With disrupted supply chains, production stops and collapsing demand, the worldwide restrictions imposed in response to the COVID-19 pandemic will have a drastic impact on the global economy and place a burden on all countries and regions. The International Monetary Fund (IMF), for instance, expects the global economy to contract by three percent in 2020. Industrialised countries such as Germany, which are especially dependent on open markets and trade routes, could be hit particularly hard.
We want to support the countries that are particularly affected by the crisis. The German people will stand to benefit if everyone in the EU gets through the crisis in good shape. This goes without saying for an export-oriented economy such as ours.
(Foreign Minister Heiko Maas)
Given the global scale and the still uncertain duration of the necessary restrictions, no country will be able to cope with the economic fallout of the pandemic on its own. International solidarity and multilateral cooperation will be necessary, particularly in the economic sphere, to mitigate the impending losses and create the conditions for a sustainable recovery of the world economy.
The European Union: solidarity at home, neighbourhood assistance abroad
The European Commission therefore announced a comprehensive aid package to the tune of over 15 billion euro as early as at the beginning of April in order to respond to the global impact of the COVID-19 pandemic. The geographical focus of the support will be on the regions bordering the EU in the Western Balkans and the countries of the Eastern Partnership as well as on sub-Saharan Africa. The funds made available by the EU are to be used in these regions for emergency economic assistance, for example for particularly affected sectors and companies, to support long-term economic recovery, e.g. through investments, or for necessary spending in the healthcare sector right now.
Germany and France this week proposed a reconstruction fund totalling 500 billion euro to support economic recovery within the EU. In particular, this money will be used to promote investment in the areas of environmental and digital transformation. The Member States are now set to hold discussions on the precise form that this will take. Read more about the EU’s response to the pandemic here.
International financial institutions: rapid support for a sustainable recovery
The international financial institutions have also responded to the crisis. For example, the International Monetary Fund has launched a loan package of around 100 billion US dollars from which countries can apply for short-term assistance. Over 40 applications have already been approved. In addition, the IMF provides a special aid fund in the form of the Poverty Reduction and Growth Trust (PRGT) with a current volume of almost 13 billion US dollars, from which developing countries in particular can obtain loans at no or extremely low interest rates. The IMF has also waived the repayment of existing loans for almost 30 countries for the next six months so that they can fully deploy their financial resources to overcome the current crisis.
The World Bank Group, one of the largest development policy organisations in the world, has also announced an initial assistance programme to the tune of 160 billion US dollars by mid-2021. By the end of April, 32 country projects totalling 2.1 billion US dollars had been approved and more than 300 million US dollars has already been disbursed at short notice, primarily to ensure the provision of medical care.
As the third-largest shareholder in the World Bank Group, Germany is committed to ensuring that all assistance measures are in line with the goals of 2030 Agenda for Sustainable Development and the Paris Climate Agreement. This is intended to ensure that the economic recovery from the COVID-19 pandemic is indeed sustainable and to the benefit of all those affected.