed at ensuring the financial stability of their economies in light of the ongoing COVID-19 pandemic and lockdown effects on businesses,” it stated.