Financial Measures Taken Against the Economic Impact of COVID-19 Pandemic in Selected Countries and Turkey

Countries combatting the COVID-19 outbreak have created effective policies in reducing the spread of the virus by taking measures such as social distancing, closing workplaces, restricting work, and quarantine practices.

Table 5.2 COVID-19 outbreak status in selected countries

Source World Health Organization (2020) (October 12, 2020)

have taken and continue to take fiscal measures within the scope of their economic policies in order to eliminate the economic contraction.

Within the scope of the financial measures implemented, the USA, the UK, Italy, Russia, and Brazil, which attracted attention with the increase in the number of cases and mortality rates, were determined as selected country examples. Table 5.2 includes the figures of these selected countries regarding the COVID-19 outbreak.

According to Table 5.2 prepared in accordance with of the data of WHO, USA, Brazil, Russia, France, UK, Italy, and Turkey are seen in terms of the number of cases in selected countries.

In general, it is seen that countries shaped their economy policies within the scope of monetary policies, fiscal policies, and structural measures during the epidemic period, and practices such as expansionary spending policies, tax concession, and direct income transfer were predominant within the scope of fiscal policy.

5.4.1 The USA

The USA, where more than 8 million cases have been reported and more than 220 thousand Americans died in 50 states, faced the rapid spread of COVID-19. At this point, the USA is the country where the most people died due to the coronavirus epidemic as of October 12, 2020 (Worldometer 2020). In fact, on May 28, 2020, it was announced that the USA left the World Health Organization on the grounds that they did not manage the process well and caused such deaths when they informed the world late.

In addition to the health effects of the COVID-19 epidemic, the USA is considered as reaching the highest level of unemployment since the Great Depression (O’connor et al. 2020: 1). The package of measures taken against the epidemic in the USA is calculated as 2.5 trillion dollars (approximately 11% of GDP). Financial measures taken under the package are listed as follows (OECD 2020):

• Congress provided $116.3 billion to cover individual’s current and future bills.

2 trillion dollars of aid has been enacted through the CARES (the Coronavirus Aid, Relief, and Economic Security) Act. An additional support package was announced through the Paycheck Protection and Health Care Enhancement Act,

• Under the CARES Act, $221 billion of tax deductions and tax deferrals—with no

late payment fee—was enacted, regardless of the size of the business,

• Employment tax payments of 2020 were postponed to 2021 and 2022,

• Small Business Management announced measures to address the urgent capital and cash needs of businesses affected by the virus.

• Under the CARES Act, the Foreign Exchange Stabilization Fund announced a $500 billion package to support businesses, cities and states.

In addition, the US Revenue Service (IRS) pushed tax payments to June 15. Small and medium-sized enterprises took measures such as applying tax reductions, removing the tax liability of those who cannot work due to quarantine, and delaying the withholding liability of taxpayers in order to quickly compensate the cost of putting workers on leave related to coronavirus (Internal Revenue Service 2020).

5.4.2 Brazil

On March 20,2020, Brazilian Parliament declared the epidemic as a natural disaster. The cost of the measures taken against COVID-19 corresponds to approximately 8% of GDP. Financial measures included in these measures are listed as follows:

• Providing income support for three months at $120 per month to households in need of assistance,

• Commencement of short-time working allowance to be covered by the Unem­ployment Insurance Fund,

• Determining the import and industry taxes as zero on medical equipment import.

• Suspension of tax on bank loans for three months,

• Postponement of air navigation tariffs for six months,

• Postponement of the tax obligations of small and medium-sized enterprises (SMEs) for three months,

• Opening a new line of credit to enterprises by the Brazilian Central Bank, up to 0.6% of GDP.

• Increasing the lending limits of public banks,

• Prohibition of layoffs for two months and covering two-month wages of employees through the Emergency Credit Line.

5.4.3 The UK

The UK, which is not a member of the EU, announced a support package for 18.1% of its GDP (approximately 401.5 billion pounds). The financial measures included in this package are listed as follows (IMF 2020a, b):

• Postponing VAT payments (approximately 30 billion pounds sterling) to 2021,

• Compiling an additional £6.2 billion to support the National Health Services and other public services,

• Allocating £30 billion to support businesses and £8 billion for welfare support,

• Guarantee to all employers 80% (up to £2500 per month) of employee salaries until October 2020,

• Postponing tax liabilities of self-employed for three months,

• Postponing tax obligations of income taxpayers until July 31, 2020,

• Transferring an additional 750 million pounds of resources to Research and Development Expenses,

• The application of expanding the loan amounts for SMEs has started.

5.4.4 Italy

The European Union (EU) pledged a 1.7 trillion euro rescue package to reduce the impact of the COVID-19 outbreak on the eurozone. The European Central Bank announced that it would purchase assets worth 750 billion euros (Nicola et al. 2020: 1). An emergency action package of 25 billion euros named “Cura Italia” has been put into effect in Italy. The support package corresponds to 1.4% of GDP. The financial measures taken are listed below (IMF 2020a, b):

• Granting 3.2 billion euros to support the National Health Services and Civil Protection,

• Providing a support of 10.3 billion euros to prevent job loss, support those laid off and self-employed workers,

• Providing 6.4 billion euros of support within the scope of regulations on deferring tax and other liabilities of businesses,

• Providing 5.1 billion euros of support to meet the loan demands of SMEs,

• Postponing of electricity, water, natural gas, and wastewater costs for two months in local governments most affected by the COVID-19 outbreak.

5.4.5 Russia

The cost of the package announced by Russia to combat the epidemic was approx­imately 6.6 billion dollars (2% of GDP). The financial measures taken are listed as follows (OECD 2020):

• Increasing the amount of compensation paid to healthcare workers who performed the first response in the fight against COVID-19 outbreak,

• Making a payment, equal to the minimum wage, until the end of 2020 to those who are quarantined, sick, and recovered,

• Paying a monthly salary equal to the minimum wage for three months to those who are unemployed,

• Financial support for children up to a certain age for three months,

• Supporting SMEs and businesses with key roles,

• Postponing the tax liabilities of businesses most affected by the epidemic,

• Postponing execution and bankruptcy procedures of businesses for six months,

• Postponing the social security premium payment obligations of SMEs for six months,

• Supporting financial institutions by the Federal government for the unpaid loans of SMEs.

5.4.6 Turkey

Turkey announced a package named “Economic Stabilization Shield” on March 18, 2020, for combatting COVID-19 in the field of economy (Turan and ve Hamza Qelikyay 2020: 18). The total cost of the package, which includes economic measures, is calculated as 350 billion TL (5% of GDP). Financial measures included in are listed as follows (IMF 2020a, b):

• Reduction or postponement of tax obligations (withholding tax and VAT with­holding and SSI premiums for six months, postponing accommodation tax, reducing VAT on domestic flights from 18 to 1%) in many sectors affected by the epidemic, especially tourism,

• Postponing the declarations and tax payments of the taxpayers over the age of 65 and who have chronic diseases, banned from going out on the streets, until the ban is lifted,

• Providing stock financing support to the exporter,

• Postponing bank loan principal and interest payments for three months and providing financial support when necessary,

• Providing additional resources of 3 billion TL to municipalities,

• Provision of capital support by Turkey Assets Fund (TVF) to the three main state-owned banks, amounting to 0.4% of GDP,

• Creating new rights to buy the shares of companies in trouble by TVF,

• Relaxing the short-work allowance criteria,

• Suspension of layoffs for three months,

• Expanding the credit channels of public banks to support individuals,

• Increasing the lowest pension to 1500 TL,

• Providing cash support to families in need through the Ministry of Family, Labour and Social Services,

• Increasing the allowance of healthcare workers who receive allowance according to their performance to the ceiling and employing 32,000 additional health personnel.