Covid19 has brought together a synchronised effort by countries political and central bank heads. The major decision that the countries had to take to control the spread of virus is a lockdown. This is being done at various magnitude in different countries but the impact of it on the economy will be similar especially in terms of daily wage or low wage earners and SMEs. This has led to a synchronisations of efforts to minimise the impact and bring reversal as soon as the lockdown and the spread ends.
As on about of $4.72 Trillion (5.3% of World Nominal GDP) fiscal stimulus has been announced to support the SME and public at large along with some country specific actions. And central banks on average has cut rates by 0.68% along with various asset purchase program and other quantitative easing measures.
Below is the details of various stimulus measures announced along with number of confirmed cases.
Our View :
As the total confirmed cases near 7,00,000 there is still sometime to go before we see peak in new cases. This amount of stimulus is unprecedented but will it be enough to bring normalisation or even sustain standard of living for majority of population while all the countries try to reduce the spread through large lockdowns.
We believe this is first tranche of stimulus announcement from various countries that is focussed on low income and SME along with central banks making sure that financial markets remain well supplied with liquidity at lower rates. There would be another tranche to boost the spend or improve the consumer credit and pattern once the lockdown is partially reversed.
If China situation is taken as a pattern that will be seen in other countries as well then more is needed to create normalised environment so that defaults in consumer and business credit is contained along with various incentives to bring consumer spending back to some level of normalisation.