When $8 Trillion in Global Fiscal Stimulus Still Isn’t Enough

(Bloomberg) -- As governments dedicate more than $8 trillion to fight the coronavirus pandemic, a further widening in the gap between rich and poor countries threatens to exacerbate the global economy’s pain.

Wealthy nations have delved deep to cushion the blow. For instance, Germany and Italy have each allocated more than 30% of gross domestic product to direct spending, bank guarantees, and loan and equity injections, for a combined $1.84 trillion in aid, figures from the International Monetary Fund show.

Yet the countries IMF analysts say they’re most concerned about have only been able to trickle out support: Many African and Latin American economies have failed to reach even a few billion dollars in fiscal aid, according to IMF data and reporting from more than 60 countries collated by Bloomberg News.

“Governments worldwide are unleashing fiscal support measures, but not all fiscal packages are the same,” said Chua Hak Bin, a senior economist at Maybank Kim Eng Research Pte. in Singapore. While “fiscal bazookas are the norm in the more advanced economies,” emerging-market governments “don’t have that kind of ammunition and fiscal space. Their fiscal packages are more water pistols than bazookas.”

Read More: Is It Enough? Tracking Major Economies’ Stimulus Measures

IMF Chief Economist Gita Gopinath has repeatedly voiced concern that developing nations have less policy space and less sophisticated infrastructure to manage the virus outbreaks taking hold in their countries.

Much of the global fiscal tally of more than $8 trillion consists of bank guarantees in developed nations -- France and Spain have allocated more than $300 billion and $100 billion respectively for this kind of support, for example. Total virus-relief spending in the U.S. stands in excess of $2.3 trillion.

​South Africa, the continent’s only member of the Group of 20, has managed to boost its support to about $26 billion, yet many of its neighbors are far more strapped.

Tracking fiscal support across the world isn’t a straightforward exercise, making global comparisons difficult. Some countries like Russia haven’t yet published official figures for aid, while others like Mexico provide too few details to estimate a support package.

For Bloomberg’s collection of data, no central bank funding was considered. Fiscal support generally fell into three categories: direct aid for medical response to the virus; consumer support, including cash handouts; and funds for businesses, including tax breaks, loan support, bank guarantees, and wage subsidies. In many cases, governments have reallocated spending that was already budgeted, while also adding new measures.

Here’s a look at some highlights across regions:

Asia-Pacific

China’s stimulus in the crisis thus far has been “remarkably restrained,” with fiscal measures amounting to about 3 trillion yuan ($424 billion), or 3% of gross domestic product, Chang Shu at Bloomberg Economics calculates. That includes faster unemployment insurance payments, lower value-added tax rates for small firms, and infrastructure investment.

In the rest of Asia, governments are showing a willingness to prioritize near-term stimulus over the usual long-term deficit concerns. Japan’s fiscal support stands at more than 20% of GDP, while Singapore, Hong Kong and Australia have each rolled out spending amounting to 10% or more of GDP. Indonesia has already adjusted its deficit-spending cap.

In Thailand, where the tourism sector makes up about one-fifth of the economy in normal times, officials have rolled out several aid packages that mix support from the central bank and fiscal authorities.

Americas

The U.S. has enacted three different pieces of legislation that together pledge more than $2 trillion in support for virus relief, with lawmakers close to finalizing an almost half-trillion-dollar deal on more aid. American taxpayers are seeing cash handouts reach their bank accounts, while small businesses have appealed for a top-up to a $349 billion payroll-support program that ran out of funds in less than two weeks.

President Donald Trump announced last week that the government will draw on a chunk of the approved funding to offer $16 billion in direct payments to beleaguered farmers and put $3 billion toward government purchases of meat, dairy products and other foods.

In Latin America the response has been spotty. Argentine officials are more focused on negotiating longer-term debt relief, and Brazil’s government is in disagreement about the threat of the virus. In Mexico, even allies of President Andres Manuel Lopez Obrador say he’s been too restrained in offering fiscal aid.

Europe

Germany has pledged more than $1 trillion in support, about half of that in the form of bank guarantees. U.K. authorities have garnered some praise for their measures, which total more than a half-trillion dollars and include aid targeted at furloughed employees and special groups of vulnerable people such as the self-employed.

Russia’s government hasn’t offered a specific amount for its overall fiscal support, but analysts at ING Bank calculate that tax breaks, state guarantees, and other spending total about 3 trillion rubles ($38.6 billion).

Middle East & Africa

As the number of confirmed cases starts to rise in the Southern Hemisphere, the conversation around governments’ need and ability to help remains much different. Ethiopian Prime Minister Abiy Ahmed warned in an April 12 Bloomberg op-ed that Africa’s economies need emergency debt relief, for starters -- with the risk that the plight of the continent’s 1.3 billion people could reverberate around the world.

In the Middle East, economies are grappling with chaos in oil markets in addition to coronavirus. The United Arab Emirates, Egypt and Bahrain were among countries pledging early packages of assistance. Saudi Arabia has pledged about 79 billion riyal ($21 billion) in fiscal aid, according to estimates from Ziad Daoud at Bloomberg Economics.

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