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.
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.
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.
Check out more countries in Asia and how they responded to COVID-19 crisis at Rikvin.com.
