How Governments have responded to COVID-19 in South Asia

As confirmed cases of the novel coronavirus (COVID-19) exceeded 5 million, as of May 25, governments around the world are easing the restrictions imposed on their populations to combat the spread of the virus.

But the economic impact of the total breakdown in economic activity has resulted in the International Monetary Fund projecting negative global growth for 2020 and calling this “the worst economic fallout since the Great Depression”.

Hence, as was expected, governmental authorities around the world have announced several economic support measures – both fiscal and monetary – to help businesses survive and families put food on the table. These include direct payments transfers to individuals, and limitless loans to struggling businesses, with the total response stimulus ranging from 0.9 percent of the GDP to as high as 18.2 percent, in some cases.

Below we take a look at the six major economies of South Asia in this COVID-19 Response Policy Tracker as detailed below.

*(all figures in US$ unless specified; information sourced from various news outlets, International Monetary Fund, and Center for Strategic and International Studies in the US which runs a COVID-19 Fiscal Response Tracker)

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Singapore

COVID-19 situation:

Singapore has reported 31,068 confirmed COVID-19 cases, with 23 deaths, as of May 25, 2020.

What are the Fiscal Measures announced by Singapore in response to COVID-19?

• Singapore announced $4.4 billion of relief funding, dubbed the “Unity Budget,” on February 18, to co-fund business costs and provide tax relief for workers.
• On March 26, it unveiled a second stimulus plan, the “Resilience Budget,” worth $33 billion, which was designed to assist hard-hit sectors and self-employed individuals and provide cash payouts to citizens depending on income.
• On April 6, a third budget was announced and was called the “Solidarity Budget.” This includes one-off payments to citizens, wage subsidies, and self-employed relief schemes.
• The fourth round of support was announced on April 21.

In all, the four packages of measures amounted to a total stimulus of S$63.7 billion (13 percent of GDP). These include funds:

• Of S$800million to contain the outbreak (mainly to the Ministry of Health).
• For Care and Support Package which provides support to households (S$ 5.7 billion), including a cash payout to all Singaporeans, and additional payments for lower-income individuals and the unemployed.
• For the Stabilization and Support Package which provides support to businesses (about S$35.3 billion), including wage subsidies, an enhancement of financing schemes, and additional support for industries directly affected and the self-employed.

Finally, as of now, the Singapore Government has also set aside loan capital of S$20 billion and has introduced other economic resilience measures amounting to S$1.9 billion.

What are the Monetary Measures announced by Singapore in response to COVID-19?

On March 31, the Monetary Authority of Singapore (MAS) announced measures to help individuals and SMEs facing temporary cash-flow difficulties, which has three components:

(i) Help individuals meet their loan and insurance commitments;
(ii) Support SMEs with continued access to bank credit and insurance cover; and
(iii) Ensure interbank funding markets remain liquid and well functioning.

A second package announced on April 30, extends the scope of relief for individuals to a broader set of loan commitments.

Before that, on March 19, the MAS announced the establishment of a $60 billion swap facility with the US Federal Reserve. The MAS intends to draw on this swap facility to provide USD liquidity to financial institutions in Singapore. The first MAS US$ auctions were held in late March and weekly auctions are held every Monday.

And on March 30, the MAS adopted a zero percent annual rate of appreciation of the policy band and reduced the mid-point to the prevailing level of the S$NEER, with no change to the width of the band.

Later on April 7, MAS announced that it would adjust selected regulatory requirements and supervisory programs to enable financial institutions to better deal with issues related to the pandemic.

A day later, on April 8, MAS announced a S$125 million support package to sustain and strengthen financial services and FinTech capabilities. The package, funded by the Financial Sector Development Fund, has three main pillars:

(i) Supporting workforce training and manpower costs;
(ii) Strengthening digitalization and operational resilience; and
(iii) Enhancing FinTech firms’ access to digital tools.

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Indonesia

COVID-19 situation:

Indonesia has reported 22,271 confirmed COVID-19 cases, with 1,372 deaths, as of May 25, 2020.

What are the Fiscal Measures announced by Indonesia in response to COVID-19?

The government announced a stimulus package worth $725 million in February 2020, which provides fiscal incentives to support the country’s tourism, aviation, and property industries. The package also allocated $324 million for low-income households.

Then on March 13, the government issued its second emergency stimulus package worth $8.1 billion, which included exempting some workers in manufacturing from income tax and giving manufacturing companies a discount on corporate tax payments.

On March 31, it introduced Indonesia’s third stimulus package worth nearly $24.6 billion for health care spending, social protection, and tax incentives.

Latest announcement came on May 18, when the Government announced $43 billion in economic stimulus, which comprises of:

(i) Support to the health care sector to boost testing and treatment capability for COVID-19 cases;
(ii) Increased benefits and broader coverage of existing social assistance schemes to low-income households such as food aid, conditional cash transfers, and electricity subsidy;
(iii) Expanded unemployment benefits, including for workers in the informal sector;
(iv) Tax reliefs, including for the tourism sector and individuals (with an income ceiling); and
(v) Permanent reductions of the corporate income tax rate from 25 percent to 22 percent in 2020-21 and 20 percent starting in 2022.

In addition to tax and spending measures, the stimulus package under the national economic recovery program also includes capital injection into SOEs and interest subsidies, credit guarantees, and loan restructuring funds for micro, small, and medium enterprises (MSMEs).

What are the Monetary Measures announced by Indonesia in response to COVID-19?

First up, the Bank Indonesia (BI) reduced the policy rate by 50 bps cumulatively in February and March 2020, to 4.5 percent. BI also announced other measures to ease liquidity conditions, including:

(i) Lowering reserve requirement ratios for banks;
(ii) Increasing the maximum duration for repo and reverse repo operations (up to 12 months); (iii) introducing daily repo auctions;
(iv) Increasing the frequency of FX swap auctions for 1, 3, 6 and 12-month tenors from three times per week to daily auctions; and
(v) Increasing the size of the main weekly refinancing operations as needed.
(vi) Adjusted macro prudential regulation to ease liquidity conditions and support bond market stability.

BI has started to purchase government bonds in the primary market during the latest Islamic bonds auction. It has also taken measures to further strengthen financial deepening, access to financial services, and monetary operations, including by facilitating collaboration between the banking industry and Fintech companies, and introducing Sharia-compliant instruments.

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Hong Kong

COVID-19 situation:

Hong Kong has reported 1,066 confirmed COVID-19 cases, with 4 deaths, as of May 25, 2020.

What are the Fiscal Measures announced by Hong Kong in response to COVID-19?

In early March, Hong Kong launched a fiscal stimulus of approximately $1300 for each of Hong Kong’s 7 million residents, as well as targeted income tax cuts and rent suspension for a portion of the population, for a total of around $15 billion.

Then on April 8, the authorities unveiled a new stimulus package to support businesses and individuals in response to the coronavirus (COVID-19) pandemic. It amounts to approximately 5% of Hong Kong’s GDP. It includes:

(i) Government rental concessions, fee waivers, provision of loans, and loan-repayment deferrals to assist small and medium-sized enterprises (concessionary interest rates of up to 3% provided for one year, for loans under 80% and 90% guarantees)
(ii) Providing tenants of government properties a 75% rent concession for six months, waiving registration fees for medical workers for three years, and deferring payment of salaries tax, personal assessment and profits tax due for payment in April, May, and June 2020 by three months
(iii) The MTR Corporation will also reduce fares by 20% for six months commencing from 1 July 2020.

Other relief measures included support for the aviation industry, support enabling banks to lend and to provide individual banking clients with a moratorium on principal, and support for insurance companies providing a grace period from 30 days to 180 days for premium payments.

What are the Monetary Measures announced by Hong Kong in response to COVID-19?

On March 15, the Hong Kong Monetary Authority (HKMA) lowered its countercyclical capital buffer imposed on banks to 1 percent from 2 percent, and reduced its base rate by 64 basis points to 0.86 percent. This freed up HKD 500 billion in capital.

The HKMA also recently announced a Pre-approved Principal Payment Holiday Scheme, in which participating banks will pre-approve deferment of loan principal payments falling due between 1 May 2020 and 31 October 2020 of eligible SMEs for up to 6 months. All corporate borrowers that have an annual sales turnover of HK$800 million or less and that have no outstanding loan payments overdue for more than 30 days are eligible.

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India

COVID-19 situation:

India has reported 131,868 confirmed COVID-19 cases, with 3,867 deaths, as of May 25, 2020.

What are the Fiscal Measures announced by India in response to COVID-19?

The Government on March 26 announced a stimulus package valued at approximately 0.8 percent of GDP. The key elements of the package are:
(i) In-kind (food; cooking gas) and cash transfers to lower-income households;
(ii) Insurance coverage for workers in the healthcare sector; and
(iii) Wage support to low-wage workers (in some cases for those still working, and in other cases by easing the criteria for receiving benefits in the event of job loss).

These measures are in addition to a previous commitment by the Indian Prime Minister that an additional 150 billion rupees (about 0.1 percent of GDP) will be devoted to health infrastructure, including for testing facilities for COVID-19, personal protective equipment, isolation beds, ICU beds and ventilators.

Several measures to ease the tax compliance burden across a range of sectors have also been announced, including postponing some tax-filing and other compliance deadlines.

Notably, during May 13-17, the Indian Finance Minister announced new measures targeting businesses (about 2.7 percent of GDP), expanding support for poor households, especially migrants and farmers (about 1.5 percent of GDP), targeted support for the agricultural sector (about 0.7 percent of GDP), and some expansion of existing programs providing work opportunities to low-wage labourers (about 0.2 percent of GDP).

Key elements of the business-support package are:

• Various financial sector measures for micro, small, and medium-sized enterprises and non-bank financial companies;
• Liquidity injection for electricity distribution companies; and
• A reduction in up-front tax deductions for workers.

Additional support to migrants and farmers will mainly be in the form of providing concessional credit to farmers, as well as a credit facility for street vendors and an expansion of food provision for non-ration card holders (mainly migrants).

The main measure for the agricultural sector is support for infrastructure development.

What are the Monetary Measures announced by India in response to COVID-19?

On March 27, the Reserve Bank of India (RBI) reduced the repo and reverse repo rates by 75 and 90 basis points (bps) to 4.4 and 4.0 percent, respectively.

The Central Bank also announced liquidity measures to the tune of 3.7 trillion Rupees (1.8 percent of GDP) across three measures comprising:

(i) Long Term Repo Operations (LTROs),
(ii) A cash reserve ratio (CRR) cut of 100 bps, and
(iii) An increase in marginal standing facility (MSF) to 3 percent of the Statutory Liquidity Ratio (SLR).

Earlier in February, the RBI has provided relief to both borrowers and lenders, allowing companies a three-month moratorium on loan repayments and the Securities and Exchange Board of India (SEBI) temporarily relaxed the norms related to debt default on rated instruments. At the same time, the implementation of the net stable funding ratio and the last stage of the phased-in implementation of the capital conservation buffers were delayed by six months.

The RBI also introduced regulatory measures to promote credit flows to the retail sector and micro, small, and medium enterprises (MSMEs) and provided regulatory forbearance on asset classification of loans to MSMEs and real estate developers. CRR maintenance for all additional retail loans has been exempted, and the priority sector classification for bank loans to NBFCs has been extended for on-lending for FY 2020/21.

During April 17-20, the RBI reduced the reverse repo by 25 bps to 3.75 percent, and announced:

• A TLTRO-2.0 for an initial amount of around 0.2 percent of GDP, in extension of the initial TLTRO program of around 0.4 percent of GDP (funds to be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs);
• Special refinance facilities of around 0.2 percent of GDP for rural banks, housing finance companies, and small and medium-sized enterprises;
• A temporary reduction of the Liquidity Coverage Ratio (LCR) from 100 to 80 percent and restriction on banks from making dividend payouts to conserve capital;
• A standstill on asset classifications during the three-month loan moratorium period with 10 percent provisioning requirement, and an extension of the time period for resolution timeline of large accounts under default by 90 days.

On April 27, the RBI announced a special liquidity facility for mutual funds (SLF-MF) of Rs 500 billion and a fixed-rate 90-day repo operation for banks exclusively for meeting the liquidity requirements of mutual funds, along with regulatory easing for liquidity support availed under the facility; and the SEBI reduced broker turnover fees and filing fees on offer documents for public issue, rights issue and buyback of shares by 50 percent.

On April 30, the RBI extended the regulatory benefits under the SLF-MF scheme to all banks, irrespective of whether they avail funding from the RBI or deploy their own resources under the scheme.

In summary, the RBI’s policy measures since February 8, represent liquidity injection of around 4 percent of GDP.

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Philippines

COVID-19 situation:

The Philippines has reported 13,777 confirmed COVID-19 cases, with 863 deaths, as of May 25, 2020.

What are the Fiscal Measures announced by the Philippines in response to COVID-19?

On March 30, the Government approved a $3.9 billion social protection program for poor families and health workers.

On April 7, it further announced a $610 million “Bayanihan Grant to Cities and Municipalities” to assist local governments.

On April 13, the government approved a $1 billion wage subsidy package intended to support about 3.4 million small business workers. Workers qualifying for the financial assistance will receive about $340 for two months.

On May 12, the COVID-19 Unemployment Reduction Economic Stimulus Act of 2020, was filed which is aimed at creating jobs in rural areas through infrastructure projects worth $29 billion. More than 20 million families will receive government aid.

What are the Monetary Measures announced by the Philippines in response to COVID-19?

The Bangko Sentral ng Pilipinas (BSP) has reduced its policy rate thrice in 2020 by a cumulative 125 bps to 2.75 percent and lowered the reserve requirement ratio for commercial banks by 200 bps to 12 percent, effective from April 3.

To support the government’s programs to counter the impacts of COVID 19, the BSP purchased PHP 300 billion worth government securities (about 1.5 percent of 2019 GDP) and remitted PHP 20 billion as dividend to the government even though it is no longer required to make dividend payments to the government under the newly amended BSP charter.

The BSP has also announced a series of regulatory relief measures for the banking sector, including:

(i) A temporary relaxation of requirements on compliance reporting, penalties on required reserves, and single borrower limits;
(ii) Easier access to the BSP’s rediscounting facility;
(iii) A temporary relaxation of provisioning requirements (subject to the BSP approval), and
(iv) A relaxation of prudential regulations regarding marking-to-market of debt securities.

To encourage extension of loans to enterprises, particularly, micro-, small-, and medium-sized enterprises (MSMEs), the BSP allowed loans to MSMEs to be counted as part of banks’ compliance with reserve requirements and assigned zero risk weight to loan exposures guaranteed by the Philippine Guarantee Corporation.

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Vietnam

COVID-19 situation:

Vietnam has reported 325 confirmed COVID-19 cases, with no deaths, as of May 25, 2020.

What are the Fiscal Measures announced by Vietnam in response to COVID-19?

On March 3, the Government announced a $1.16 billion fiscal stimulus package from the government’s contingency budget. The package includes tax breaks, delayed tax payments, and government spending on infrastructure.

In early April, the government announced plans for a $2.6 billion fiscal package to support those most affected by the pandemic. Under the new package, those displaced from their jobs will receive about $76 per month through June, low-income households will collect about $42 per month, and those who “rendered services to the state during the revolution” will be sent about $22 a month.

The government will also delay collecting an estimated $7.6 billion in value-added tax, corporate income tax, and land rent from various businesses and households for five months starting from April.

Other implemented measures include:

(i) Tax exemptions for medical equipment;
(ii) Lower business registration fee effective from February 25 (one-year exemption of business registration tax for newly established household business;
(iii) First 3-year exemption of business registration tax for SMEs);
(iv) Streamlined tax and custom audit and inspection at firms; and
(v) Allowing firms and workers to defer (up to 12 months) contributions to the pension fund and survivorship fund without interest penalty.

What are the Monetary Measures announced by Vietnam in response to COVID-19?

Effective May 13, the State Bank of Vietnam (SBV) cut its benchmark policy rates by 50 bps, the second time in the year, after the first cut by 50-100 bps on March 17. The short-term deposit rates cap was cut further by 30-50 bps, while the short term lending rate cap for priority sectors is trimmed further by 50 bps.

The SBV has also issued guidelines to commercial banks to reschedule loans, reduce/exempt interest, and provide loan forbearance.

Affected firms are eligible for concessional loans from Vietnam Social Policy Bank (VSPB) with no interest for making salary payment to their workers who temporarily stopped working.

Effective March 31, SBV instructed Credit Institutions (CIs) to actively reduce bonus and salary, cut other operating costs, adjust business plans in a timely manner (including not paying dividend in cash), and use the saved resources to reduce interest.