Guest blog written by Imaad Syed
Most governments across the world responded to challenges of the COVID-19 pandemic through fiscal and monetary support measures. Coordination and implementation issues aside, these measures have been instrumental in saving lives and livelihoods in the short-term. However, budgeting challenges remain given the massive outlays for the COVID response. In this blog post, we briefly overview the scale of fiscal response, types of fiscal measures, and budgeting challenges ahead.
National governments were quick to deliver significant fiscal stimulus packages in response to the economic crisis due to coronavirus lockdowns. These packages varied in size and location (Figure 1). New Zealand had the largest fiscal response of any major country at 19.5% of its GDP (second overall behind Tuvalu at 29%), followed by Singapore (16.1%), Canada (12.5%), and the United States (11.8%). Approximately 70% of countries had a fiscal response of 5% of their GDP or lower (Figure 2). Lesotho had the largest fiscal response among countries in Africa at 10.2% of its GDP, while United Kingdom (9.2%) and Chile (8.4%) had the largest fiscal response in Europe and South America, respectively.
The fiscal response to COVID has largely centered around relief for taxes and fees, employment incentives, and economic stimulus.
- Taxes and fees relief: Most governments have extended filing deadlines and reduced tax rates to provide relief to individuals and businesses. Other measures include:
- Deferring tax installment payments and writing off interest on late payments
- Extending payroll tax exemptions and deferring sales tax remittances
- Suspending increments in government fees and charges
- Increasing corporate tax thresholds and rebates
- Removing import tariffs on critical medical supplies