The dominant risk to the US economic recovery is a resurgence of COVID-19 cases that would force renewed business shutdowns, the International Monetary Fund warned Friday.
The US government will need to do more in the coming months to provide support to households and boost demand, as well as address worsening poverty and the shortcomings of the US health system, the IMF said in its annual Article IV report on the world’s biggest economy.
“Even with the unprecedented policy support being provided to the economy,” the US suffered a 37 percent collapse in GDP in the second quarter, and the economy is expected to contract by 6.6 percent in 2020, the fund said, stressing the “tremendous uncertainties” surrounding the outlook.
“The principal risk, and one that is the most difficult to quantify, is that a resurgence in the number of COVID-19 cases in the US could lead to renewed, partial shutdowns,” the report said.
With case counts spiking in states like Florida, Georgia, Texas, and California, local authorities already have reimposed some restrictions.
And the IMF warns that the brunt of the economic impact is being borne by lower-income families, predominantly black and Hispanic, who are least able to weather the downturn.
“There are already urgent warning signs that the depth of the economic contraction and the sectoral distribution of economic losses will lead to a systemic increase in poverty,” the IMF said.
The Washington-based crisis lender said the recovery “will require a further round of fiscal measures in the coming months that boost demand, increase health preparedness, and support the most vulnerable.”
“The US has fiscal space and it should be deployed quickly to hasten the recovery from the second-quarter contraction, permanently improve the social safety net, and facilitate a broader remaking of the US economy,” it said.