The United States is already in a recession

As the coronavirus spreads all over the world, it is causing increasing losses of human lives, tragedies, and inconveniences for many people in a growing number of countries. Economic losses are high for a large number of firms and individuals. Governments and central banks are busy implementing various monetary and fiscal policy tools to dampen the negative effects of this partial “shutdown” of the economy. It is still too early to assess the economic consequences of the coronavirus for the United States. It would not be reasonable to publish precise numbers. The economic costs are difficult to quantify and we can only roughly try to assess the economic effects of the various monetary and fiscal stimulus programs. One has to think in scenarios.

In brief: under an optimistic scenario, there will only be slightly negative GDP growth over the whole year 2020 after a severe, but short recession in the first half of the current year. GDP growth in 2020 would be negative at around minus one percent (the growth rate in 2019 was at 2,3 percent; in January of this year, I had expected a growth rate of two percent in 2020). Under a more pessimistic scenario, the recession would be deeper and the recovery even more modest. Under this more dramatic scenario, we would have a serious economic crisis with a large and persistent drop in consumption and investment, higher unemployment, and growing financial stability risks. Negative economic growth of around -4,0 percent (or even more) in 2020 would be conceivable under this more dramatic scenario.

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