The U.S. Economy – how deep will the recession be? Unfortunately, we do not know yet

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 “lockdown” 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 rough scenarios.

In brief: under an optimistic scenario, there will a relatively strong recovery of the economy after a severe recession in the first half of the current year. GDP growth in 2020 would be negative at around -3 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 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 perhaps -6 percent (or even more) in 2020 would result under this more dramatic scenario. These numbers are not really useful and robust at the moment. Probably, we will have to wait until the beginning of May to get a slightly better picture of what happens to the economy right now.

Success! You're on the list.
WordPress Cookie Plugin by Real Cookie Banner
%d bloggers like this: