In 2008, the world was thrust into what has been called the worst recession since the Second World War. Many countries responded with multibillion dollar stimulus packages in attempt to stave off the recession or at least dampen the effects. The British government took multiple steps to soften the blow of the global financial crisis. Relative to its counterparts, has the U.K. done enough?

The list below examines each country's response to the financial crisis on the basis of fiscal stimulus spending relative to GDP. Data estimates were provided by the IMF.

United Kingdom
Size of stimulus: 0.2 % of GDP (2008), 1.4% of GDP (2009)
GDP growth rates from 2008: 0.742%, GDP estimate for 2009: -4.385%

In October 2008, the British government announced a 500 billion pound stimulus package to shore up the nation's financial system. Like the U.S., banks did not use the capital to lend as they were expected to. In November, officials introduced a 15 billion pound stimulus package to reduce the country's sales tax and increase spending.

In December 2008, U.K. Prime Minister Gordon Brown announced an "ambitious" stimulus package agreed to by the nations of the European Union. As ambitious as the 200 billion euro deal may have seemed, the IMF warned that even more action was necessary to "avoid a long-lasting crisis."

Expected stimulus in 2010: -0.1% of GDP

United States of America
Size of stimulus: 1.1% of GDP (2008), 1.9% of GDP (2009)
GDP growth rates from 2008: 0.439%, GDP estimate for 2009: -2.73%

The United States was at the forefront of the global economic crisis. Domestically, two stimulus packages, totaling almost $1 trillion, were enacted to save ailing banks and jumpstart the struggling economy. Internationally, the Federal Reserve and foreign central banks worked together with coordinated rate cuts and liquidity infusions to unfreeze credit markets and prevent the collapse of financial markets worldwide.

An official end to the U.S. recession has yet to be declared; unemployment and a high deficit are lingering concerns. (Recovering from an economic slump isn't the easiest thing to do, but here are a few potential methods of rebuilding. Check out Profiting From A Consumerless Recovery.)

Expected stimulus in 2010: 2.9% of GDP

Size of stimulus: 0.4% of GDP (2008), 2% of GDP (2009)
GDP growth rates from 2008: 9.007%, GDP growth rate for 2009: 8.504%

China responded to the global crisis by announcing a stimulus plan in November 2008. The plan entailed a four trillion yuan stimulus, with about 30% coming from the central government and the remainder coming from the reallocation of funds at the provincial and local levels. Big ticket items included public infrastructure, earthquake reconstruction, rural development and technology advancement.

Expected stimulus in 2010: 2.0% of GDP

Size of stimulus relative to GDP: 0.4% (2008), 1.4% (2009)
GDP growth rates from 2008: -.705%, GDP estimate for 2009: -5.369%

Japanese banks were able to escape the worst of the crisis due to their relatively low exposure to toxic assets and limited involvement in securitization. However, the country's economy has suffered since it is heavily driven by exports. Japan enacted its first stimulus in 2008, and the country's economy emerged from the recession in the second quarter of 2009. In December 2009, deflation, the rising yen and lagging global economic conditions moved Japan's government to announce an additional 7.2 trillion yen stimulus package.

Expected stimulus in 2010: 0.4% of GDP


Size of stimulus: 0.7% of GDP (2008), 0.8% of GDP (2009)
GDP growth rates from 2008: 2.354%, GDP estimate for 2009: 0.732%

Decreased export revenue and falling commodity prices have taken a toll on the Australian economy. However, the economy "down under" remains stronger than many other nations. In October 2008, Australia orchestrated its first round of stimulus by offering bonus payments to first-time homebuyers and families based on income and children.

In February 2009, the Australian government approved the Nation Building - Economic Stimulus Plan, a $27 billion fiscal stimulus package aimed at supporting jobs and boosting growth. (The subprime meltdown gave rise to a mouthful of financial acronyms. Learn how to sort through this alphabet soup in Bailout Acronyms 101.)

Expected stimulus in 2010: 0.3% of GDP

Size of stimulus: 0% of GDP (2008), 1.5% of GDP (2009)
GDP growth rates from 2008: 0.414%, GDP estimate for 2009: -2.479%

Strong capitalization and conservative lending may have kept Canadian banks from going under, however, tight credit and rising commodity prices have hurt the Canadian economy. Canada was the only G7 nation to experience positive GDP growth during the second and third quarters of 2008, and the Canadian economy shrank by less than all other G7 nations in the final quarter of the year. In January 2009, the Canadian government introduced its Economic Action Plan to combat the crisis, boost the country's economy and create jobs.

Expected stimulus in 2010: 1.3% of GDP

Size of stimulus: 0% of GDP (2008), 1.5% of GDP (2009)
GDP growth rates from 2008: 1.248%, GDP estimate for 2009: -5.297%

Decreased demand for industrial goods sent German exports downhill. In November 2008, the German government passed a $29 billion stimulus package, which was met with skepticism by critics claiming less than half of the money was new. Additional stimulus measures were passed in January 2009, when the German government authorized a $70 billion plan including personal tax cuts and increases in spending.

Expected stimulus in 2010: 2.0% of GDP

Size of stimulus: 0% of GDP (2008), 0.7% of GDP (2009)
GDP growth rates from 2008: .323%, GDP estimate for 2009: -2.358%

In December 2008, the French government announced a 26 billion euro stimulus package to go into effect in 2009. The plan provided several initiatives such as making cash payments to the poor, offering increased rebates to new car buyers and boosting funding for modernization of rail infrastructure, energy and the postal service. (The bear market of 2008 was a game-changer for many investors. Find out what lessons you can take away from it in 5 Lessons From The Recession.)

Expected stimulus in 2010: 0% of GDP

Size of stimulus: 0% of GDP (2008), 0.2% of GDP (2009)
GDP growth rates from 2008: -1.04%, GDP estimate for 2009: -5.145%

Italy is often referred to as "the sick man of Europe." Coincidentally, the country responded to the global financial crisis with the smallest stimulus package (relative to GDP) on our list. In November 2008, the Italian government approved a $103 billion stimulus package. The plan drew criticism from economists saying the vast majority of the package was the "recycling of funds already available."

In February 2009, Italy passed an additional stimulus package worth $2.56 billion.

Expected stimulus in 2010: 0.1% of GDP

The Bottom Line

Although the U.K. may not have responded with the world's most robust stimulus package, the government acted with relatively quick and varied measures to respond to unprecedented turmoil. Unfortunately, the impact of such massive efforts cannot be felt or measured as quickly as they were enacted. Only time will tell if the efforts were enough.

Related Articles
  1. Professionals

    10 Must Watch Documentaries For Finance Professionals

    Find out about some of the best documentaries that finance professionals can watch to gain a better understanding of their industry.
  2. Fundamental Analysis

    Emerging Markets: Analyzing Colombia's GDP

    With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy.
  3. Home & Auto

    Under the Tuscan Sun: Buying a House There

    A look at the real estate trends, what you can expect to pay and, yes, some sample listings.
  4. Economics

    The 4 Countries That Produce the Most Chocolate

    Discover the four countries in the world that manufacture the largest amount of chocolate and learn basic facts about the chocolate industry.
  5. Stock Analysis

    Who Are Delta Airlines’ Main Competitors?

    Compare the top competitors of Delta Air Lines, Inc. Take a deeper look into the key drivers of competition in the airline industry.
  6. Entrepreneurship

    Top 3 Most Successful German Entrepreneurs

    Discover three of Germany's most successful entrepreneurs, their respective entrepreneurial fields and the contributions they made to society.
  7. Investing

    Impact Investing Funds: What are the Risks?

    Impact investing funds can carry risks unique to this asset class, including political risk, currency risk and exit risk.
  8. Mutual Funds & ETFs

    Top 3 German Bonds ETFs

    Learn about the top three exchange-traded funds (ETFs) that invest in sovereign and private bonds issued by Germany with different duration yields.
  9. Entrepreneurship

    Top 5 Most Successful Canadian Entrepreneurs

    Understand what makes an entrepreneur successful. Learn about five Canadian entrepreneurs who were able to achieve success in their respective times.
  10. Investing News

    Germany Tech Startups: Keep Them On Your Radar

    Many German companies, which are eager to catch up with the rest of the world by entering the digital age, are investing in tech startups.
  1. Who decides to print money in Canada?

    In Canada, new money comes from two places: the Bank of Canada (BOC) and chartered banks such as the Toronto Dominion Bank ... Read Full Answer >>
  2. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  3. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  4. Is Mexico an emerging market economy?

    Mexico meets all the criteria of an emerging market economy. The country's gross domestic product, or GDP, per capita beats ... Read Full Answer >>
  5. Is Japan an emerging market economy?

    Japan is not an emerging market economy. Emerging market economies are characterized by low per capita incomes, poor infrastructure ... Read Full Answer >>
  6. Is Argentina a developed country?

    Argentina is not a developed country. It has one of the strongest economies in South America or Central America and ranks ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!