Governments Around the World Respond to COVID-19 Economic ImpactWorldwide ERC® - Jun 03 2020
Several governments are developing economic recovery proposals to help economies, businesses and individuals offset the impact of COVID-19 related restrictions.
The European Union. The European Commission introduced an economic proposal for 750 billion euros in recovery funds to European Union (EU) member states. The “Next Generation EU” plan would provide funds for investment in reducing carbon emissions, expanding digital programs, and supporting social and employment needs. The EU Parliament voted overwhelmingly in favor of financial assistance to member states on 15 May.
The Next Generation EU proposal, along with the 2021 to 2027 budget of 1.1 trillion euros for the EU was offered to the EU Parliament on 27 May. According to the EU Spring 2020 Economic Forecast, the EU’s economy is estimated to contract in 2020 by 7.5%. In its Fall 2019 Forecast, EU economists estimated gross domestic product (GDP) growth of 1.2% for 2020 and 2021. The forecasts also expect unemployment to rise from 6.7% in 2019 to 9% this year, then to decrease to 8% next year.
Of the funds, 500 billion euros would be distributed as grants and 250 billion euros as loans. The EU would issue long-term bonds on global financial markets to pay for the grants and loans. Funds would be allocated to member states based on their respective needs with Italy, Spain and Greece likely receiving the highest percentages of funds.
First negotiations on the package will occur at the 11 June meeting of the Eurogroup, which consists of the leaders of the 27 EU member states. The final agreement will then be presented to the EU Parliament and then the parliaments of the member states. The EU proposal is in addition to stimulus packages being pushed in EU member states to help their individual economies.
The Latest from Japan. On 27 May, the Japanese Cabinet approved a financial relief package of 117 trillion yen to offset the economic impact of COVID-19. The package provides funds to cover housing costs, payments to individuals, business loans, and money to local governments. The package comes on top of an initial April package also estimated at 117 trillion yen bringing the total to over 234 trillion yen.
The COVID-19 pandemic has had a particularly harmful effect on the Japanese economy. The country was already experiencing a contraction in growth. With the restrictions around COVID-19, the country is now officially in a recession with two consecutive quarters of GDP decreases.
According to the Japanese National Tourism Organization, the number of tourists to Japan dropped from almost 3 million people in April 2019 to just 2,900 in April 2020, a 99.9% decrease. While other top tourism destinations have a more seasonal number of visitors, Japan has a fairly consistent number of year-round visitors and is thus hit especially hard by the timing of the pandemic.
The United States (U.S.). In the U.S., Congress is working on a fifth proposal to provide additional economic relief to businesses and individuals impacted by the travel and social distancing restrictions due to COVID-19. On 15 May, the House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions Act “HEROES Act” (H.R. 6800) by a vote of 208 to 199. The $3 trillion package would provide an additional $1,200 payment to individuals making under a certain salary threshold, expand sick and family leave as well as unemployment benefits, and make changes to the popular Paycheck Protection Program (PPP).
The U.S. Senate is currently developing its own version of the next COVID-19 economic recovery package. Worldwide ERC® is advocating for inclusion of provisions in the final package that would benefit our members. We are requesting that the Congress expand the timeframe in which small businesses can use PPP funds, exempt the loans from being taxable as well as allow loans to be forgiven and the borrower still deferring their payroll tax payments per our letter of 20 April to House Speaker Nancy Pelosi.