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Covid 19

The document discusses the global economic impact of the Covid-19 pandemic, highlighting the significant supply and demand shocks that led to a predicted global GDP contraction of 3%. It outlines major economic concerns including vaccine availability, labor force reduction, and long-term economic effects, as well as the fiscal and monetary policy measures taken by governments worldwide to mitigate these impacts. Key actions included emergency fiscal packages, interest rate cuts, and support for businesses and healthcare needs.

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Souvik Dey
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14 views8 pages

Covid 19

The document discusses the global economic impact of the Covid-19 pandemic, highlighting the significant supply and demand shocks that led to a predicted global GDP contraction of 3%. It outlines major economic concerns including vaccine availability, labor force reduction, and long-term economic effects, as well as the fiscal and monetary policy measures taken by governments worldwide to mitigate these impacts. Key actions included emergency fiscal packages, interest rate cuts, and support for businesses and healthcare needs.

Uploaded by

Souvik Dey
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Covid-19: The Global Shutdown

Containment, Fiscal Policy and Monetary Policy

Author- Laura Alfaro, Sarah Jeong

Presented by: Souvik Dey, Ankit


Content
▪ Global Shutdown and its Impact
▪ Major Economic Concerns
▪ Economic Disruption- Supply and Demand Shock
▪ Economic Policy Measures- Fiscal and Monetary Policy

04/16/2025
Global Shutdown and its Impact

• Why shutdown: For flattening the curve for delaying the peak of crises as there was no
vaccine at that point of time.

• Impact of Shutdown: Supply Shocks creating supply chain disruptions and demand
shock in the form of lower consumer demand, investment uncertainty and liquidity
constraints for firms and individuals.

• Decline in GDP: Multilateral organizations predicted that GDP would be estimated at 2.3%
prior to Covid-19 but pandemic in April 2020 they estimated that global GDP would
contract by 3% way worse than the global financial crises(2008).

04/16/2025
Major Economic Concerns
• WHO declared it as a public health emerging of International concerns in March 2020.

• National institute of Allergy and Infectious Diseases(NIAID) estimated that vaccine would not be available for
mass use before 2021 and could arrive in at least 12-18 months.

• Amidst clinical trials, there was a concern that vaccinated people could develop more severe symptoms than
the unvaccinated people.

• Even if vaccines were to be deployed quickly, poor countries worried about limited access to vaccines.

• As of July 2020, there remained concerns that repeat waves of outbreak would occur in countries at the stage of
reopening.

• Long lasting negative effects on the Global Economy: The major economic concerns were reduction in the
labor force, increase in the ratio of capital to labor, Lower rate of return to capital, slowing capital accumulation
and GDP growth for potentially many years.

04/16/2025
Economic Disruptions: Supply Shock

• Forbes reported that 95% of fortune 1000 firms were seeing supply chain disruptions.

• The UN Conference on Trade and development(UNCTAD) announced that worldwide FDI was on
track to decline by 40% in 2020, which would cause lasting damage to global production networks
and supply chains.

• Governments looked to business to assist with meeting the need for equipment. Among others, GE
and Ford revamped their production lines to produce hand sanitizers and respirators.

• In normal years, The UK receives 80000 overseas workers to pick crops. By April 2020, only a third
of the usual number of migrant pickers had arrived.

• Disruptions to major agricultural industries, the means of food production and distribution
changed dramatically.

04/16/2025
Economic Disruptions: Demand Shock

• Global Recession : IMF estimated in April 2020 that cumulative output loss in the first two years of
the pandemic would reach $9 trillion.

• Impact on Hiring and Demand :Companies laid off workers, decreasing labor demand.
Unemployment claims hit a record 9.9 million from March 26 – April 2, 2020

• Consumer Confidence and Spending : Social distancing and mental health concerns reduced
consumer confidence and spending.

• Global Trade Contraction : WTO forecasted a global trade volume contraction of 13–32% in
2020. Demand declined across all sectors, particularly affecting natural resources. Major producers
(Chile, Peru, Brazil, India, Colombia, Algeria, Mozambique, Iraq) faced reduced demand.

• Oil Price Collapse : By late March, oil prices fell to their lowest since 2003.China’s early 2020
shutdown hurt fossil fuel demand.

04/16/2025
Economic Policy Measures: Fiscal Policy
• General Fiscal Policy Approach :
• Long-term and non-essential expenditure was placed on halt as governments attempted to address healthcare,
unemployment and financial needs. Countries and states lacked a fiscal buffer due to previous expansionary
policies and high debt.

• United States Fiscal Measures:


• Congress passed an emergency fiscal package of $8.3 billion to target the healthcare crisis.
• The U.S. pushed back dates to pay 2019 taxes to July 15th, freeing up approximately $300 billion of short-term
liquidity.
• The U.S. Senate passed legislation to approve the largest stimulus package in recent memory, which would
provide $2 trillion to shield American families and businesses from financial consequences.”
• The legislation would allocate $116 billion to healthcare needs and equipment.
• The package would also provide $350 billion in loans to small businesses.

• European Union Fiscal Actions:


• The European Central Bank launched a Pandemic Emergency Purchase Program worth €750 billion, or 6.5% of
GDP.
• EU leaders agreed to a €25 billion investment fund to tackle COVID-related economic distress.
• The European Commission guaranteed €8 billion to small and medium enterprises (SMEs) and mid-cap firms,
and provided ‘credit holidays’ for debtors affected by the virus.

04/16/2025
Economic Policy Measures: Monetary Policy
• Global Response
• Countries took similar approaches to monetary policy, slashing interest rates on loans.
• Both crises (GFC and COVID) necessitated a coordinated global response as international trade and
commodities tanked.

• United States (Federal Reserve)


• The Fed cut the target rate for funds by 1.5 percentage points since March 3 to 0-0.25%, and purchased
$500Bn of Treasuries and $200Bn of agency MBS.
• The FOMC announced credit erasing measures and established two facilities — PMCCF and SMCCF — to
support credit to large firms.
• The Fed lowered the discount rate on primary credit and extended lending term discounts to 90 days.
• The Fed also instituted enormous lending facilities to support banks and businesses, including the PMCCF-
Primary Corporate Credit Facility, Main Street Lending Program, and Municipal Liquidity Facility.

• Europe (European Central Bank - ECB)


• The ECB instituted cheap loans for banks and increased bond purchases from €20 billion to €120 billion.
• The ECB signaled flexible treatment of bad-loan portfolios, allowing lenders to tap capital and liquidity
buffers.

04/16/2025

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