Question

With COVID-19 outbreak going around the world and USA, what is the economic outlook for USA in 2020?

Answer 1

The COVID-19 pandemic has spread with alarming speed, infecting millions and bringing economic activity to a near-standstill as countries imposed tight restrictions on movement to halt the spread of the virus. As the health and human toll grows, the economic damage is already evident and represents the largest economic shock the world has experienced in decades.

The June 2020 Global Economic Prospects describes both the immediate and near-term outlook for the impact of the pandemic and the long-term damage it has dealt to prospects for growth. The baseline forecast envisions a 5.2 percent contraction in global GDP in 2020, using market exchange rate weights—the deepest global recession in decades, despite the extraordinary efforts of governments to counter the downturn with fiscal and monetary policy support. Over the longer horizon, the deep recessions triggered by the pandemic are expected to leave lasting scars through lower investment, an erosion of human capital through lost work and schooling, and fragmentation of global trade and supply linkages.

The crisis highlights the need for urgent action to cushion the pandemic’s health and economic consequences, protect vulnerable populations, and set the stage for a lasting recovery. For emerging market and developing countries, many of which face daunting vulnerabilities, it is critical to strengthen public health systems, address the challenges posed by informality, and implement reforms that will support strong and sustainable growth once the health crisis abates.

The U.S. economy has almost certainly entered a contraction.

Unemployment insurance claims reported for the week ending March 14^th showed a sizable spike, but the true contraction likely started the following week (the week ending March 21^st). It appears that millions of Americans have already lost their jobs, likely at a pace that exceeds job losses in the worst weeks of the Great Recession. Even if economic activity in the United States were not being shut down in support of social distancing, the current spread of the COVID-19 pandemic around the world reduces demand in the world economy and complicates supply chains, and the drop in equity prices lowers household wealth to an extent that would have caused a sizable slowdown in the U.S. economy. When those factors are added to the economic disruption needed to fight the virus, the United States will likely see one of the sharpest economic contractions in its history this March, continuing through the second quarter of 2020. The open question will be how quickly restrictions on activity are lifted and whether the economy can snap back; both will depend in part on policy responses.