Early movers: #UAE and #Australia begin economic stimulus as world scrambles 

| April 6, 2020

The outbreak of coronavirus has had repercussions far beyond public health. Effects are now being felt on the global markets as social distance restriction begins to restrict international commerce, writes Lisa Moore.

Communities are also feeling the impact as businesses begin closing operations to slow the spread of the virus. In the United States, for instance, many major retailers, from Glossier to Patagonia, have taken the unprecedented move to indefinitely shut their doors to prevent the spread of coronavirus.

It is specifically this ‘grassroots’ impact on businesses that economists are most concerned about. With the shutting down of major cultural events such as sports games and music festivals, and business conferences like Facebook’s F8 and Apple’s annual Worldwide Developers Conference, ordinary workers at those firms and their suppliers have felt the brunt.

The closure of schools will also substantially affect economies. When schools start sending kids home, their parents are taken out of the workforce with an additional burden being placed on those parents who are casual workers, single parents or small business owners. While some will be able to work from home or take paid leave, most parents will have no choice but to forfeit income at the expense of looking after children. Creating particular concern in theUS, school closures of 12 weeks are predicted to reduce the national GDP by 1%.

This underscores the biggest concern that economists share – the stability of the Small to Medium-size Enterprise (SME) sector, the economic staple of most free-market countries.

The sharp – albeit transitory – decline in business activity and the huge strain it puts on workers and business owners, raises the obvious question to world leaders: What can governments do to soften the blow and ensure markets survive public health measures?

However, unpredictable and drastic events like the COVID-19 pandemic  throw governments into such a state of panic that economic concerns are often not addressed until it is too late.

Italy for instance, having entered a state of total nation-wide lockdown, has all but abandoned economic considerations. With over 30,000 cases, Rome is more concerned about containing the epidemic than maintaining business flow. With the country’s markets essentially at a standstill, the eyes of the world are now on Italy to observe how a modern Western economy will bear an almost-total shutdown.

But while some governments are struggling to contain the virus, others are implementing early measures to ensure economies stay afloat, with the UAE and Australia being some of the first movers.

While both these nations have seen business slowdowns in the wake of the pandemic, the Emirati and Australian governments have wasted no time gathering and deploying resources to both workers and business owners.

For Australia, its Treasury has begun a US$10.3 billion economic stimulus package program to support low-income workers. According to official reports, as many as 6.5 million workers and 3.5 million businesses would be supported by the effort. First to be activated will be a direct $750 payment to low-income earners as well as seniors and veterans. Additionally, a ‘Boost Cash Flow’ fund of $6.7 billion has been set up to deliver payments of up to $25,000 to SMEs, with another $1.3bn set aside for business owners to continue paying their employees and trainees.

Showing financial prudence but also an awareness of the imminent economic threat, Australian PM Scott Morrison announced that “measures are all temporary, targeted and proportionate to the challenge we face. Our actions will ensure we respond to the immediate challenges we face and help Australia bounce back stronger on the other side, without undermining the structural integrity of the Budget.”

The UAE has also gone full throttle to ensure its economy can weather pandemic. The government recently unveiled a $27bn stimulus package. According to regional media sources, the money will go mostly toward supporting the Emirate’s vital industries like banking and tourism. With eyes on UAE small businesses, authorities have also taken major steps to ease the burden on owners and support their operations. The Emirates have canceled the 25% down payment required for requesting installment-based payment of government fees for obtaining and renewing licenses. This will ease the burden on SMEs considerably. The Abu Dhabi Executive Council has also ordered a $1.3 billion fund to be dispersed to pay for utilities in workplaces with another $800 million going towards credit guarantees to support SME operations.

Other countries have also followed suit in deploying plans to uphold their economies.

Saudi Arabia’s central bank has begun the dispersal of a $13.3bn package to support private businesses. Egypt’s government has allocated 100 billion pounds ($6.4 billion) to combat the economic effects of coronavirus.

Asian nations have also followed the trend, with Japan announcing a $4bn aid package.

The most striking example of government-backed economic support came recently from Washington. The United States federal government is planning a $1 trillion package to help American workers and businesses get through the economic impact of coronavirus. Secretary of the Treasury Steven Mnuchin told reporters that the government needs to “move swiftly and boldly in a major way to help American small businesses survive this disruption and thrive on the other side of it. In particular, we are preparing bold steps to ensure that Main Street can access liquidity and credit during this extraordinary time.” Among other steps, the package would include direct cash grants of $1,000 to households with the aim of increasing cash flow in the economy.

The fight against corona requires decisive and early action. We know that early and aggressive health policies can slow the contagion. Perhaps the UAE and Australia will also teach us the importance of early economic intervention too. As former Italian Prime Minister Matteo Renzi told media “Italy is now paying for mistakes made in the early days of the outbreak. Please don’t make the same mistakes of under-evaluation of the risk”, he said.

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