Project: FREE COVID19 brief
COVID19 | FREE Network Project
The Covid-19 pandemic is affecting all the inhabited continents of this planet and leaves none of us untouched. It has already killed thousands of people across the globe, closed down cities, borders and businesses and most countries are still just in the initial phase of this crisis. Although there is 24/7 reporting on the pandemic, much of the focus in international media has been on the most affected countries and richer countries in Eastern Asia, the EU and the US. Much less attention has been given to countries around the Baltics, in Eastern Europe and the Caucasus.
However, these countries are home to more than 200 million people and to the institutes that form the Forum for Research on Eastern Europe and Emerging Economies, i.e. the FREE network. We have therefore started to collect data on this region from official sources with the ambition to offer a regularly updated, comprehensive and easily comparable overview of the health impact of the Covid-19 pandemics, as well as the policies and practices countries in the region adopt to deal with it.
The countries in the network and the region we include are Belarus, Georgia, Latvia, Poland, Russia, Sweden, and Ukraine. For comparison, we also include Italy as a point of comparison since it is a country that has been particularly badly affected and we have several people in our faculties that know Italian and follow these developments closely. In addition to FREE Network countries in our reporting, we partially cover Armenia, Estonia, Lithuania, Moldova and Germany due to close links with economists and researchers specialised in these countries, therefore extending our covered region.
The quality of the health data will by necessity vary between countries and this also affects the comparability of numbers. For example, the ability and willingness to test the population for the virus differs significantly between countries and will obviously affect the number of infections that is reported to the European Centre for Disease Prevention and Control (ECDC), the main source of data on health outcomes in our tables and graphs. Other data that we report, such as border or school closures, are easier to compare, but there may still be differences in how these policies are implemented on the national level. However, we still believe that it is useful to compile this data for our region in one place as a starting point for discussions on how the virus is spreading and governments respond to the crisis.
Since the FREE Network focuses on economic issues, we put particular emphasis on high-frequency indicators in this area and on measures governments have taken to deal with the economic consequences of the pandemic. In the initial phase of this collaborative project, the focus will be on providing a descriptive picture of the state of the situation using the best data we can find, but over time, this will be complemented by more in-depth policy analysis of the measures and implications for the economies in the region.
Country Reports
The main data is presented in a summary page that facilitates comparisons between countries, and this is complemented with more detailed country reports.
Belarus country report |
Georgia country report |
Italy country report |
Latvia country report |
Poland country report |
Sweden country report |
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
COVID-19 | The Case of Poland II
Poland in the FREE Network Covid-19 Project (May 26, 2020)
Current Health Situation in Poland
Poland noted its first coronavirus infection in early March 2020. After the initial rapid spread of the disease throughout the country and spike in the total number of registered infections, since early April the infection curve stabilized at a relatively low level (compared to other European countries) of 250-350 new daily cases. The flattening of the curve was a result of drastic health and social restrictions gradually imposed on society (more details below). Since the first reported case, the testing capacity has also been substantially improved, with the number of tests conducted daily increasing from 2K to 15-20K in late April, and holding steady since then.
Figure 1. Number of Covid infections per 100K inhabitants in districts in PL (as of May 25)
Even though Poland has not yet reached an apparent decrease in the number of new daily infections, since the end of April the government introduced a strategy of a slow, four-step re-opening of the economy (more details below). As of 26 May 2020, the total number of Covid infections in Poland approached 22K, with the number of fatalities as high as 1K, and cases reported in all but 7 districts of the country (out of over 300 – see Figure 1). At this point in time, Poland also found itself at the third phase of the lifting of restrictions on economic activity.
Government Health Policies
Lockdown Introduction
The Minister of Health announced a state of epidemic risk in the territory of Poland on March 14 [7], raising it further to a state of epidemic 6 days later [8]. Measures counteracting the epidemic were introduced centrally in Poland by the Minister of Health, and were gradually extended:
- Restriction on the size of public gatherings: since 14.03.2020 limited to 50 [7]; since 25.03.2020 – 2 people (except for families and funerals up to 5 people) [9],
- Ban on all non-essential mobility since 25.03.2020 [9]; since 01.04.2020 limitations on access to public spaces like parks, playgrounds and recreational areas; distance of 2 meters between people in public places; further restrictions for minors [10],
- Bars and restaurants closed and allowed only to provide take-away food since 14.03.2020 [7],
- Childcare institutions, all schools and higher education institutions closed on 12.03.2020, formally online education provided since 25.03.2020 [11, 12],
- Since 15.03.2020 foreigners banned from travelling into Poland (with exceptions), while all Poles arriving from abroad quarantined for 14 days after arrival [7],
- Shopping malls, sports and recreation centers, sports events, cinemas, theatres, etc. closed since 14.03.2020 [7]; since 01.04.2020 – hairdressers, beauty salons, physiotherapy, hotels etc. [10],
- Restrictions on the number of people using public transport since 25.03.2020 [9],
- Since 01.04.2020 restrictions on the number of people in shops and designated shopping hours for 65+ only [10], since 02.04.2020 obligation to wear disposable gloves [10],
- Restrictions in workplaces since 02.04.2020: distance between coworkers, access to protective equipment [10],
- Since 16.03.2020 certain hospitals devoted exclusively to patients with (suspicion of) Covid-19 [13],
- Since 16.04.2020 mandatory covering of mouth and nose in all public places, inside and outside [17].
Gradual Ease of Restrictions
On March 16, 2020, the Minister of Health announced a gradual strategy of lifting the restrictions imposed on social life and economic activity. The plan is divided into four steps. The first stage was implemented on 20.04.2020 [18]:
- increase in the limit of customers in shops,
- public spaces like parks and recreational areas (except playgrounds) open,
- mobility restrictions lifted for minors over 13 y.o.
The second stage was introduced on 04.05.2020 [19, 20, 21]:
- shopping malls open with restrictions on the number of customers, shopping hours for 65+ cancelled,
- museums, libraries, physiotherapy, hotels open,
- sports facilities open with restrictions on the number of users,
- 14-day quarantine for workers from neighbouring countries cancelled,
- since 06.05.2020 some nurseries and kindergartens open.
The third stage started on 18.05.2020 [22, 23]:
- mobility restrictions lifted for minors under 13 y.o.
- hairdressers, beauty salons, outdoor cinemas open, restaurants and bars – with restrictions on the number of customers,
- increase in the number of people using public transport,
- sport trainings allowed with restrictions,
- some classes (practical or individual) in post-secondary schools allowed,
- since 25.05.2020 classes for children from the 1st – 3rd grade in primary schools and final-year graduates allowed,
- since 01.06.2020 consultations with teachers at schools allowed.
The fourth stage is planned for the near future, without a specific date. It involves the opening of cinemas and sports centers.
Government Economic Policies
The government implemented several stages of the so called “Anti-crisis shield”, the first of which came into force on April 1. The overall package includes a number of broad measures to support enterprises and workers for a period of three months and covers both direct financial support as well as provisions regarding financial liquidity for companies [14, 15]. In March the National Bank of Poland decreased interest rates and announced that it will support access to credit through targeted longer-term refinancing operations and if necessary will provide monetary stimulus through large scale open market operations [16].
Short Summary of Measures
Labor market [14]:
- Increased flexibility of employee daily and weekly hours of work;
- Extension of childcare leave for parents with children aged 0-8;
- In case activities affected by revenue reduction (revenue fall by 15% year-to-year or 25% month-to-month):
- Self-employed or employees on non-standard contracts to receive a monthly benefit equivalent to 80% of minimum wage for up to three months;
- Companies to receive support equivalent to 50% of the minimum wage for inactive employees due to the stoppage, provided individual salaries are not reduced by more than 50%;
- Companies to receive support equivalent to up to 40% of average wage for employees whose hours are reduced by 20%;
- Alternative support to employment provided to SMEs (up to 249 employees) in case of revenue loss from the Labour Fund: depending on the level of revenue loss (>30%, >50%, >80%) support to employees expressed as ratio of the Minimum Wage (respectively: 50%, 70% and 90%);
- Relaxation of work and stay permits for foreigners.
Social transfers:
- No specific measures have been implemented but the government is considering:
- a tourism voucher of 1000 PLN paid to employees with a 90% contribution from the government (10% paid by employers); paid to employees on wages below the national average wage;
- additional support to housing benefit for those who become eligible to housing benefits due to the economic slowdown;
Tax breaks [14]:
- 100% of social security contributions to be paid by the government for self-employed and employees employed in micro enterprises (up to 9 employees) and 50% paid by the government in small enterprises (10-49) for three months;
- Tax payments and social security contributions on earnings and profits can be delayed till 01.06.2020;
- Losses from 2020 will be deductible from the 2021 tax base.
Emergency loans, guarantees and support [14]:
- Small-scale loans to small companies;
- Reduced administrative requirements and relaxation of numerous regulatory rules;
- Increased liquidity of firms through channels supported by the Polish Development Fund (PFR):
- extension of de minimis guarantees to SMEs;
- subsidies to SMEs which suffered revenue losses due to the pandemic;
- equities and bond issues to be financed by PFR;
- subsidies to commercial loan interest payments from BGK;
- commercial turnover insurance from Export Credit Insurance Corporation (KUKE);
- Relaxation of regulations related to contracts with public institutions (e.g. related to delays).
Monetary policy [16]:
- On 17.03.2020 NBP lowered the main reference interest rate by 0.5 pp and reduced the rate of obligatory reserves from 3.5% to 0.5%. The main reference rate was lowered further to 0.5% on 08.04.2020.
- NBP announced the readiness to engage in large scale open market operations;
- Targeted longer-term refinancing operations to allow credit refinancing by commercial banks.
References
[1] OECD Health Statistics, https://stats.oecd.org/viewhtml.aspx?datasetcode=HEALTH_REAC&lang=en.
[2] Central Statistical Office in Poland (GUS), bdl.stat.gov.pl.
[3] Supreme Medical Chamber (Naczelna Izba Lekarska), https://nil.org.pl/rejestry/centralny-rejestr-lekarzy/informacje-statystyczne.
[4] Ministry of Health, https://twitter.com/mz_gov_pl?lang=pl.
[5] Warsaw Stock Exchange (Giełda Papierów Wartościowych), https://www.gpw.pl/gpw-statistics.
[6] Central Bank of Poland (Narodowy Bank Polski), https://www.nbp.pl/home.aspx?f=/kursy/kursya.html.
[7] Ministry of Health, http://dziennikustaw.gov.pl/DU/2020/433.
[8] Ministry of Health, http://dziennikustaw.gov.pl/DU/2020/491.
[9] Ministry of Health, http://dziennikustaw.gov.pl/DU/2020/522.
[10] ministry of Health, http://dziennikustaw.gov.pl/DU/2020/566.
[11] Ministry of Science and Higher Education, http://dziennikustaw.gov.pl/DU/2020/405.
[12] Ministry of National Education, http://dziennikustaw.gov.pl/DU/2020/410.
[13] https://www.gov.pl/web/koronawirus/lista-szpitali.
[14] Polish Development Fund (Polski Fundusz Rozwoju Przewodnik Antykryzysowy dla Przedsiębiorców 02.04.2020), https://pfr.pl/tarcza.
[15] Polish Development Fund (Polski Fundusz Rozwoju Przewodnik Antykryzysowy dla Przedsiębiorców 05.05.2020), https://pfr.pl/tarcza.
[16] Central Bank of Poland (Narodowy Bank Polski), https://www.nbp.pl/home.aspx?f=/polityka_pieniezna/dokumenty/komunikaty_rpp.html.
[17] Ministry of Health, http://dziennikustaw.gov.pl/DU/2020/673.
[18] http://dziennikustaw.gov.pl/DU/rok/2020/pozycja/697.
[19] http://dziennikustaw.gov.pl/DU/rok/2020/pozycja/792.
[20] http://dziennikustaw.gov.pl/DU/rok/2020/pozycja/780.
[21] http://dziennikustaw.gov.pl/DU/rok/2020/pozycja/779.
[22] http://dziennikustaw.gov.pl/DU/rok/2020/pozycja/878.
[23] http://dziennikustaw.gov.pl/DU/rok/2020/pozycja/871.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
COVID-19 | The Case of Georgia
Introduction
Georgia has close to 4 million inhabitants. It borders Russia, Azerbaijan, Armenia and Turkey, which are also its main trading partners. The capital and largest city is Tbilisi with about 1,5 million inhabitants. Agriculture and the tourism sector dominate the local economy.
Georgia reported its first case of Covid-19 on February 27, 2020 and its first deaths on April 6, 2020. The government reacted quickly, banning direct flights from China in late January 2020 and imposing severe travel restrictions even within the country in March 2020. Schools and universities were closed on March 11, 2020. The government banned all larger public gatherings on March 21, 2020, the same day when the country declared the state of emergency. The four major cities of Georgia – Tbilisi, Batumi, Kutaisi and Rustavi – were put under lockdown on April 15, 2020.
As of May 8, 2020, Georgia reported a total of 9 fatalities, suggesting that the virus has quite successfully been contained so far. A breakdown of the healthcare system seems unlikely at the moment. Economically, the situation is more heterogenous. Georgia’s public finances are in a tolerable enough shape to handle a crisis. The public debt to GDP ratio is not very high (44.9% in 2018), and the government budget deficit is also below 3% of GDP. Georgia’s financial system has been praised as one of the strongest among in the ECA region. However, annual inflation in January-February was 6.4%, which is significantly higher than the target level of 3%. Georgia is facing uncertainties in terms of inflationary expectations, and this limits the National Bank of Georgia’s (NBG) ability to stimulate the economy under the current circumstances. Most probably, NBG will not cut the policy rate to avoid provoking further currency depreciation and stoking inflationary expectation even further. Moreover, a major weakness in the Georgian economic system lies in its lack of a broad social safety net infrastructure, which could help support afflicted groups during downturns. Finally, another risk is the substantial informal sector: workers in these sectors are hard to reach via conventional policy measures.
Below, we outline how the Georgian economy has been affected by Covid-19 and what the policy responses have been so far. We will also discuss several economic scenarios and explain which further policy options are thinkable.
How Does the Covid-19 Crisis Affect the Georgian Economy?
Demand Side Effects
- A decline in domestic consumption resulting from behavioural and policy changes is to be expected on the demand side – i.e. people staying home as a precaution or because they are required to. In addition, currency depreciation and possible price spikes (due to herding behaviours and potential disruptions in supply chains) are also expected to have a negative effect on consumption and investment.
Household consumption accounts for 66.7% of the Georgian GDP (Geostat, 2018). A significant reduction in household consumption (e.g. spending on transportation, clothing, electronics, and domestic services) would therefore result in an overall slowdown of GDP growth. A slowing of internal demand would hit people working in the informal sector particularly hard; namely, those without a regular salary (e.g. temporary workers, taxi drivers, and other self-employed service sector workers) and small and micro business-owners. Their situation is worsened still because the government’s fiscal stimulus and assistance is unlikely to reach them directly. They are also not expected to benefit from the extra liquidity injected into the financial system, as they will not qualify for bank loans to cover temporary income losses. Another vulnerable group are the formal sector workers employed in companies that face a dramatic decline in their usual economic activities (restaurants, hotels, the entertainment industry, transport, etc.). These companies are likely to put their workers on unpaid leave or simply fire them. Moreover, the slump in household demand will also be made worse by the fact that most families are likely to have limited savings and, therefore, their capacity to smooth consumption is limited. Hence, the crisis may cause a significant drop in well-being and, possibly, further deterioration in individuals’ physical and mental health, alongside the direct impacts of Covid-19
- A decline in domestic investment because uncertainty and deteriorating business sentiments will stall business investment decisions. Expectations of a global recession could become self-fulfilling if ‘business-as-usual’ does not resume in the next few months. If companies expect a slowdown in demand, they will also delay investment, and GDP will decline further. Investment (gross fixed capital formation) accounts for approximately 28% of Georgia’s GDP. Thus, the Georgian government has announced capital spending to combat the expected drop in private investment.
- A decline in tourism and related business seems inevitable as tourism arrivals and receipts are expected to decrease sharply as a result of the numerous travel bans, and due to precautionary behavior. According to our preliminary calculations, the Georgian economy lost between 3-9% of potential tourism revenue in February. Since the tourism sector accounts for 6% of Georgia’s GDP (GNTA 2018), a direct hit to the industry will substantially impact GDP. In table 1, we work out GDP losses associated with the following scenarios:
Table 1: Net effect of the coronavirus crisis on tourism in Georgia
- The spillover effect on other sectors: a drop in demand for goods and services in the region, in China, the EU, and the US – will affect the overall economy via trade and production linkages.
While it is difficult to predict how Georgia’s economy will react to a global shock of such magnitude, some preliminary estimations may already be made. Georgia’s growth rate over the last 20 years correlates notably to several neighboring economies. One of the greatest correlations is, unsurprisingly, with Russian economic growth. Russia’s growth is also highly correlated with other countries, reflecting global economic linkages. These correlations are reported in table 2 below:
Table 2: Correlations of growth rates
Table 2 | Georgia | Russia | Armenia | Turkey | China | Kazakhstan | Italy | Germany | France | US | Israel | Ukraine |
Georgia | 1.00 | 0.87 | 0.88 | 0.66 | 0.58 | 0.81 | 0.67 | 0.74 | 0.85 | 0.69 | 0.77 | 0.73 |
Russia | 1.00 | 0.90 | 0.60 | 0.73 | 0.83 | 0.64 | 0.67 | 0.82 | 0.63 | 0.79 | 0.91 |
Source: World Bank, authors’ calculations.
In order to explore how a slowdown across major world economies will affect Georgia, we have followed three economic scenarios relating to major world economies, as reported by Orlik et al. (2020). The numbers reflect growth rate changes relative to the baseline (no virus outbreak).
Table 3: Coronavirus effect on growth rates.
Table 3. Coronavirus effect on growth rates | Real GDP annual growth change in 2020 compared to the baseline scenario, pp | Real GDP growth, % in 2020, assuming a 5% baseline | |||
Russia | Germany | US | Georgia | Georgia | |
Scenario A: Outbreak causes localized disruption | -0.9 | -1.2 | -0.2 | -1.09 | 3.91 |
Scenario B: Widespread contagion | -3 | -2.8 | -1.3 | -3.09 | 1.91 |
Scenario C: Global pandemic | -4.8 | -3.6 | -2.4 | -4.55 | 0.45 |
Source: Orlik et al. (2020); authors’ calculations.
- A decline in trade is likely and it is possible to find certain similarities between the current situation and the economic slowdown in the Eastern Europe and Central (EECA) region in 2014-2017, caused by a drop in oil prices and global appreciation of the US dollar. The latter resulted in a sharp decline of external demand, falling commodity prices and regional currency crises, which equally affected the Georgian economy. The country’s goods exports fell by 23%, while imports contracted by 15% in 2015. Trade was only restored to the 2014 level by 2018. While, the forthcoming crisis is expected to not only have stronger negative impacts on external demand, but also disruptions in the production value chains, affecting Georgia’s trade in more severe ways. Trade of all commodities, except food and medicine, is projected to decline, depending on the duration of the shock.
- A decline in Foreign Direct Investment (FDI) is to be expected since foreign investors prefer to invest in safe assets. Additionally, currency depreciation expectations will negatively affect FDI. The FDI in Georgia amounted to 1,267.7 mln. USD in 2019 (7.1% of GDP).
- A decline in remittance inflows seems likely: since all countries will suffer economically in the aftermath of the health and oil price crises, we expect significant slowdown in remittance inflows from the rest of the word. The remittances decline will hit Georgia particularly hard as it is among the top receiver countries of foreign transfers. For instance, in 2019, money transfer inflows accounted for 9.8% of GDP. Various scenarios for just how much Georgia is set to lose in monetary inflows is presented in table 4 below:
Table 4. Net change in money transfers inflow in 2020 due to coronavirus (Mln. USD) | ||
Scenario 1: 10% decrease of net money transfers in the remaining months of the year (March-December) | Scenario 2: 30% decrease of net money transfers in the remaining months of the year (March-December) | Scenario 3: 50% decrease of net money transfers in the remaining months of the year (March-December) |
-114 | -372 | -629 |
Net change in consumption spending due to money transfers decline* | ||
-570 | -1,857 | – 3,146 |
Net change as a share of household total real consumption spending** | ||
+0.3% | -2.6% | -5.5% |
* $1 of transfers is assumed to become $0.8 equivalent of consumption spending.
** USD/GEL exchange rate is assumed to equal to the official exchange rate as for March 20th (3.1818) in the remaining months of the year (March-December). Inflation is assumed to be 6% in 2020.
Source: Geostat, NBG, authors’ calculations.
Supply Side Effects
- Production disruptions may occur on the supply side. Domestic production suffers as a result of forced business closures and the inability of workers to get to work, as well as disruptions to trade and business as a result of border closures, travel bans, and other restrictions on the movement of goods, people, and capital (in the PRC as a whole fell to 50%–60% of normal levels but is now normalizing, after the introduction of extremely restrictive measures that – so far – no country in the West has been able/willing to mimic. However, in the absence of such restrictions, the crisis may be prolonged, and production might be hard to restart quickly). The overall impact on production may be mitigated by the fact that in some sectors (particularly in manufacturing) production can be ramped up in later periods to compensate for lower production (providing closures do not last too long).
- Long-term economic effects need to be taken into account. Covid-19 will impact health via mortality and morbidity, and through changes in (and the diversion of) healthcare expenditure.
Currency Depreciation
The expected decline of tourist inflows, remittances, and exports as a result of reduced foreign demand from Georgia’s trading partners and low world oil prices have already affected the lari exchange rate (mostly through expectation channels). On the other hand, due to restrictions on air travel, the outflow of currency from Georgia to foreign countries will be reduced (the import of tourism services will be lower), which will have a positive effect on the exchange rate. Another positive factor may be that Georgia’s reliance on remittances from oil-exporting countries (like the Russian Federation) has been significantly reduced in recent years.
What Has Been Done to Address the Covid-19 Crisis?
The Government of Georgia timely started applying measures to address dramatic impacts on various market participants:
Businesses
- Restructuring loans for businesses affected by the crisis;
- Companies that operate in the tourism industry: hotels and restaurants, travel agencies, passenger transportation companies, site-seeing companies, arts and sports event organizers, etc., will have their property and personal income taxes deferred by the Georgian government for four months;
- Doubling the volume of VAT refunds to companies, with the aim of supplying them with working capital;
- Designing a state program to co-finance interest payments on bank loans by hotels with 4-50 rooms, throughout the country, for the next six months.
Workers
- Loan payment deferrals for three months;
- Personal income taxes deferred for employees in the tourism industry.
The Health Care System
- No new measures are planned at this point.
The Financial System
- Easing lending restrictions for commercial banks;
- NBG has not cut policy rates and is unlikely to do so given the risks of inflation.
Other Measures
- Boosting capital expenditure (CapEx) projects with the aim of providing additional economic incentives;
- Governmental price fixing for specific products (rice, pasta, sunflower oil, flour, sugar, wheat, buckwheat, beans, milk powder and its products) by subsidizing corresponding businesses.
Will the Current Measures Be Sufficient?
Given the rapidly changing scope of the crisis, the short answer is simple – probably not. As the forecast seems pessimistic, it is the role of the fiscal stimulus and, where possible, the monetary policy to help soften the economic shock.
It is evident that the measures adopted by the government as well as private commercial banks in Georgia will not be able to directly reach a sizeable group of the population affected by the shock – i.e. those unemployed due to Covid-19; those working in the informal sector; people with low income; or households that are very reliant on remittances transfers. It is important for the government to connect with these groups quickly, not only for humanitarian reasons, but also in the interest of a broader development agenda. In case of relatively prolonged quarantine sizable part of the population will no longer be able to support themselves and their families in coming months.
What More Can Be Done?
We broadly outline the additional monetary and fiscal policy measures that may be considered:
More Forceful Fiscal Intervention:
As previously mentioned, Georgia’s systemic weakness lies in its lack of a broad social safety net infrastructure, which could help target and support afflicted groups during downturns. An unemployment benefits system, which in other countries acts as an “automatic stabilizer” and reduces and mitigates the effect of economic downturns, simply does not exist in Georgia. Yet even with an unemployment benefits system in place, the sizeable informal economy would prevent such a system from effectively easing labor market tensions. In the current situation, the government should attempt to provide cash relief for workers in the informal sector, for the low-income self-employed, and for independent contractors. These groups of workers are the most vulnerable to income flow reduction during the crisis, furthermore, they are unlikely to have access to sick leave benefits or to take advantage from cheaper bank credit.
Based on the experience of other countries, the government perhaps should consider the following measures in addition to current measures:
- Providing low interest emergency loan/cash advances to affected adults, or direct cash payments to affected households, in particular households with the elderly and children. These measures are valuable as they can quickly reach afflicted groups. Unfortunately, this solution is not well-targeted and risks wasting government funds on those who are not disadvantaged.
- Simply providing “helicopter money”, or cash transfers to households below a certain income threshold (similar measures are being considered in the US) may be an option, but this measure is subject to the same concerns as above. However, the advantage is that cash transfers allow households to optimize their expenditure and do not distort consumption choices.
- Another form of wide-reaching support could be state subsidies to help support utility payments for a limited time. These measures, equally, are not well-targeted, nevertheless there may be methods to direct them towards the households which need them the most.
- Measures to encourage companies to not cut employment in the months following the crisis: following the example of other countries, Georgia may support salary payments for companies, on the condition that they do not reduce employment or force workers to take unpaid leave.
Naturally, none of the proposed measures are perfect as they cannot specifically target those most affected by the crisis, yet they may act as a short-term second-best solution. As these examples show, Georgia should consider to develop a targeted social safety net system in the future. Such a system can make the country more resilient in the face of future crises and unexpected emergencies.
Monetary Policy
While other countries push for fiscal stimulus and monetary expansion, Georgia is facing uncertainties in terms of inflationary expectations. As discussed, this limits NBG’s ability to stimulate the economy under the current circumstances. Annual inflation in January-February was at 6.4%, significantly higher than the 3% target. Going forward, a sharp decline in aggregate demand would reduce the pressure on inflation, while a depreciating nominal effective exchange rate will exert upward pressure. Therefore, the possibility to reduce the monetary policy rate depends on which effect will dominate in the future. In the meantime, NBG has approached the IMF to increase access to funding under its Extended Fund Facility program (NBG). Alongside the additional funds from other international donors, this will positively affect the economy, strengthen the nominal effective exchange rate and, consequently, curb inflation.
In addition to the measures already announced, NBG has the option of decreasing the minimum reserve requirements for deposits attracted in a foreign currency. This will stimulate FX lending and economic activity, without creating depreciation or inflationary expectations.
Overall, the Georgian government responded very timely and efficiently to contain the virus outbreak, earning well-deserved plaudits from the international community and approval from the general public. However, as the scope of the crisis continues to change rapidly, additional measures might soon be needed. As the economic landscape becomes more uncertain, the government needs to ensure that emergency economic stimulus measures directly reach the people most affected by the crisis.
Disclaimer
This policy brief was first published as an ISET policy note on March 25, 2020 under the title “The Economic Response to COVID-19: How is Georgia Handling the Challenge?“. This brief is an adaption of the original note and is published with the consent of the authors.
References
CIA World Fact Book, 2020. “Georgia”.
The Guardian, 2020. “How UK government could support people as coronavirus spreads”.
Imeson, Michael, 2019. “Georgian banks gather rewards for resilience”. The Banker.
Lomsadze, Giorgi, 2020. “Georgia gets rare plaudits for coronavirus response“. Eurasianet.
Migration Policy Institute, 2020. “Global Remittances Guide”.
Orlik, Tom; Jamie Rush; Maeva Cousin and Jinshan Hong, 2020. “Coronavirus Could Cost the Global Economy $2.7 Trillion. Here’s How”. Bloomberg.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
COVID-19 | The Case of Italy
Italy was the first European country to experience the Covid-19 pandemic on its territory, and as of today, March 30, it is the most heavily affected. Because of this, there is already ample coverage of the Italian case from multiple sources. Nevertheless, and although the country is not part of the FREE network region, we report on the covid-19 crisis in Italy, for two reasons.
Since SITE has a substantial share of Italian nationals in its staffing, following and updating the Italian statistics and measures to parallel the reporting from our core countries is relatively easy.
We intend for our report on Italy to provide a useful benchmark for the policy measures implemented by other countries, as Italy represents the first country hit in Europe and therefore the most surprised and least prepared case.
Basic Facts
Italy is a country of around 60 million people, with capital Rome, around 3 million. Around 10 million live in Lombardy, the region most heavily hit by the pandemic, and 1,3 million in Milan, its largest city. Italy is a founding member of the European Community and part of the Eurozone.
The main responsibility for health care delivery in Italy is at the level of the 20 regions and 2 autonomous provinces, although the central government, through the Health Ministry, oversees and coordinates the national strategy. The whole of the health care system, Servizio Sanitario Nazionale (SSN), which includes several national level institutes and subsidiary bodies on scientific advice plus the regional providers Aziende Sanitarie Locali (ASL) and Aziende Ospedaliere (AO), is among the best in the world for accessibility and cost efficiency, according to WHO and based on the Bloomberg Health-Care Efficiency Index. The responsibility for education is at the national level, divided between the Education Ministry and the Ministry for University and Research. Professional education is instead left to the regions. Social services to the elderly, the disabled, and needy families are dealt with by local authorities, sometimes with the assistance of volunteer associations and non-profit social service cooperatives.
Health Indicators
On January 30, the first two cases of coronavirus were reported in Italy: two Chinese tourists from Wuhan were hospitalized in Rome. They had landed 10 days before in Milan (January 23th).
On February 21, the first local infection was reported at the hospital of Codogno, in Lombardy (a 38 years old man). All the people who were in contact with him (including in the hospital) were contacted, tested and asked to isolate themselves (around 100 persons). Nevertheless, few days later hundreds of cases were reported in the area around Lodi in Lombardy, and in Veneto. The indicators on Covid-19 numbers in the table are from the newspaper Il Sole 24 ore. The numbers of hospital beds are from the NCBI as reported by the Financial Times. The OECD provides statistics on nurses and doctors. Capacity is being expanded in real time during these weeks, but this is not reported in a systematic way, as far as we could see.
Financial and Economic Indicators
As part of the EU and Eurozone, Italy does not have a sovereign monetary policy, but depends on the European Central Bank.
The stock market data is from the Italian Stock Exchange ; we focus on the performance of the main index, called FTSE MIB.
Since February 23, all layoffs of workers were put on hold for two months. There is no current reporting on this, and the latest available data is from before the pandemic and therefore can be seen as unrelated.
Short Summary of Health Crisis Measures
From January 23 (when a flight from Wuhan with 202 passengers was supposed to land in Rome) controls on passengers from Wuhan were started. These included temperature controls with scanners at major airports and mandatory submission of schedules with destinations and travel plans for all the passengers coming from Wuhan. In Rome and Milan airports, posters were put up explaining the typical symptoms of the new coronavirus, encouraging to avoid non-important travels to Wuhan and to get a flu vaccine at least two-week prior departure. The posters also gave typical hygiene recommendations such as hand washing, avoiding contact with sick people or crowded places, as well as contact with animals and raw meat, and recommendation to avoid travel if sick.
Flights to and from China were suspended as soon as the infection was detected in the two tourists, on January 30. As a precautionary measure, the same routines implemented for the SARS epidemic in 2003 were started: the Council of Ministers declared a state of emergency with a duration of 6 months starting January 31, and allocated EUR 5 million to this.
On February 22, through a decree from the central government, 10 Italian towns suspected to be outbreaks of coronavirus were put on lockdown.
On February 29, with over 1000 infected, the regions of Lombardy, Veneto and Emilia Romagna closed schools and universities. This was extended to the national territory on March 4, when also public attendance of football matches, cinemas and theatres was suspended for 1 month. The one-meter distance rule, with no hugs and no handshakes, was also introduced.
On March 7 and March 9, the lockdown was subsequently expanded to cover the national territory. On March 21, all nonessential production was stopped to halt the spread of coronavirus. As of March 30, the lockdown was prolonged two more weeks.
Government Economic Policies
Labor Market
- All layoffs started after February 23 are put on hold.
- Payments of social contributions are put on hold.
- Sick-pay restrictions are reduced (12 extra days per month allowed).
- Government funding for shortened or suspended working time.
- 500€ lump sum benefit for all free-lancers that are not part of safety nets.
- Most public and private employers must allow distance work. (Exception are allowed, and the criteria to be used have been hotly debated between workers and industry representatives.)
- Parental leave with 50% compensation for all private employees with children younger than 12 for up to 15 days since March 5. Alternatively, up to 600€ bonus for private childcare.
Tax Breaks
- Tax payments due between March and May are put on hold.
- Tax credits proportional to costs (chiefly rents and sanitation) for commercial activities.
Emergency Loans, Guarantees and Support
- Extra funding for repurposing of production towards medical needs.
- Loan guarantees, liquidity support and suspension of repayments for SMEs.
- Financial support to sports and Alitalia.
- Extra funding (400 millions) to municipalities to provide basic support (food stamps) to households with special needs (these are mostly households whose main source of income are jobs in the informal sector, which as such do not qualify for any safety net.)
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
COVID-19 | The Case of Poland
Poland is a country of around 38 million people. The area is 312 thousand sqkm which gives a population density of 124.7persons/sqkm. The capital is Warsaw with 1.8 million inhabitants, other major cities are Kraków (0.8mn), Łódź (0.7mn), Wrocław (0,6) and Poznań (0,5). Poland has been a member of the EU since 2004, but along with some other new members has not adopted the EURO currency.
Different responses to the crisis across countries depend partly on the organization of political authority, as reflected in the level of regional decentralization of decision making in key areas of authority, and the strength and independence of public agencies. In the case of Poland, the government has four levels, the central government, 16 regions (voivodeships), 314 counties (powiaty) and 2477 municipalities (gminy). From the point of view of involvement in response to the Covid-19 pandemic, different layers of government are responsible for different public services, with counties being the most involved in the provision of healthcare and secondary education, while municipalities being in charge of social support, local transport, primary schools and other types of care.
In Poland the highest decisive body with regard to the pandemic is the Ministry of Health. The Principal Sanitary Authority (Główny Inspektor Sanitarny) deals specifically with the country’s epidemiological situation and infectious diseases, and is subordinate to the Ministry of Health.
Health Indicators
While Poland lags far behind many other developed countries in terms of the availability of medical staff (2.4 doctors and 5.1 nurses per 1000 inhabitants in 2017), the Polish health care system scores much better with regard to resources like hospital beds (6.6 beds per 1000 inhabitants) [1].
Generally, from the perspective of efficient treatment provided to large numbers of patients infected with Covid-19, the most important country statistics concern the health infrastructure related to infectious diseases. In 2018 wards devoted to infectious diseases in general hospitals had a capacity of only 2997 beds, which accounted for 1,65% of all available hospital beds [2]. As far as medical professionals are concerned, in 2020 Poland had 1120 actively working medical doctors with a specialization in infectious diseases [3]. They constituted as few as 0,75% of all specialists, which gives an indication of how small this field is in Poland. Assuming an uncontrollable dissemination of the disease, Polish health care resources would quickly face a huge overburden.
Figure 1: Nurses. Total, per 1000 inhabitants, 2018 or latest available.
Figure 2: Doctors. Total, per 1000 inhabitants, 2018 or latest available.
Figure 3: Hospital beds. Total, per 1000 inhabitants, 2018 or latest available.
According to official announcements, the territory of Poland was free from the Covid-19 disease until as late as March 3, when the first case was confirmed. Patient 0 came by bus from abroad after participating in the Carnival celebrations in Nordrhein Westfalen in Germany. Several other initial patients returned to Poland from Italy. Since then the disease spread throughout the whole country, (according to official statistics) having infected at least 3266 people as of one month later [4].
Financial Indicators
The Warsaw Stock Exchange belongs to the main stock markets in Central and Eastern Europe. Along with 25 other countries, it is included in the FTSE Russel list of economically developed markets. As of 2019 the Warsaw Stock Exchange had 460 listed companies, 50 of them foreign [5]. Since the emergence of the Covid-19 disease in Poland in early March, the main index of companies at the Warsaw Stock Exchange, called WIG, faced value loss exceeding 17% (Figure 2).
Poland keeps its own currency, the Polish Zloty (PLN), which is a free floating currency. According to the exchange rate data from the National Bank of Poland (NBP), which provides the average daily exchange rate of the Zloty with world’s most important currencies, during last month Poland’s currency dramatically lost value in comparison to both the Euro and the US dollar [6].
Figure 4: Volatility of one of the main indices at the Warsaw Stock Exchange (WIG).
Figure 5: The Polish currency in March 2020.
In Poland, the number of newly registered unemployed is given in monthly intervals and reflects the number of people who have registered at the County Employment Agency (Powiatowy Urząd Pracy) for the first time in a particular month. However, publicly available data comes with a lag of three months, so unless statistics are provided earlier the impact of isolation policies introduced due to the pandemic will not be known publicly for some time.
Government Health Policies
The Minister of Health announced a state of epidemic emergency in the territory of Poland on March 14 [7], raising it further to a state of epidemic 6 days later [8]. Measures counteracting the epidemic were introduced centrally in Poland by the Minister of Health, and were gradually extended:
- Restriction on the size of public gatherings: since 14.03.2020 limited to 50 [7]; since 25.03.2020 – 2 people (except for families and funerals – up to 5 people) [9],
- Ban on all non-essential mobility since 25.03.2020 [9]; since 01.04.2020 limitations on access to public spaces like parks, playgrounds and recreational areas; distance of 2 meters between people in public places; further restrictions for minors [10],
- Bars and restaurants closed and allowed only to provide take-away food since 14.03.2020 [7],
- Childcare institutions, all schools and higher education institutions closed on 12.03.2020, formally online education provided since 25.03.2020 [11, 12],
- Since 15.03.2020 foreigners banned from travelling into Poland (with exceptions), while all Poles arriving from abroad quarantined for 14 days after arrival [7],
- Shopping malls, sports and recreation centers, sports events, cinemas, theatres, etc. closed since 14.03.2020 [7]; since 01.04.2020 – hairdressers, beauty salons, physiotherapy, hotels etc. [10],
- Restrictions on the number of people using public transport since 25.03.2020 [9],
- Since 01.04.2020 restrictions on the number of people in shops and designated shopping hours only for 65+ [10], since 02.04.2020 obligation to wear disposable gloves [10],
- Restrictions in workplaces since 02.04.2020: distance between coworkers, access to protective equipment [10],
- Since 16.03.2020 certain hospitals devoted exclusively to patients with (suspicion of) COVID-19 [13].
Government Economic Policies
The government implemented the so called “Anti-crisis shield” which came into force on April 1. The package includes a number of broad measures to support enterprises and workers for the period of three months and includes both direct financial support as well as provisions regarding financial liquidity for companies [14]. In March the National Bank of Poland decreased interest rates and announced that it will support access to credit through targeted longer-term refinancing operations and if necessary will provide monetary stimulus through large scale open market operations [15].
Short Summary of Measures
Labor market [14]:
- Increased flexibility of employee daily and weekly hours of work;
- Extension of childcare leave for parents with children aged 0-8;
- In case activities affected by revenue reduction (revenue fall by 15% year-to-year or 25% month-to-month):
- Self-employed or employees on non-standard contracts to receive a one-off benefit equivalent to 80% of minimum wage;
- Companies to receive support equivalent to 50% of the minimum wage for inactive employees due to the stoppage, provided individual salaries are not reduced by more than 50%;
- Companies to receive support equivalent to up to 40% of average wage for employees whose hours are reduced by 20%;
- Additional employment support provided to SMEs in case of higher revenue loss;
- Relaxation of work and stay permits for foreigners.
Tax breaks [14]:
- Social security contributions to be paid by the government for self-employed and employees employed in small enterprises (up to 9 employees) for three months;
- Tax payments and social security contributions on earnings and profits can be delayed.
Emergency loans, guarantees and support [14]:
- Small-scale loans to small companies;
- Reduced administrative requirements and relaxation of numerous regulatory rules;
- Increased liquidity of firms through channels supported by the Polish Development Fund (PFR):
- extension of de minimis guarantees to SMEs;
- equities and bond issues to be financed by PFR;
- subsidies to commercial loan interest payments from BGK;
- commercial turnover insurance from Export Credit Insurance Corporation (KUKE);
- Relaxation of regulations related to contracts with public institutions (e.g. related to delays).
Monetary policy [15]:
- On 17.03.2020 NBP lowered the main reference interest rate by 0.5 pp and reduced the rate of obligatory reserves from 3,5% to 0,5%.
- NBP announced the readiness to engage in large scale open market operations;
- Targeted longer-term refinancing operations to allow credit refinancing by commercial banks.
References
[1] OECD Health Statistics, https://stats.oecd.org/viewhtml.aspx?datasetcode=HEALTH_REAC&lang=en
[2] Central Statistical Office in Poland (GUS), bdl.stat.gov.pl.
[3] Supreme Medical Chamber (Naczelna Izba Lekarska), https://nil.org.pl/rejestry/centralny-rejestr-lekarzy/informacje-statystyczne
[4] Ministry of Health, https://twitter.com/mz_gov_pl?lang=pl
[5] Warsaw Stock Exchange (Giełda Papierów Wartościowych), https://www.gpw.pl/gpw-statistics
[6] Central Bank of Poland (Narodowy Bank Polski), https://www.nbp.pl/home.aspx?f=/kursy/kursya.html
[7] Ministry of Health, http://dziennikustaw.gov.pl/DU/2020/433
[8] Ministry of Health, http://dziennikustaw.gov.pl/DU/2020/491
[9] Ministry of Health, http://dziennikustaw.gov.pl/DU/2020/522
[10] ministry of Health, http://dziennikustaw.gov.pl/DU/2020/566
[11] Ministry of Science and Higher Education, http://dziennikustaw.gov.pl/DU/2020/405
[12] Ministry of National Education, http://dziennikustaw.gov.pl/DU/2020/410
[13] https://www.gov.pl/web/koronawirus/lista-szpitali
[14] Polish Development Fund (Polski Fundusz Rozwoju Przewodnik Antykryzysowy dla Przedsiębiorców 02.04.2020), https://pfr.pl/tarcza
[15] Central Bank of Poland (Narodowy Bank Polski), https://www.nbp.pl/home.aspx?f=/polityka_pieniezna/dokumenty/komunikaty_rpp.html
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
COVID-19 | The Case of Belarus
Belarus is a country with about 9.5 million citizens. The area is 207 thousand sqkm which gives a population density of 45.9 persons/sqkm. The capital is Minsk with around 2 million inhabitants, other major cities are Gomel (0.53mn), Mogilev (0.38mn), Vitebsk (0.38mn), Grodno (0.37mn), Brest (0.35mn). Belarus is a member of the Eurasian Economic Union and is part of the Union State of Russia and Belarus. The national currency is the Belarusian Ruble (BYN).
Different responses to the crisis across countries depend partly on the organization of political authority, as reflected in the level of regional decentralization of decision making in key areas of authority, and the strength and independence of public agencies. In the case of Belarus, the power is highly centralized and most decisions are made either by central government or personally by the president.
It is widely considered that the government in Belarus has a small degree of independence from the president. The authority in charge of dealing with pandemics is the Ministry of Health.
Health Indicators
Belarus had its first officially registered case of Covid-19 on February 27 and the first death on March 31. At first, the increase of the newly registered cases was slower than in most other countries, but in the beginning of April, Belarus started to catch up, reaching 351 officially registered total cases by April 3. As of April 3, officials in Belarus have performed 32000 cases and tried to trace and isolate all the close contacts in the early phase of Covid-19 spread.
Belarus has a relatively high numbers of doctors and hospital beds per capita. There are 4 doctors, 12 nurses and 8 hospital beds per 1000 citizens and 2.3 intensive care units per 10,000 citizens. Government officials claim that there are 22 lung ventilators per 100 thousand persons and that this number can be increased to 38 if necessary.
Financial Indicators
Belarus currently does not have a properly functioning stock exchange, so it is hard to provide any strong evidence on the changes in corporate valuations. The Belarusian ruble started to depreciate in late February of 2020. Figure 1 depicts the recent developments in the exchange rate with respect to US dollar. Since the beginning of 2020, the US dollar went from 2.1 BYN to 2.57 BYN.
Figure 1: USD to BYN exchange rate.
The developments that can be seen on Figure 1 are largely due to the depreciation of the Russian Ruble which in turn was caused by decrease in oil prices as the OPEC+ agreement have failed in early March of 2020.
Government Health Policies
The government’s strategy so far was to identify and trace all the Covid-19 cases by performing a large number of tests (32,000 as of April 3) and isolating the first-degree contacts of infected persons. Public events with international participation were forbidden, however this does not apply to other public events and gatherings including football games and music concerts. As of April 4, government officials are still planning to hold the WW2 victory parade on May 9. Borders and airports are not closed, but persons arriving from abroad are advised to self-isolate for 14 days. There is no state-wide closure of schools and universities. The only closed teaching institutions are those which had students with officially confirmed Covid-19.
There is no state-wide quarantine as government officials deem it unnecessary and President Lukashenka calls the situation “Covid hysteria”. Among the measures taken up to date is financial regulatory easing ordered by the National Bank of Belarus. The government also issued a decree that consumer prices should not increase by more than 0.5% per month. In addition to that, the government plans to spend 110 million BYN (42.5 million USD) on economic support measures.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
COVID-19 | The Case of Latvia
The first positive COVID – 19 case in Latvia was confirmed on March 3. By April 5, the number of positive cases grew to 533. The share of positive tests remains quite stable and is currently slightly below 3%.
State of Emergency
On March 12, the government declared the state of emergency until at least April 14. The adopted measures include suspension of all on-site education activities at schools and universities, prohibition of any public gatherings, festivals or other organized public events. People are advised to stay home, many companies are switching to remote work. There is no closure of public transportation, but, as of March 21, the number of routes and transportation frequency is being reduced because of a significant fall in the number of passengers.
On March 14, Latvia announced a national lockdown that became effective on March 17. All organized cross-border passenger traffic is closed until at least April 14. Riga airport is closed except for cargo aircrafts. Border crossing is also banned for private vehicles, except for Latvians returning to Latvia and for foreigners leaving Latvia. The government is now considering to prolong the state of emergency to three months. This implies that Latvia can remain in the state of emergency until mid-June.
As of March 28, all shopping centers are closed on weekends, except for grocery stores, pharmacies and construction shops. As of March 31, it is not allowed to stay outdoors in groups of more than 2 people (this does not apply to members of the same household). There should be at least a 2-meter distance between any groups of two people. This rule applies to staying outdoors, shops, public transport, and any other public spaces.
Fiscal Measures
The government announced a package of measures totaling approximately EUR 2 billion (equivalent to 80% of one-month Latvian GDP). The measures include financing of the sickness benefit (normally the first 10 days of the sickness leave is covered by the employer), postponement of all personal income tax advance payments, provision of up to three years of tax holidays to companies, state-guaranteed bank loan holidays and state-financed loans. Employees of the affected firms are eligible for a special compensation worth 75% of the employees’ wage (maximum 700 EUR per month). In addition, municipalities will provide additional support to the most vulnerable groups that are unable to meet their basic needs due to the crisis (e.g. the unemployed not (yet) receiving the unemployment benefit, persons in self-isolation or quarantine).
On April 2, the State Employment Agency informed that due to the COVID-19 pandemic, 20 companies in Latvia have announced collective redundancies, which will lead to 3278 employees being laid off. This mainly includes layoffs in transportation, catering and accommodation sectors.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
COVID-19 | The Case of Sweden
Sweden is a country of around 10 million people. The area is 450 thousand sqkm which gives a population density of 22.7 persons/sqkm. The capital is Stockholm with 1.5 million inhabitants, other major cities are Gothenburg (0.6mn), Malmö (0.3mn), and Uppsala (0.2mn). Sweden has been a member of the EU since 1995 but is not a member of the Eurozone.
Different responses across countries to the crisis depend partly on the organization of political authority, as reflected in the level of regional decentralization of decision making in key areas of authority, and the strength and independence of public agencies. In the case of Sweden, the government has three levels, the central government, 21 regions and 290 municipalities. The regions are responsible for – among other things – health care, while municipalities are in charge of elderly care and schools, all institutions which play an important role in the response to Covid-19.
Public agencies in Sweden have a significant degree of independence from the government and line ministers as long as the agency delivers on the mission and guidelines determined by the government. The agency in charge of dealing with pandemics is the Public Health Agency of Sweden (Folkhälsomyndigheten, 2020), which states on their website that “The Public Health Agency of Sweden has a national responsibility for public health issues and works to ensure good public health. The agency also works to ensure that the population is protected against communicable diseases and other health threats.” The Public Health Agency of Sweden has advised the government on which actions to take in the Covid-19 crisis. It is also Sweden’s Coordinating Competent Body for the European Centre for Disease Prevention and Control (ECDC). Other important authorities involved in health recommendations and crisis measures are Socialstyrelsen (Socialstyrelsen, 2020) and the Swedish Civil Contingencies Agency (MSB, 2020).
Health Indicators
Sweden had its first recorded case of Covid-19 on February 1, but then it took until February 27 for the next case to be registered. In the first week of March, a more significant number of people were diagnosed with the virus as people had returned to Sweden with symptoms after having been in the Italian Alps during the school winter holiday the week before. A few early cases were also related to travel to and from Iran. The indicators on Covid-19 numbers in the table are from the ECDC (ECDC, 2020). The OECD provides numbers on nurses and doctors per 1000 inhabitants.
Figure 1: Nurses. Total, per 1000 inhabitants, 2018 or latest available
Figure 2: Doctors. Total, per 1000 inhabitants, 2018 or latest available
Financial Indicators
Sweden is highly integrated in international financial markets and has a well-developed and liquid stock market. Despite being an EU member country, Sweden keeps its own currency, the Swedish krona (SEK), which is free floating since the Swedish Riksbank is targeting inflation rather than fixing the exchange rate.
The stock market data (see below) is from Nasdaq Stockholm and is the main index of large companies called OMX30.
Figure 3: Stock market data
The exchange rate data is from FOREX which provides travellers with foreign currency and is the selling rate for SEK/USD.
Figure 4: Exchange rate data
The exchange rates are not the same as those that would be used by financial institutions and companies but easily available and movements in this exchange rate, which is what we use here, follow the institutional rates closely.
Laid off workers are the number of workers that have been given notice by their employer that they will be laid off and the numbers are reported on a monthly basis by the Swedish Public Employment Service. In the wake of the corona crisis they are now making more frequent updates to their numbers and have regular press releases to complement their standard data reporting (Arbetsförmedlingen, 2020).
Government Health Policies
In general, the government follows the recommendations of the Public Health Agency of Sweden (PHAS) and other trusted authorities.[1] However, it is also clear that the regions, which are in charge of providing health care, make their own adjustment to some of the recommendations that are issued by the PHAS. For example, the region of Stockholm has adjusted the recommended use of protective equipment to be used by medical staff, most likely in light of shortages. Testing is also not centralized and the PHAS will hold a meeting at the end of March with the different parties involved in testing.
[1] The government states “The Public Health Agency of Sweden coordinates communicable disease control at national level and provides daily updates regarding the situation in Sweden. The National Board of Health and Welfare supports and coordinates the health and medical care preparedness of the various regions. The Government is in daily contact with these agencies. The Government has issued the National Board of Health and Welfare and the Public Health Agency of Sweden several instructions on limiting the spread of SARS-CoV-2. The Government will ensure that the expert agencies and the health and medical care system have the resources necessary to limit the spread of the virus.”
Short Summary of Measures
Mobility restrictions:
- Restriction on size of public gatherings; 500 and then 50 people.
- Restrictions on bars and restaurants, no standing in line or at the bar, only service at tables.
- High schools and higher education institutions are closed and instead provide online education.
- Travel to Sweden from non-EU countries is stopped.
- Visits to nursing homes are forbidden.
Health care:
- Extra delivery of face masks.
- Coordinated efforts to procure more medical equipment.
- Provision of extra hospital beds and intensive care beds.
- Additional government funding to health care providers and related agencies.
- Information campaigns to public and social services personnel.
- Contributions to WHO emergency fund.
Government Economic Policies
In addition to the health and prevention measures, the government has announced an extensive list of measures to deal with the economic impact of the pandemic. These are implemented by several ministries as well as the central bank and the financial supervisory authority.
Short Summary of Measures
Labor market:
- Unemployment benefits extended to more people.
- Sick-pay restrictions removed.
- Government funding for shortened working time.
Tax breaks:
- Tax payments can be delayed.
Emergency loans, guarantees and support:
- Loan guarantees to SMEs.
- Capital injection to ALMI to support loans to SMEs.
- Extra funding for export credits.
- Extra funding for export guarantees.
- Financial support to culture and sports.
- Guarantees to the Nordic airline SAS.
Central Bank measures:
- Loans to banks at low interest and reduced collateral restrictions; banks that benefits from these loans pay a fine if they do not increase their credit supply significantly.
- Loans to banks in USD.
- Purchases of government and mortgage bonds.
- Purchases of commercial papers.
Financial regulator:
- Counter cyclical buffers for banks set to zero.
- Relaxed amortization requirements for households.
- Banks allowed to fall below liquidity coverage ratios.
References
- Arbetsförmedlingen, Swedish Public Employment Service. 2020. English. https://arbetsformedlingen.se/other-languages/english-engelska (2020-03-24)
- Arbetsförmedlingen, Swedish Public Employment Service. 2020. Pressmeddelanden. https://arbetsformedlingen.se/om-oss/press/pressmeddelanden (2020-03-23)
- Arbetsförmedlingen, Swedish Public Employment Service. 2020. Statistik. https://arbetsformedlingen.se/om-oss/statistik-och-analyser/statistik (2020-03-24)
- ECDC, European Centre for Disease Prevention and Control: An agency of the European Union. Download today’s data on the geographic distribution of COVID-19 cases worldwide. https://www.ecdc.europa.eu/en/publications-data/download-todays-data-geographic-distribution-covid-19-cases-worldwide (2020-03-23)
- Folkhälsomyndigheten, 2020. Our mission – to strengthen and develop public health. https://www.folkhalsomyndigheten.se/the-public-health-agency-of-sweden/ (2020-03-23)
- Forex, 2020. Växla valuta. https://www.forex.se/valuta/usd (2020-03-24)
- MSB, The Swedish Civil Contingencies Agency. 2020. https://www.msb.se/en/ (2020-03-23)
- Nasdaqomxnordic, 2020. OMXS30, OMX STOCKHOLM 30 INDEX, (SE0000337842). http://www.nasdaqomxnordic.com/indexes/historical_prices?Instrument=SE0000337842 (2020-03-23)
- OECD, The Organisation for Economic Co-operation and Development. 2020. Doctors. https://data.oecd.org/healthres/doctors.htm (2020-03-24)
- OECD, The Organisation for Economic Co-operation and Development. 2020. Nurses. https://data.oecd.org/healthres/nurses.htm (2020-03-24)
- Government Offices of Sweden, 2020. The Government’s work in response to the virus responsible for COVID-19. https://www.government.se/government-policy/the-governments-work-in-response-to-the-virus-responsible-for-covid-19/ (2020-03-23)
- Socialstyrelsen, 2020. Learn more about Swedish Health Care. https://www.socialstyrelsen.se/en/ (2020-03-24)
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.