Präsentation von OECD-Experte Rüdiger Ahrend im Rahmen eines Webinars des OECD-Berlin Centre am 16. Sepetember 2020

1. TERRITORIAL IMPACT OF COVID-19 CRISIS ON
SUBNATIONAL FINANCE IN OECD COUNTRIES
Rudiger Ahrend
Head of Division, CFE/OECD
Rudiger.Ahrend@oecd.org

2. © OCDE | The territorial impact of the Covid-19 crisis: managing the crisis across levels of government 2
Differentiated territorial impact of COVID-19 crisis
Differentiated
impacts
Health
Economic
Fiscal
Social
• Municipalities and regions are at the frontline of managing the crisis
• The impact is asymmetric within countries, between regions and local areas – in the health, economic
and fiscal impacts of the crisis. The maps of the various impacts do not coincide
England
Metropolitana (Santiago)
Daegu
Quebec
Hovedstaden
Canterbury
Flandre
New South Wales
Lombardy
Stockholm
Île-de-France
Tokyo
Community of Madrid
Prague
Bavaria
New York
Vienna
Noord-Brabant
São Paulo
Bogota D.C.
Mazowieckie
Ciudad de Mexico
Ticino
United Kingdom
Chile
Korea
Canada
Denmark
New Zealand
Belgium
Australia
Italy
Sweden
France
Japan
Spain
Czech Republic
Germany
United States
Austria
Netherlands
Brazil
Colombia
Poland
Mexico
Switzerland
0% 20% 40% 60% 80% 100%
national COVID-19 fatalities
country mean highest
Regional share of fatalities linked to COVID-19
within countries

3. © OCDE | The territorial impact of the Covid-19 crisis: managing the crisis across levels of government
Fiscal impact of covid-19 on subnational governments
Scope and type of spending responsibilities
Characteristics of subnational government revenues (sensitivity to
economic fluctuations)
Fiscal flexibility
Fiscal health
Scope and efficiency of support policies from higher levels of
government
Differentiated
impact on
subnational
government
finance:
5 main factors

4. © OCDE | The territorial impact of the Covid-19 crisis: managing the crisis across levels of government
Spending and revenues
strongly affected
SPENDING
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
EST
LTU
SVK
MEX
NLD
TUR
AUT
GBR
IRL
GRC
BEL
ITA
KOR
POL
AUS
HUN
LUX
OECD36 (UWA)
DNK
NOR
ESP
EU28
SVN
ISR
PRT
CHL
OECD36 (WA)
CZE
FIN
JPN
USA
NZL
SWE
CAN
FRA
CHE
DEU
LVA
ISL
Taxes Grants & subsidies Tariffs and fees Property income Social contributions 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
NZL
GRC
IRL
ISR
ISL
FRA
LUX
TUR
GBR
DEU
SVK
KOR
NLD
HUN
BEL
PRT
LVA
CHE
OECD33 (UWA)
JPN
SVN
NOR
EU28
CZE
EST
POL
OECD33 (WA)
LTU
DNK
AUS
USA
AUT
SWE
ESP
FIN
ITA
Health Social Protection Education
General Services Economic Affairs Defence
Public Order Housing and Community Recreation, Culture and Religion
• Increase spending (particularly health,
social protection, local economic
development)
• Impact varies a lot depending on
spending responsibilities
REVENUE
• Large drop in revenues
• Shock more significant than for expenditure
• Impact varies a lot depending on the
structure of revenues
• Tax revenues and user charges may be
strongly impacted
• Tax revenues: impact in 2021 and 22

5. © OCDE | The territorial impact of the Covid-19 crisis: managing the crisis across levels of government
Main risks
Subnational finance
 Scissor effect >> Increased deficits and short and
long-term debts
 Fiscal consolidation plans in the medium term,
leading to:
 cuts in public investment, which could
undermine the recovery
 cuts in social expenditure, which could affect
even more vulnerable populations
96
97
98
99
100
101
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Metropolitan regions =100
Metropolitan regions Non-metropolitan regions with access to a metropolitan area
Non-metropolitan regions with access to a small/medium city Non-metropolitan regions far from a metropolitan area
Growth indexRegional economies
 Difficulty for subnational governments to participate
in recovery plans, support local economies and
SMEs
 Focus on short term priorities and not on resilience
 Amplification of pre-existing trends, increase of
regional disparities

6. © OCDE | The territorial impact of the Covid-19 crisis: managing the crisis across levels of government 6
Supporting SNG finance
Vertical coordination
mechanisms • Budgeting and
accounting
• E-financial management
• Financial analysis
• Fight against fraud, etc.
• Local public companies
• etc
• Relaxing
spending rules
• Easing spending
responsibilities
• Temporary reduction of
employer's contributions
VAT exemptions
• Public procurement
• Grants & subsidies
• Rainy day funds
Expenditure-
side
measures
Revenue
-side
measures
Fiscal rules
& debt
Financial
management
• Relaxing budget
balance rules
• Relaxing debt rules
• Easing access to
borrowing
• Equalisation
mechanisms
• Tax arrangements
• Compensation
schemes
o Intergovernmental
fiscal dialogue
o Shared and
agreed data
o Assess and adjust
More than two third of OECD countries have adopted measures to support SNG finance

7. © OCDE | The territorial impact of the Covid-19 crisis: managing the crisis across levels of government 7
Take aways (1): For national governments
• Continue supporting subnational finance and facilitate SNGs’
involvement in the recovery
• Avoid mistakes from the past: subnational public investment should
not be the adjustment variable
• Stronger fiscal coordination across levels of government is
necessary
• Provide some room for manoeuvre in certain countries e.g. soften
strict fiscal and debt rules and facilitate access to borrowing
• National recovery strategies need to have (i) a territorial dimension
(ii) integrate structural priorities like climate in today’ strategies (iii)
be sustainable

8. © OCDE | The territorial impact of the Covid-19 crisis: managing the crisis across levels of government 8
Take aways (2): For regions and municipalities
• SNGs need to contribute to economic recovery
strategies (SMEs and public investment as key
priorities)
• Regional governments and large cities are particularly
well placed to support the economic recovery due to
their scale and areas of responsibilities
• Regions and municipalities need to diversify sources of
funding
• SNGs need to mutualise risks and expertise, notably
for borrowing and procurement
• Quality public investment needed: avoid
fragmentation, target a few strategic priorities
• Balance infrastructure investment with public
investment in skills development, innovation, R&D,
etc., as part of public investment strategies.
-
Diversify
sources of
funding
SMEs
Scale
Recovery
strategies
Quality public
investment
Long-
term
Sustain
ability

9. © OCDE | The territorial impact of the Covid-19 crisis: managing the crisis across levels of government
• COVID-19 is challenging all types of government – national, regional and local– to be better
prepared for future shocks, regardless of their nature
• Long term priorities need to be considered today, and integrated in the responses to the
crisis (climate, digital infrastructure, more balanced regional development)
• This calls for rethinking governance and fiscal systems for greater regional resilience
9
Take aways (3) Building resilient regions
Rethinking
regional
development
policy/fiscal
tools (better
address
inequalities)
Rethinking
multi-level
governance
systems and
sources of
financing
Strengthening
strategic,
institutional
and financial
capacities of
regions
Clarifying the
assignment of
responsibilities,
asymmetric
approaches
Capitalising on
the role of
SNGs to build
trust with
citizens
Strengthening
institutional
and fiscal
coordination –
vertical &
horizontal

10. Thank you
For more information
www.oecd.org/coronavirus
Rudiger.Ahrend@oecd.org
Link to the paper: oe.cd/il/2X6