The resurgence of the pandemic, “main risk” for the u.s. economy

The activity quivered in the United States, but the resurgence of the pandemic, since the end of June/beginning of July, has already led to “a slowdown” in some States of the country and a “partial cancellation” of the decisions of reopening, notes the IMF.

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July 17, 2020 21h43

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The resurgence of the pandemic, “main risk” for the u.s. economy

Delphine Touitou

Agence France-Presse

WASHINGTON — The resurgence of the pandemic is “the biggest risk” to the u.s. economy, which recorded a contraction a historic high of 37 % in the second quarter, warned Friday the international monetary Fund at the conclusion of its annual review.

The administration Trump has published data rather favourable for may and June such as housing starts, Friday, which jumped 17.3 percent last month, a sign that the activity quivered in the United States.

But, the resurgence of the pandemic, since the end of June/beginning of July – “the risk the more difficult to quantify” – and has already led to “a slowdown” in some States of the country and a “partial cancellation” of the decisions of reopening, notes the IMF. Anything to derail the recovery that started in may.

The institution of Washington, which expects a recession of 6.6 % this year, also warns against the possibility of increased “systemic poverty”.

Even well before the pandemic, the poverty rate was already high compared to that of other advanced economies.

Nearly one American in six has not been able to pay her rent in June and nearly one in three is worried about the due date of July, said Friday the Bureau of statistics american.

Tens of millions of Americans have lost their jobs as a result of the paralysis of the american economy in the spring in an effort to stem the pandemic.

They were $ 32 million to be registered as unemployed at the end of June, up from 1.6 million a year earlier, according to the department of Labor.

“New policy efforts will be needed to combat the pandemic and to address a range of socio-economic challenges are deeply rooted and which continue to afflict the United States,” says the IMF has, however, welcomed “the unprecedented efforts” made in the spring to help homes and businesses the most vulnerable.

The country was already facing strong social inequality despite a decade of economic expansion, he said, emphasizing “an important racial dimension of poverty in the United States”, African-Americans and Hispanics are more likely to fall into poverty than white households.

The Fund calls on the United States to take a series of measures to stimulate demand, improve preparedness for health crises and support the most vulnerable.

Sign of a fragile recovery, the consumer confidence has already eroded at the beginning of July due to the sharp increase of contamination in the country, according to the University of Michigan.

Priority to education

Consumption is the main engine of growth, with a height of 70 % of gross domestic product.

However, the confidence of households could further deteriorate in the future “because the coronavirus is spreading and because of damage continued economic, social disturbances, which should leave permanent scars”, warned Friday Richard Curtin, the chief economist in charge of the investigation.

According to him, new measures of government support are essential.

But, even when the government applied relief financial services for the most vulnerable households, this is not going to drive enough of their consumption expenditure “necessary to quickly restore employment and incomes to pre-crisis levels,” he says.

It is necessary to act quickly, he points out, while the election campaign will intensify with the approach of the election in November.

“Without action, a new loss of confidence and a longer recession may occur,” warns the economist.

The two former presidents of the us federal Reserve, Janet Yellen, and Ben Bernanke, have also pleaded Friday in this sense, “new actions are needed.”

The secretary of the Treasury Steven Mnuchin, himself, reiterated before Congress that the next package of aid will go to the destination of the sectors hard hit by the economic crisis.

The pandemic has caused nearly 138 400 deaths in the United States and infected most of 3.59 million people, according to data from the Johns Hopkins university.

Among the many recommendations, the IMF calls for the support of the local authorities to safeguard the health, education, social programs and social assistance.

“Improve educational opportunities by increasing spending on early childhood education, teaching preschool, and programs of science, technology, engineering and mathematics” is essential, he noted.

Finally, it invites to “rethink” the model of financing public schools to provide more resources to schools with a concentration on the poor students.

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The ADMINISTRATION TRUMP IN favor of A NEW HELP FOR BUSINESSES

Small and medium-sized enterprises are “the most affected” by the crisis of the COVID-19 should be a second federal loan, said on Friday the us Treasury secretary, Steven Mnuchin, who strives to maintain the jobs.

“There should be a second check for the companies most affected”, he said during a hearing before members of the House of Representatives.

He stated that sectors such as travel and food will be a priority.

The administration Trump and the elected members of Congress could discuss again, to put on feet a third plan of loans to SMES, so that they can retain their employees during the crisis.

The us Treasury secretary, Steven Mnuchin, has pointed out that sectors such as travel and catering will be treated as a priority to receive a second federal loan.

AP, Kevin Dietsch

“I would suggest that, as we have a program that works, we try to continue as much as possible”, with “a criterion based on the lower incomes,” since the beginning of the crisis and the size of the company, he said.

The administration wants to use the approximately $ 130 billion remaining in the current program, supplemented with additional funds, “it will be discussed” with the elected officials of the Congress.

A little more than $ 650 billion of loans to SMES have been made available since the end of march, in two phases, and about 132 billion is still available.

These loans are transformed into a grant if the grant money was used to pay for salaries instead of laying off.

“According to the chamber of commerce of the United States, 79 % of small businesses are open at least in part, and half of the ones that are closed will reopen soon”, detailed Mr. Mnuchin.

These loans have allowed 10 million people to keep their jobs, according to him.

Steven Mnuchin is also returned to the fact that publicly traded companies have been able to benefit from the funds.

“About 30 billion dollars have been repaid”, he assured, adding that, in order for the loan to be cancelled, the beneficiaries will have to provide much more data and these data will be published”.

Since the implementation of this measure, nearly 5 million of loans have been disbursed, for a total amount of 518 billion, has detailed Jovita Carranza, director of the federal agency responsible for the SMES.

A volume of loans greater than the total funds distributed in 67 years of existence of this federal agency, she pointed out. AFP

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