"Households Receive Money, Companies Get Loan Guarantees"…Governments Worldwide Respond with 'Helicopter Money'

[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Governments around the world are consecutively rolling out large-scale fiscal stimulus measures that can be felt on the ground to support households and businesses suffering from the prolonged spread of the novel coronavirus infection (COVID-19). Instead of supplying liquidity to the market, they are backing economic agents by providing loan guarantees to companies facing funding shortages and giving money directly to individuals to prevent collapse. One foreign media outlet evaluated, "The wealthiest countries in the world are preparing costly measures to fight COVID-19."

According to the daily newspaper The Guardian on the 17th (local time), the UK government announced that it would provide loan guarantees worth ?330 billion (approximately 496 trillion KRW) to businesses. This amounts to about 15% of the UK's gross domestic product (GDP) and is the largest bailout since the 2008 global financial crisis. In addition, regardless of company size, business rates for leisure and hospitality businesses such as pubs, restaurants, and cinemas will be exempted for one year, and subsidies of up to ?25,000 will be provided. Furthermore, mortgage repayments for households experiencing financial difficulties will be deferred for three months.

Spain, where confirmed cases are rapidly increasing along with Italy, also held a press conference on the same day where Prime Minister Pedro Sanchez announced a stimulus package worth €200 billion (approximately 274 trillion KRW). This corresponds to 20% of Spain's GDP, of which €117 billion will be used to guarantee loans for private companies struggling to secure funding. Additionally, funds will be provided to temporarily laid-off workers, and mortgage repayments will be suspended for workers affected by COVID-19-related employment impacts. In Spain, more than half of the workers are employed by small and medium-sized enterprises. Following this announcement, Spain's IBEX 35 index rose by more than 6%.

Outside Europe, the Australian government announced support of AUD 715 million (approximately 530.5 billion KRW) for its domestic aviation industry. The Canadian government is also preparing a stimulus package worth CAD 27 billion (approximately 23.4 trillion KRW) to respond to COVID-19, which is expected to be announced on the morning of the 18th. Canadian Prime Minister Justin Trudeau also revealed plans to implement emergency measures restricting movement and supporting wages for individuals affected by COVID-19 during a press conference on the same day.

Countries are moving beyond interest rate cuts to guarantees because they aim for more direct effects. In a situation where fear that the COVID-19 crisis may prolong is maximized and economic activities are unexpectedly halted, they intend to directly soothe anxieties. This is also why the U.S. administration is pushing to provide Americans with cash payments of $1,000 (approximately 1.24 million KRW) or more. U.S. Treasury Secretary Steven Mnuchin said, "What we want is to get money delivered very quickly and accurately rather than tax benefits." According to CNN, he also mentioned that without additional measures, the unemployment rate could rise to as high as 20% in the worst-case scenario.

The Japanese government is also reportedly considering providing cash payments to individuals. The Mainichi Shimbun reported that the Japanese government and ruling party are reviewing a plan to provide cash payments per person as part of an emergency economic measure to be formulated in April. The Mainichi noted that the amount is expected to be larger than the ?12,000 (approximately 138,000 KRW) per person paid after the global financial crisis in 2009.

This content was produced with the assistance of AI translation services.