What Will a Recovery Look Like? Part II

WASHINGTON:  The Peterson Institute for International Economics on April 10 said the US economy is currently contracting at an unprecedented 50% annual rate with unemployment likely to reach 18% by June.

But if the virus is contained and the shutdown is lifted, the Washington-based think tank predicts an equally rapid snap-back with the economy growing at a 50% pace in the July to September quarter. In this best-case scenario, the economy will have shrunk by 8% in 2020, rebounding to 6% growth in 2021.

Peterson Institute researchers lean towards predicting a V type recovery, which they prefer to label a “check mark” rebound.

The Peterson Institute forecast is among the first to predict the shape of an eventual recovery.  The International Monetary Fund presents its forecast next week. 

Researchers are quick to praise the recovery measures currently being implemented to alleviate the distress of millions who are short of cash and having to delay rent and car payments. 

They also support the extraordinary efforts the Federal Reserve is making to sustain flows of credit and prevent disruption in financial markets.  Altogether US authorities are committing about $10 trillion, an amount equal to 10% of gross domestic product to support the economy. 

As bad as the situation is in the United States it is worse in Europe. The Peterson Institute says the 16 economies in the eurozone of the European Union will register negative growth of 12% this year while the British economy is predicted to decline by nine percent.  Recoveries less robust than in the US are forecast for 2021.  #

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