The economic effects of COVID-19 have been severe and diverse. They appeared immediately in some sectors, while in others they arrived only later. As a rule, when examining the effects of any crisis, experts agree that one of the most informative indicators is the change in new car sales. The IHS Markit forecasts that only 69.9 million new cars will be sold worldwide in 2020. This is a 22% global decline compared to 2019. In Europe, a 24.6% decline is expected. According to Goldman Sachs, iPhone sales could fall by as much as 36 per cent in the third quarter of 2020. The International Energy Agent (IEA) says global crude oil consumption could fall back to levels not seen since 1995.
These three indicators can clearly show the impact of the COVID-19 on the world economy, which vary significantly by country and continent. Using data from 14 countries, we will explain the diverse reactions of governments, entrepreneurs, and businesspeople in each country.
The rate of people claiming unemployment benefits surged to 6% in the first three weeks of the pandemic, 780,000 jobs were lost. A whopping 90% of jobs were affected by governmental measures meant to fight the pandemic. Australia has not experienced such a recession in which so many people lost their jobs in at least for at least 30 years. Wages were reduced by 6.7%. The main response of entrepreneurs to the crisis was a series of layoffs, while others took the pay cut route. According to the Australian Bureau of Statistics, the young and the elderly took the most severe hit. The most affected sectors were the accommodations (hospitality) and catering industry, where more than one-fourth of jobs were lost between the middle of March and the first week of April. The weekly $550 Jobseeker contribution was the most used governmental support.
The unemployment rate is 7.5%, based on data of the first seven months of the year. The amount of the rescue package is USD 189 billion, of which USD 73 billion is for job retention.
The crisis has also triggered an unemployment crunch in Austria. By July, the unemployment rate reached 9%. To mitigate worse unemployment woes, the government enacted a 3+3-month temporary work time reduction programme for employers. Employees receive 90, 85, or 80% of their net pay for the reduced work time. Companies are only eligible for support if they can agree with worker unions regarding conditions of the company’s work time reduction. The tourism sector suffered the greatest crash. Companies that carry out a significant part of their operations in Austria are also entitled to support from the state-owned holding company, ABBAG. The Austrian government is also providing tax deferrals and tax breaks of up to USD 11.8 billion and emergency aid of up to USD 17.7 billion to businesses.
The unemployment rate is 9%, based on the first seven months of the year. The economic rescue package amounts to USD 44 billion.
Due to inequality, the number of people losing their jobs has been the highest among the poorest citizens. Toyota Motors announced as early as April 13, that, like General Motors, they would suspend vehicle production in the country. Although President Jair Bolsonaro embraced a “strategy of denial’’, the country as a whole enacted substantive measures to combat the crisis. Brazil provided a credit of USD 1.9 billion to companies with revenues of less than USD 68,000, and USD 7.6 billion to companies with revenues between USD 68,000 and USD 1.9 million. One of the most significant measures is the monthly USD 110 emergency benefit for the unemployed, first provided for three months. Their “13th month” pension was paid out much earlier than usual to support the elderly, and the number of beneficiaries of the Bolsa Familia (“Family Fund”) was increased by 1 million. But even these could not substantially reduce the worsening unemployment situation.
The unemployment rate is 13.3%, based on the first seven months of the year. Analysts expect the economic rescue package to amount to USD 551 billion, of which USD 42 billion will be for job retention.
In Canada, like in several strong European economies, entrepreneurs did not turn to layoffs, or if they did, state subsidies helped reduce it. As a first step, the Canadian Government provided a USD 12.1 billion package of financial aid to help people facing difficulties due to the epidemic crisis. The package consisted of 2 parts. The first part’s USD 6.4 billion covered unemployment benefits, and the second USD 6.4 billion went to those not entitled to receive the Canada Emergency Response Benefit (CERB). The unemployment benefit is $2000, which is half of the average monthly salary in Canada. The government has also planned special credit conditions for property owners to cancel rent for micro and small businesses.
The unemployment rate is 10.2%, based on the first seven months of the year. The economic rescue package is USD 251 billion, of which USD 25 billion will be for job retention.
According to the Denmark Bureau of Statistics, in April alone, almost 11% of employees, 222,100, were sent on temporary leave but received wage compensation. The central compensation ceased on August 29. This saved a huge portion of employment opportunities. In some sectors though, such as sporting goods distributors, the trained professionals were not laid off. The Danish government launched liquidity and other business support packages in time. Entrepreneurial organisations claim these measures were the turning point in the crisis. The packages made it significantly easier for workers laid off or sent on holiday in March and April to return to work.
The unemployment rate is 5.2%, based on the first seven months of the year. The economic rescue package is USD 46 billion.
Changes in unemployment started gradually in Hungary. Where such measures were necessary, employers opted for leave and reducing working hours instead of layoffs. Less than 15% of SMEs laid off workers. More than half of Hungarian small and medium-sized enterprises (SMEs) have claimed to have not been affected at all by the pandemic, while 8% of firms had no choice but to close down (Budapest Business School Research, July 2020). Research indicates that the impact of the epidemic was not significant in the agriculture and construction sectors. Some 77.3% of enterprises in agriculture, and 62.5% in the construction sector, claim that the epidemic did not have a major impact on business. In contrast, the tourism and catering sector suffered near-total shutdown (94.7%), more than half of the enterprises providing other accommodation suffered (53.3%), and almost half of all commercial enterprises (46.6%) took a hit. Looking forward, 86% of companies say their operations will be negatively affected by the coronavirus in the near future.
The unemployment rate is 4.8%, based on the first seven months of the year. The economic rescue package is USD 30 billion.
In Ireland, the unemployment rate hovered at nearly 5.0%. This jumped temporarily to 16.7% because every applicant for pandemic unemployment benefits was classified as unemployed. 41.2% of employees between 15-24, and 13.7% between 25-74, lost their jobs. The Irish government’s primary crisis management tool was a wage subsidy scheme, which started on 26 March 2020. From 16 April, the benefit was extended to workers whose annual salary before COVID-19 exceeded 76,000 EUR and was reduced after the pandemic. From 4 May, the payment of subsidies was transferred to a levelled system based on the average weekly wage.
The unemployment rate is 5%, based on the first seven months of the year. The economic rescue package is USD 8.7 billion.
Unemployment in the Netherlands has been below the European average. On 31 March, the government announced the Noodfonds Overbrugging Werkgelegenheid (NOW) System to provide financial assistance to employers to pay their workers. The NOW System replaced part-time unemployment benefits. NOW has been extended through October and new conditions have been added. Notably, SMEs of less than 250 employees with more than 30% revenue loss are entitled to reimbursement of Tegemoetkoming Vaste Lasten (fixed costs). To preserve jobs, companies whose revenue has fallen by at least 20% can receive wage compensation divided into three parts.
The unemployment rate is 4.5%, based on the first seven months of the year. The economic rescue package is USD 35 billion.
In Norway, measures to halt the crisis have been estimated to cost around NOK 24 billion (USD 2.74 billion) per month and have forced many businesses to close down. As a result, many workers have been made redundant, and the unemployment rate has risen from a historically low level to its highest level since World War II. For temporary redundancies of less than USD 66,000 full pay is guaranteed until the 20th day of the redundancy period. The employers pay for two days and the state for 18 days. After day 20, the former employees receive 80% of the average unemployment benefit.
The unemployment rate is 5.2%, based on the first seven months of the year. The economic rescue package is USD 18 billion.
In terms of austerity, Sweden was one of the world’s most significant outliers. The nation introduced only minimal restrictive measures in the economy and society. Social distancing, quarantine, working from home, and school closures were recommended, but not enacted at the level of other developed countries. Overall, there has been significantly less pressure on Swedish companies, which was reflected in low redundancy rates and fewer companies that went out of business or were temporarily suspended. The Q2 profits for flagship Swedish companies like Volvo, Alfa-Laval, Trelleborg and SKF declined; whereas Q2 profits for Electrolux did not change, and Ericsson was even able to increase its profits. The housing market has also remained remarkably stable.
The unemployment rate is 8.9%, based on the first seven months of the year. The economic rescue package is USD 31 billion.
Spanish entrepreneurs have opted for redundancies above the European average. According to the IMF forecast, the epidemic could bring unemployment in the country up to 20.8%. The government tried to mitigate the damage with a rescue package of USD 21.2 billion and then USD 236 billion (20% of GDP). USD 708 million is being provided to the most vulnerable families. Workers are encouraged to work remotely, and those made redundant are also given full unemployment benefits. Over USD 118 billion has been set aside for struggling businesses to receive guaranteed loans and export credit (INSS-Instituto Nacional de la Seguridad Social). The provision on foreign investment has been amended to prevent the acquisition of strategic firms. Some 35% of businesses have considered reducing the number of employees, 45% reducing working hours, and 50% reducing pay.
The unemployment rate is 15,3%, based on the first seven months of the year, and the economic rescue package totals USD 253 billion.
The crisis has rocked the Swiss economy, but the country has been able to mitigate the magnitude because it quickly made loans available to companies and allowed for short-term working time compensation. Moreover, working from home was introduced widely and effectively. According to a Deloitte survey, 24% of entrepreneurs become insolvent, and 19% of employees are expected to lose their jobs in the near future. Some 18% of entrepreneurs have closed their businesses, 21% have seen their activity fall to zero, and 38% are currently feeling the effects of the downturn. Thus far, the epidemic has had a negative economic impact on more than three-quarters (77%) of Swiss entrepreneurs, while 10% have reported strong business growth.
The unemployment rate is 3.2%, based on the first seven months of the year. The economic rescue package is USD 67 billion.
The first coronavirus case was identified on 31 January 2020; it was a Chinese tourist couple in Newcastle. In the UK, as in the US, companies have responded to the crisis by laying off a significant number of workers. To alleviate the economic consequences, the Minister of Finance announced a massive aid package very early on, which was then added to several times. The approximately USD 519.2 billion package covered corporate loan guarantees, partial financing of wages and self-employed income, tax breaks, and one-off support for SMEs, a housing discount and mortgage moratorium, and various welfare measures. The impact of the provisions has yet to be analysed, but the consensus is that the wave of mass layoffs was smaller than it would have been without the measures.
The unemployment rate is 3.9%, based on the first seven months of the year. The economic rescue package is USD 235 billion, of which USD 72 billion will be for job retention.
American layoffs hit fast and hard. More than half of U.S. small businesses said they could not operate for more than three months without support. Goldman Sachs conducted a survey of ten thousand small business executives. They highlighted the critical need for political action and immediate help. On 27 March, the U.S. government adopted a USD 2.2 billion stimulus package. The package includes a USD 1,200 credit for all Americans with incomes less than USD 75,000 a year. USD 500 billion was earmarked for rescuing companies. From the package, unemployment benefits were increased to USD 600 per week, which will be available to claimants through July. And USD 376 billion has been made available to small businesses with less than 500 employees.
The unemployment rate is 8,4%, based on the first seven months of the year. The economic rescue package totals USD 3 trillion, of which USD 1.1 trillion will be for residential assistance and for job retention. Given the relatively severe virus status in the United States, further economic rescue packages and measures are being considered by the Congress and other arms of government.
As can be seen from the country data, leaders have applied three main measures to mitigate the effects of the crisis with varying speed, degree, and intensity. In addition to the financial reserves of companies, the financial and political stability of the given country, as well as the strength of the employees’ and employers’ interests in each country also influenced the development of the rates of redundancies, working hours and pay reductions by country. The spread of the virus has not stopped, it is growing again in several regions, so in addition to the existing conservative economic measures, it will be necessary to attract new sources of income and make the necessary business strategy changes.