According to an economist from Moody’s Analytics, if the coronavirus stimulus checks are not provided soon, the US economy could be facing a decline in the first quarter of the next year.
The four top congressional leaders, Nancy Pelosi, Mitch McConnell, Chuck Schumer, and House Minority Leader Kevin McCarthy had recent negotiations on the coronavirus relief. It was announced that a $900 billion stimulus package was agreed upon finally. American lawmakers will soon be casting their votes on the proposal.
The chief Asia-Pacific economist with Moody’s Analytics stated that this bill is extremely crucial for the US economy and its prospects in the near future.
He proceeds to explain that the retail sales in the US continue to decline, because of the surge in the coronavirus cases and people have the lesser disposable income to spend. Moreover, the number of jobless claims has also reached the highest level since September.
Until last month, 20.6 million people in America were availing of unemployment benefits. This means that the economic recovery of the US is slowing down yet again.
Without the relief package, we can’t expect the economy to grow but instead, it will slow down the process. He adds that after the first quarter, the vaccine provides some hope that the economy might be able to start recovering again.
According to the International Monetary Fund, the global economy will shrink by 4.4% this year while the US economy is expected to face a contraction of 4.3%.
However, officials from the IMF have stated that this recovery is not guaranteed while the pandemic is still spreading at a rapid pace and the future is uncertain. Lockdowns being imposed again to protect against the second wave of the virus have been harmful to economies all across the world.
The huge impact on the economy because of the coronavirus can only be countered by the governments increasing spending on the economy. However, after the pandemic is over, the governments will have to compensate and reduce spending as well as debt.
The increased spending will most likely have some negative consequences as well in the long-term; however, the governments have no other choice.
Analysts are hoping that if the economic recovery takes place at a rapid pace, they will be able to sustain the economy without government spending.