How 5 Countries Are Responding to the Economic Impact of COVID-19


Article by Joe Geoghegan, Regulatory Change Analyst at Vox Financial Partners.

Beyond the devastating health implications of COVID-19, the global pandemic is poised to have crippling economic ramifications, many of which we’re already beginning to experience. Stock markets from China to the U.S. have plunged over the past two months, unemployment is spiking, and once-healthy markets are taking industry-defining hits. On a global scale, the UN currently estimates an economic loss of up to 2 trillion dollars this year.

In this article, we take a look at some of the hardest-hit economies and the different actions and policies countries have implemented in an effort to maintain fiscal and monetary stability.

As the first country to be impacted by the virus, China enacted extreme social distancing measures and large-scale testing to flatten the curve of new infections and slow the contagion. With cases reportedly slowing, they are now in the process of lifting lockdowns and travel restrictions.

However, these measures have come at a cost. The country reported its highest unemployment level on record in February and saw sharp declines in investment in fixed assets, retail sales, the value of exports, industrial production and services production—all key economic indicators. The country is expected to see its GDP shrink in Q1 of this year.

In an attempt to revive economic growth, China is due to release trillions of Yuan in fiscal and monetary stimulus in the coming weeks. The increase in spending is aimed at stimulating infrastructure investment, pointing towards a V-shaped recovery for China’s economy.

In the meantime, there are a few positive signs: China’s demand-driven economic activity is holding, and leading indicators such as coal consumption and freight transportation are slowly recovering as people are returning to work.


Italy is home to one of the world’s worst outbreaks. At the time of writing, the country has more than 80,000 reported cases, 8,000 deaths, and a significantly overwhelmed healthcare system. To make matters worse, Italy’s economy was already on shaky ground due to bad bank loans and years of stagnant economic growth.

According to the IMF, Italian government debt exceeds annual economic output by 131%, second to Greece. As investors demand higher rates for bonds, the value of these bonds is decreasing due to the contrary relationship of yields and prices. The economy is expected to contract by 3% this year.

Nicola Borri, a finance professor at LUISS Guido Carli, a university in Rome, told the New York Times, “It’s likely that banks will need to be rescued. The economy has basically been stopped. We are probably going to see massive defaults. Clearly, Italian banks will be badly hit.”

Last week, the Italian government approved €25 billion to support their medical system and households suffering as a result of the pandemic. With the country still in quarantine, there’s the threat of significant economic damage and a potential banking crisis that could impact not just the country but the globe.


Vietnam’s government responded quickly to the outbreak, suspending a visa waiver program for eight European countries and keeping tight restrictions on inbound travelers.

But even for a country that worked diligently to contain the spread, the country is still feeling the economic impact. With the knock-on effect on consumption, tourism, production, and supply-side disruptions to trade, the government’s target growth rate of 6.8% in 2020 is expected to decrease by a full percentage point.

To spur economic growth, the State Bank of Vietnam said it would cut policy interest rates, including dropping its refinance rate from 6% to 5% and its discount rate and repurchase rate from 4% to 3.5%. The country also relaxed its restrictions on trade with China

United States

As the current coronavirus hot spot, the US recently surpassed China and Italy with the highest number of cases globally. To soften the economic blow, earlier this month the US Federal Reserve erased what was left of their benchmark interest rate. The House also recently passed a $2.2 trillion economic stimulus package, the biggest in US history. It includes billions of dollars in aid to small businesses, hard-hit industries, hospitals, state and local governments and to boost unemployment insurance. Most Americans will also receive up to $1,200 per taxpayer.

While many of the actions being taken to combat the current economic crisis are similar to those taken during the global financial crisis of 2008, it is important to note that the causes are different. The 2008 crisis was the result of structural and regulatory weaknesses in the financial sector which impacted the broader economy, while the current crisis is due to the virus—an external factor.

Regulation put into place after 2008, like Dodd-Frank, should mean banks are now in a better position to deal with the current crisis. However, it remains to be seen if these actions will result in the ‘Steep V’ the US—and global economies more broadly—are hoping for.


Similar to the US, the United Kingdom’s Bank of England cut interest rates to 0.25% and then to 0.1% this month, the lowest interest rate in the bank’s 325-year history. This comes with support from lenders who are offering a three-month mortgage holiday to homeowners in financial difficulty.

The UK government also announced that it would subsidise the wages of those facing unemployment as a result of the pandemic as restaurants, bars, and other businesses in the hospitality industry was ordered to close as part of the UK attempt to contain the outbreak. 

The current payment package is to provide support for 80% of the worker salaries up to a maximum of £2,500 per month for the next 3 months. This measure is part of a larger package for British businesses which also includes tax relief of £30 billion and interest-free loans for up to 12 months.

These financial measures fall within Britain’s unprecedented rescue package of £330 billion in loans, a dramatic intervention by the UK government to emerge from the crisis with minimal damage. Although, a weaker global growth, an overall slowdown in Europe, a disruption to supply chains, and the expected drop in business activity could dwarf the UK governments’ efforts.

The overarching trend we’re seeing across economies is that it’s likely to get worse before it gets better. However, the readiness and willingness of government bodies and central banks to take action—cut interest rates, introduce quantitative easing, provide income support, put policies in place to support fiscal stimulation and offer liquidity injections— impact the long term effect on global economies and the ability of these economies to bounce back.

If you need help managing critical business processes during these unprecedented times, we can help. Drop us a line here.

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