Published on : 04/29/2020 – 08:15Modified : 04/29/2020 – 16:35
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Due to the health crisis associated with the new coronavirus, the United States is entering a historic economic recession in 2020 after ten years of uninterrupted growth. US GDP fell 4.8% in the first quarter, according to a Commerce Department estimate released Wednesday.
The Covid-19 pandemic ended ten years of uninterrupted economic growth in the United States. According to the first preliminary estimate of the Commerce department, published Wednesday April 29, the American GDP fell by 4.8% in the first quarter in annual rate.
This is a historic recession, never seen since 2008, caused by the crisis linked to the new coronavirus, which has already killed more than 58,000 people in the country, a toll now exceeding the number of American soldiers killed in two decades during of the conflict in Vietnam.
“Americans find it hard to forgive an economic crisis for a president,” says Professor Jérémy Ghez
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This drop of 4.8% is a little steeper than expected, analysts originally expecting a decline of 4.3%.
The United States grew 2.3% in 2019 and President Donald Trump, who had made the health of his economy an argument in his race for re-election, aimed for 3% per year.
The second quarter should experience a much stronger fall. It was not until the end of this quarter that the world’s leading economy was gradually shut down, given the spread of the virus in the country.
Covid-19 pandemic in the United States: a historic recession in sight for 2020
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The extent of the damage will not be visible until the second quarter
The decline “will be the tip of the iceberg,” warned Kevin Hassett, Donald Trump’s economic advisor, Tuesday morning on CNN. The coming months will experience falls “such that they will not look like anything you have ever seen,” he added.
“The overall economic effects of the Covid-19 pandemic cannot be quantified in the estimate of GDP for the first quarter of 2020,” warned the Commerce Department. The extent of the damage caused by the Covid-19 pandemic on the American economy will not be visible until April.
This discrepancy is mainly explained by the fact that massive containment measures aimed at combating the spread of the virus were taken in the second half of March only.
Containment has “brought about rapid changes in demand, as businesses and schools have shifted to remote work or canceled their operations and consumers have canceled, restricted or redirected their spending,” said the Commerce Department.
Schools, bars, restaurants, shops and establishments deemed non-essential have gradually had to put their activity on hold, and in five weeks, more than 26 million people have registered as unemployed. A new figure.
CBO has released preliminary projections of key economic variables through 2021, including the effects of recent legislation. CBO has also developed a preliminary assessment of federal budget deficits in fiscal years 2020 and 2021. Read more: https://t.co/J5SDHvkhwf pic.twitter.com/wUK9MJZU6V
– U.S. CBO (@USCBO) April 24, 2020
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The last biggest drop in GDP dates back to 2008
This 4.8% drop is the largest since the 4th quarter of 2008, when the United States plunged into the economic crisis. The fall was then 8.4%. After a year and a half of recession, growth returned in late 2009.
The forecasts for the second quarter are even more worrying. GDP could drop 11.8% from the first quarter, which would drop 39.6% from the second quarter of 2019, according to the CBO.
The speed and extent of the recovery in economic activity is still uncertain. To limit the impact of the health crisis and the economic breakdown, some states such as Georgia and Texas have already authorized the reopening of businesses. The relaxation of containment will be done state by state.
Certain sectors are particularly affected by the paralysis of the economy. This is particularly the case for air transport, for which a return to the level of 2019 could take several years.
Avalanche of Fed measures
To ensure a “as robust as possible” recovery of the economy, the American Central Bank has not skimped for two months. It has unsheathed all of its classic crisis-time tools, and created others, in order to reassure the markets and give a breath of fresh air to businesses and households.
And she promised Wednesday to continue using them “aggressively”, saying that the economy “will probably need more support” than the measures already taken, which are yet unprecedented.
Public money will have to be widely used, according to his boss Jerome Powell. “Now is the time to use the great fiscal power of the United States to support the economy and try to get through (this crisis) with the least possible damage to the long-term productive capacities of the economy”, he advanced. Finished the budgetary orthodoxy, the reflection on the deficit will come after.
The Fed’s monetary committee has also kept key rates in the 0-0.25% range, and will leave them there until it is satisfied that the economy “survived” this crisis.
With AFP
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