March 30, 2020
As a result of the coronavirus outbreak, New York State, New Jersey, and Connecticut have closed nonessential businesses and schools and asked residents to stay home in an effort to slow the spread of the virus. These actions are unprecedented, and the economic impacts are likely to be temporary but severe, and difficult to track and measure. With conditions changing so rapidly, timely data on the economic impacts of the outbreak and resultant policies on businesses and people are both scarce and important. In this post, we provide some very recent information on the economic effects of the coronavirus outbreak in the tri-state region based on responses to a special survey we fielded between March 20 and March 24. The results are striking, though perhaps not surprising: roughly half of the service firms surveyed and well over a third of manufacturers said they have already implemented at least a partial temporary shutdown, and more firms plan to do so in the near future. Further, 40 percent of service firms and 30 percent of manufacturers are reporting staff reductions, and many firms are noting difficulty accessing credit and are concerned about their solvency.
With the coronavirus outbreak affecting businesses in myriad ways, partly through state directives covering local businesses, many firms in the region have curtailed their activities, mostly temporarily. As mentioned, about half of service firms and more than a third of manufacturers have instituted a partial temporary shutdown. Fewer than 10 percent of firms indicated that they have implemented a permanent shutdown, whether partial or full, and the vast majority of businesses surveyed said they are not planning to do so. In terms of the bottom line, 85 percent of service firms and 70 percent of manufacturers indicated that their profits have already fallen since the beginning of March, in many cases substantially.
The magnitude of such disruptions has reverberated through the labor market. As the table below shows, roughly 40 percent of service firms said they have already reduced payroll staff as a result of the coronavirus outbreak, with the most widespread declines reported by leisure and hospitality, retail trade, and health services businesses. Geographically, staff reductions among service firms tended to be most widespread on Long Island, in the Lower Hudson Valley, and in upstate New York; less so in New York City, northern New Jersey, and Fairfield County, Connecticut. Around 30 percent of manufacturers reported staff reductions. In both surveys, similar proportions of firms said they have cut back the hours of existing staff and reduced the number of temporary workers.

We also asked whether and how firms have adjusted work arrangements to adapt to the coronavirus outbreak. More than 80 percent of service firms said they have implemented or expanded telecommuting. About half of those have done so for all staff, with the average service firm indicating that nearly 60 percent of staff are currently telecommuting, and this incidence is highest (75 percent) among New York City firms. However, manufacturers indicated that only about a quarter of their staff, on average, are telecommuting. Further, about half of all firms indicated they have implemented or expanded paid sick/family leave for their workers.
Many firms are concerned about access to credit and maintaining solvency, as shown in the table below. The greatest concern among both service firms and manufacturers is their ability to get adequate credit from suppliers. Maintaining solvency and incurring excessive debt were also fairly widely mentioned as concerns, particularly among firms in the finance industry.

Finally, respondents were asked how they were covering shortfalls in revenues, with results shown in the table below. Drawing down cash reserves was widely mentioned, followed by making increased use of credit lines. A number of respondents also indicated that they are dipping into personal savings, while relatively few are taking out new loans or making a claim on business interruption insurance. Of note, a sizable number of firms commented that business interruption insurance policies would not cover damages resulting from the coronavirus outbreak.

As the coronavirus pandemic unfolds, we will continue to monitor economic conditions in the region and make our results available as quickly as possible. Our next regular monthly business survey reports—Empire State Manufacturing Survey, Business Leaders Survey, and Supplemental Survey—will be released on April 15 and 16.
AUTHORS:
• Jaison R. Abel, Jason Bram, and Richard Deitz
Compliments of the Federal Reserve Bank of New York.

March 31, 2020

Today we face economic upheaval potentially more severe than we witnessed during the global financial crisis. The coronavirus pandemic is a different kind of shock. Never before have modern economies shut down at the drop of a hat. From one week to the next, many workers lost their jobs and paychecks. Restaurants, hotels, and airplanes all emptied. And consumers and businesses now face steep losses in income—and potentially widespread bankruptcies.
Pressure on the banking system is growing and higher defaults on debt are imminent. And many now expect a shock to the financial sector similar in magnitude to the 2008 crisis.

Like the health experts, bank supervisors are responding to a fast-moving and extraordinary situation.

The question on the minds of policymakers is how they should prepare for this.
Just over a decade ago, global policy makers came together in an unprecedented display of coordination to launch the development of a revamped regulatory framework for the financial sector. They significantly raised the minimum standards for the quality and quantity of bank capital and liquidity and succeeded in building a more resilient banking system designed to hold buffers above the minimum that could be safely drawn down in stressed conditions.
In the current crisis, national authorities are taking a host of measures to provide fiscal support, and central banks are opening new liquidity lines. How should bank supervisors respond to ensure continued trust and confidence in the banking system?
Banking system prescription
Like the health experts, bank supervisors are responding to a fast-moving and extraordinary situation. Supervisors must combine the tools from their playbooks for dealing with natural disasters, operational risk events, and bank stress episodes. With its global vantage point, and drawing from past experience, the IMF can offer some additional guidance on the way forward:
• Don’t change the rules. Doing this in the midst of a crisis will likely cause more confusion. Likewise, be prepared to give banks time to meet rules if they fall short, and hold off on implementing new initiatives—banks should remain focused on maintaining ongoing operations, given the increased difficulties of conducting such operations remotely.
• Use the buffers. Regulators have to communicate clearly that capital and liquidity buffers should support continued bank lending, without adverse consequences for bank management. Banks built these buffers well above Basel minimum standards to manage strains on liquidity and revenue loss from missed loan repayments.
• Encourage loan modification. Supervisors should clearly communicate to banks to be proactive in rescheduling their loan portfolio for those borrowers and sectors that have been hard hit by the severe, but temporary, shock. They should also remind banks about flexible credit risk management and the accounting standards for impairment in these situations. Accounting bodies have helpfully stepped in to clarify to auditors how such modifications should be viewed once the economy begins to recover.
• Don’t hide the losses. Banks, investors, shareholders and even taxpayers have to bear them. Transparency helps prepare all stakeholders; surprises only worsen their response, as was proven during the 2008 crisis.
• Clarify regulatory treatment of support measures. Clarifying upfront how banks and regulators should treat fiscal measures, including measures directly targeted at borrowers, credit guarantees, payment holidays, direct transfers and subsidies—beyond any current guidance in the Basel capital framework—would help with overall transparency.
• Strengthen communication. Encourage continuous dialogue between supervisors and banks, especially in this unprecedented situation of working remotely with colleagues, customers, and supervisors. Typically, reporting requirements in key areas, such as liquidity and creditor positions, are enhanced in a crisis, but given operational disruptions, deferring other reporting requirements less material to assessments of financial health may make sense.
• Coordinate across borders. Banking is a global business. Broad coordination among national regulators at the international level is imperative. This crisis will pass eventually, and the effects may take time to dissipate, but preserving the integrity of the international framework will be crucial for the credibility and integrity of the global financial system. International bodies like the Financial Stability Board and the Basel Committee on Banking Supervision are working night and day to do just this.
Will it be enough?
Simply put, it may be too early to tell. At this point, conditions in many countries are as severe as the adverse scenario of the stress tests that banking regulators commonly use to assess the strength of their banking systems.
And it might get worse.
All of this assumes that economic activity could restart later this year, but we have to also consider more adverse scenarios. Under more severely strained circumstances, we will have to rethink our playbook substantially. Some banking systems might have to be recapitalized or even restructured. The IMF has deep experience in helping countries rebuild distressed banking systems through its technical assistance programs, and will stand ready to help.
AUTHORS:• Tobias Adrian and Aditya Narain
Compliments of the IMF.

March 31, 2020
• The IMF’s Executive Board has approved a framework for a new round of bilateral borrowing, to succeed agreements currently in place through end-2020
• This action is part of a broader package on IMF resources and governance reform that will help maintain the IMF’s lending capacity of $1 trillion
• These are critical steps to ensure that the IMF can support its membership through the global pandemic now unfolding and beyond.
Washington, DC – The IMF Executive Board approved yesterday a framework for a new round of bilateral borrowing by the IMF from January 1, 2021, to succeed the current bilateral borrowing agreements (BBAs) currently in place through end-December 2020 . The framework is broadly the same as that agreed in 2016 for the current BBAs. The new BBAs will have an initial term of three years through end-2023, which is extendable by one more year through end-2024. These new agreements will help maintain the IMF’s lending capacity of US$1 trillion for the next few years, ensuring its ability to respond to members’ needs.
The BBAs are the IMF’s third line of defense after quotas and the New Arrangements to Borrow (NAB). Today’s Executive Board decision is part of a broader package on IMF resources and governance reform endorsed by the IMF membership during the 2019 Annual Meetings, and builds on the Board’s January 2020 approval of a doubling of the NAB and guidance on quota reforms.
The new BBAs and the doubling of the NAB are expected to take effect on January 1, 2021, subject to timely approvals by creditor member countries and their institutions. These are critical steps to ensure that the IMF can support its membership through the global pandemic now unfolding and beyond.
Compliments of the IMF.

30 March 2020
Today, the Commission has issued new practical advice to ensure that mobile workers within the EU, in particular those in critical occupations to fight the coronavirus pandemic, can reach their workplace. This includes but is not limited to those working in the health care and food sectors, and other essential services like childcare, elderly care, and critical staff for utilities. Together with the Guidance on the implementation of the temporary restriction on non-essential travel to the EU also issued today, this responds to requests made by EU leaders on 26 March and seeks to address practical concerns of citizens and companies affected by the measures taken to limit the spread of the coronavirus, as well as of national authorities implementing the measures.
While it is understandable that Member States have introduced internal border controls to limit the spread of the coronavirus, it is imperative that critical workers are able to reach their destination without delay.
Nicolas Schmit, the Commissioner for Jobs and Social Rights, said: “Thousands of women and men working hard to keep us safe, healthy and with food on the table need to cross EU borders to go to work. It is our collective responsibility to ensure that they are not hindered in their movement, while taking every precaution to avoid further spread of the pandemic.”
The guidelines published today identify a range of workers that exercise critical occupations, and for which continued free movement in the EU is deemed essential. The list provided in these guidelines is not exhaustive. Examples include health associate professionals, child and elderly care workers, scientists in health-related industries, those needed to install critical medical devices, firefighters and police officers, transport workers, as well as persons working in the food sector. The Commission urges Member States to establish specific burden free and fast procedures to ensure a smooth passage for such frontier workers, including proportionate health screening.
Beyond these specific categories of workers, the guidelines also clarify that Member States should allow frontier workers in general to continue crossing borders if work in the sector concerned is still allowed in the host Member State.Member States should treat cross border workers and national workers in the same manner.
As regards seasonal workers, particularly in the agricultural sector, Member States are asked to exchange information on their different needs at technical level and to establish specific procedures to ensure a smooth passage for such workers, in order to respond to labour shortages as a result of the crisis. Seasonal workers in agriculture perform in certain circumstances critical harvesting, planting and tending functions. In such a situation, Member States should treat those persons as critical workers and communicate to the employers the necessity to provide for adequate health and safety protection.
These guidelines complement the recently adopted Guidelines for border management measures to protect health and ensure the availability of goods and essential services as well as the Guidance on the implementation of the temporary restriction on non-essential travel to the EU which were also presented today.
The Commission will continue to identify the best practices with Member States which can be extended to all Member States for allowing workers to exercise their crucial occupations without undue hindrance.
Background
The coronavirus pandemic has led to the introduction of unprecedented measures across EU Member States, including reintroduced checks at the internal borders.
Frontier workers, posted workers as well as seasonal workers live in one EU country but work in another. Many of them are crucial for their host Member States, for instance for the health care system, the provision of other essential services including the setting up and maintenance of medical equipment and infrastructure, or ensuring the supply of necessity goods. A coordinated approach at EU level is therefore key.
On 26 March, the Heads of State or government stated: “We will urgently address, with the assistance of the Commission, the remaining problems concerning EU citizens blocked at internal EU borders and prevented from returning to their home countries and cross-border and seasonal workers who have to be able to continue essential activities while avoiding further spread of the virus.” These guidelines presented today are the Commission’s immediate response to this call, alongside the Guidance on the implementation of the temporary restriction on non-essential travel to the EU which include the repatriation of EU citizens.
Compliments of the European Commission.