COVID-19 infection spikes threatening US economic recovery, warns IMF

*US suffered 37% GDP decline in Q2, economy expected to contract by 6.6% in 2020

*Government to provide support to households, boost demand, address worsening poverty, deficiencies in health system

Web Editor | ConsumerConnect

Subsequent to recent reports that the novel Coronavirus disease (COVID-19) has continued to ignite spikes in a second wave of infection cases in well over 18 states in the United States (US), the International Monetary Fund (IMF) has warned that the principal risk to the US economic recovery is a resurgence of Coronavirus infections that would force renewed business shutdowns in the world’s largest economy.

Recently, the US had reported more than 77,000 new cases as the number of deaths in a 24-hour period rose by nearly 1,000, according to Reuters tally.

The loss of 969 lives was the biggest increase since June 10, with Florida, South Carolina and Texas all reporting their largest one-day spikes Thursday, July 16, 2020.

The US Government, it was learnt, will need to do more in the coming months to provide support to households and boost demand, and address worsening poverty and the shortcomings of the US health system, agency report said.

The IMF, in its annual Article IV report on the world’s biggest economy, said: “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, stressing the “tremendous uncertainties” surrounding the outlook.

The Fund also stated that “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.”

Following the case counts spiking in states such as Florida, Georgia, Texas, and California, local authorities already have reimposed some restrictions.

Consequently, 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.

According to the Fund, “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 recovery “will require a further round of fiscal measures in the coming months that boost demand, increase health preparedness, and support the most vulnerable,” stated the Washington-based crisis lender.

The IMF stressed that “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.”

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