The 10 countries that spend the most to face the pandemic

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A team of researchers at Columbia University in the United States has been monitoring the amount of resources that governments in 168 countries are investing to tackle the coronavirus pandemic.

Huge emergency fiscal packages are injecting money into the economy to mitigate the effects of a global economic crisis that, according to forecasts by experts and international organizations, will be the worst since the Great Recession of the 1930s.

In these unprecedented circumstances, the dogma of maintaining fiscal balance and not incurring out-of-budget expenses has remained in the past, as infections and deaths have spread rapidly around the world.

“It is an extraordinary level of spending,” Ceyhun Elgin, director of the Masters Program in Economics at Columbia University, New York, told the BBC.

So far, the total amount of tax expenditures globally is $ 7.2 trillion (more than $ 40 trillion), equivalent to about $ 1,152 ($ 6,600) per capita, according to Elgin .

The global average is close to 3.7% of the Gross Domestic Product (GDP).

Ranking

To make a comparison on the size of the rescue packages, the Columbia survey presents them in relation to the GDP of each country.

So, the first place is occupied by Japan, with an expenditure equivalent to 21% of GDP, followed by Luxembourg (20%) and Belgium (19%).

At the other extreme, among countries that, for various reasons, have not invested additional resources to those included in their fiscal budget, are Turkmenistan, Yemen, Oman or Algeria.

Why is there so much difference between packages?

Undoubtedly, wealthier countries are better able to increase their fiscal spending, but that is not the only factor.

Elgin explains that countries with fewer hospital beds had to spend more resources, something directly related to the quality and coverage of the health system in each country.

The level of exposure to the pandemic also plays a key role, as the countries most affected, with the highest number of infections, are under greater pressure to inject more resources.

Another relevant element is access to credit or international aid, since if a country has exhausted its resources, it will not have as many options to increase its spending.

For example, countries like the United States or Japan are not only richer, but they also have more facilities to borrow, as there are more investors willing to buy their bonds.

Peru leads the ranking in Latin America

“Latin America has lower expenses than the global average,” says Elgin.

The region spent the equivalent of 2.4% of GDP, a rate lower than the 3.7% of GDP that the world disbursed.

And, in the case of rich countries (with more than US $ 10,000 per capita), the additional tax expenditures due to these emergencies represent 6.7% of GDP.

“In Latin America, the informal sector is very large. This reduces the collection of taxes and, therefore, the size of the packages is smaller ”, says the economist.

The country that leads the regional list of highest fiscal expenditures to respond to the pandemic is Peru (9% of GDP), followed by Brazil and Paraguay. At the other extreme is Nicaragua, with a level of spending equal to zero.

‘Bigger isn’t better’

“The size of the package should not be confused with its effectiveness,” says Elgin. “The most important thing is how the money is spent, the content of the package, not just the amount of money.”

“A larger package does not mean a better package,” says Elgin, adding that further studies will be needed to allow an in-depth analysis of the specific content of tax expenditures in the face of the pandemic.

“What are you spending money on? Give credit to small businesses? Rescue large companies? Unemployed? Informal? Banks? This is very important, ”says Elgin.

Follow-up by Columbia University staff includes the additional cost to the budget approved by countries for this year.

In this sense, it includes new resources in the data and excludes reallocations within the same budget.

This helps to explain, in part, the fact that other research on economic packages to deal with the pandemic points to different values.

An analysis by the Inter-American Development Bank (IDB), “Fiscal policy and management during the pandemic and post-pandemic in Latin America and the Caribbean”, for example, focused on the total resources announced by governments (including direct spending, loans to banks and other factors).

This IDB survey shows that the cost of these packages reaches 4.1% of GDP in Latin America. According to these parameters, Chile ranks first on the list, with 15.1% of GDP, followed by Peru (11.1%), and El Salvador and Colombia, with around 8%.

A team of researchers at Columbia University in the United States has been monitoring the amount of resources that governments in 168 countries are investing to tackle the coronavirus pandemic.

Huge emergency fiscal packages are injecting money into the economy to mitigate the effects of a global economic crisis that, according to forecasts by experts and international organizations, will be the worst since the Great Recession of the 1930s.

In these unprecedented circumstances, the dogma of maintaining fiscal balance and not incurring out-of-budget expenses has remained in the past, as infections and deaths have spread rapidly around the world.

“It is an extraordinary level of spending,” Ceyhun Elgin, director of the Masters Program in Economics at Columbia University, New York, told the BBC.

So far, the total amount of tax expenditures globally is $ 7.2 trillion (more than $ 40 trillion), equivalent to about $ 1,152 ($ 6,600) per capita, according to Elgin .

The global average is close to 3.7% of the Gross Domestic Product (GDP).

Ranking

To make a comparison on the size of the rescue packages, the Columbia survey presents them in relation to the GDP of each country.

So, the first place is occupied by Japan, with an expenditure equivalent to 21% of GDP, followed by Luxembourg (20%) and Belgium (19%).

At the other extreme, among countries that, for various reasons, have not invested additional resources to those included in their fiscal budget, are Turkmenistan, Yemen, Oman or Algeria.

Why is there so much difference between packages?

Undoubtedly, wealthier countries are better able to increase their fiscal spending, but that is not the only factor.

Elgin explains that countries with fewer hospital beds had to spend more resources, something directly related to the quality and coverage of the health system in each country.

The level of exposure to the pandemic also plays a key role, as the countries most affected, with the highest number of infections, are under greater pressure to inject more resources.

Another relevant element is access to credit or international aid, since if a country has exhausted its resources, it will not have as many options to increase its spending.

For example, countries like the United States or Japan are not only richer, but they also have more facilities to borrow, as there are more investors willing to buy their bonds.

Peru leads the ranking in Latin America

“Latin America has lower expenses than the global average,” says Elgin.

The region spent the equivalent of 2.4% of GDP, a rate lower than the 3.7% of GDP that the world disbursed.

And, in the case of rich countries (with more than US $ 10,000 per capita), the additional tax expenditures due to these emergencies represent 6.7% of GDP.

“In Latin America, the informal sector is very large. This reduces the collection of taxes and, therefore, the size of the packages is smaller ”, says the economist.

The country that leads the regional list of highest fiscal expenditures to respond to the pandemic is Peru (9% of GDP), followed by Brazil and Paraguay. At the other extreme is Nicaragua, with a level of spending equal to zero.

‘Bigger isn’t better’

“The size of the package should not be confused with its effectiveness,” says Elgin. “The most important thing is how the money is spent, the content of the package, not just the amount of money.”

“A larger package does not mean a better package,” says Elgin, adding that further studies will be needed to allow an in-depth analysis of the specific content of tax expenditures in the face of the pandemic.

“What are you spending money on? Give credit to small businesses? Rescue large companies? Unemployed? Informal? Banks? This is very important, ”says Elgin.

Follow-up by Columbia University staff includes the additional cost to the budget approved by countries for this year.

In this sense, it includes new resources in the data and excludes reallocations within the same budget.

This helps to explain, in part, the fact that other research on economic packages to deal with the pandemic points to different values.

An analysis by the Inter-American Development Bank (IDB), “Fiscal policy and management during the pandemic and post-pandemic in Latin America and the Caribbean”, for example, focused on the total resources announced by governments (including direct spending, loans to banks and other factors).

This IDB survey shows that the cost of these packages reaches 4.1% of GDP in Latin America. According to these parameters, Chile ranks first on the list, with 15.1% of GDP, followed by Peru (11.1%), and El Salvador and Colombia, with around 8%.

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