Senate Majority Leader Mitch McConnell smiles as he leaves the Senate floor at the U.S. Capitol, March 25, 2020, in Washington. (Photo: AP)

Massive economic stimulus

The US Senate on Wednesday passed a 2-trillion-dollar economic stimulus package, the largest ever. It is designed to pump money into unemployment insurance, loans and incentives for businesses, and directly into Americans’ pockets, while also shoring up hospitals and state and local governments struggling under the weight of the coronavirus pandemic.

The US Treasury Department and the Federal Reserve are planning to make up to 4 trillion USD in loans to help businesses cope with Covid-19. The US government has promised additional relief if the crisis does not ease in the next 10-12 weeks.

The EU recently announced a 1.5-trillion-dollar stimulus plan to rescue its members’ economies. France has spent the most on stimulus efforts, vowing to prevent businesses from collapsing. The government will guarantee loans worth hundreds of billions of USD, and delay collection of taxes, rents, and electricity, water, and gas bills for small businesses. The government of Germany, Europe’s largest economy, agreed Monday to a 166-billion-dollar economic relief package. Berlin also pledged at least 550 billion USD worth of loan guarantees for businesses affected by the pandemic. Spain has announced a 220-billion-dollar bailout and the UK said it will provide loans worth 400 billion USD.

In Asia, President Moon Jae-in announced on Tuesday that South Korea will double its economic relief package for businesses to 80 billion USD. On Monday, Japan’s Prime Minister Abe Shinzo pledged a “huge” stimulus of at least 137 billion USD.

Global recession risk

Despite these unprecedented relief efforts, a pandemic-driven global recession is becoming more likely. The International Monetary Fund said on Monday that the coronavirus pandemic will cause a global recession this year that could be worse than the one triggered by the global financial crisis of 2008-2009 and require fiscal actions never seen before. IMF Managing Director Kristalina Georgieva said the outlook for global growth is negative.

According to financial ratings agency Moody's, the world's 20 most industrialized countries will likely suffer a recession this year because of the Covid-19 pandemic. Moody’s estimates that the G20's overall GDP will shrink 0.5%, the US economy will shrink 2%, and the Eurozone will shrink 2.2%.

Analysts say the announced stimulus packages are only a short-term fix and they recommend closer and more effective coordination around the globe to defeat Covid-19 before it does more damage to the global economy.