Although the latest statistics have shown that the COVID-19 pandemic is devastating the US economy, economic experts still express hope and optimism about the prospects for the world's number one economy in 2021.
People queue to enter a tent erected to test people for the coronavirus disease (COVID-19) at the Elmhurst Hospital Center in Queens, New York City, March 27, 2020. (Photo: Reuters)
The bright picture of the US economy quickly turned greyin 2020, after the COVID-19 pandemic hit the country. The US National Bureau of Economic Research said that the US economy officially entere recession in February, ending the longest period of growth in its history. Meanwhile, government figures showed that the US economy decreased by 4.8% in the first quarter of 2020 and the pandemic could cause US economic output to lose US$7.9 trillion over the next decade.
However, despite the world's number one economy being "in jeopardy”, US economic experts are still expecting the economy to recover firmly in 2021. According to a recent survey conducted by Bloomberg, experts believe that the US economy will recover strongly from 2021. Accordingly, GDP growth will decrease by 5.7% in 2020, but will increase by 4% and 2.8% in 2021 and 2022, respectively. In addition, the US unemployment rate will gradually decrease in 2021 and over the following years. The estimated unemployment rate in the fourth quarter of 2020 will be 9.5% and by the end of 2021, the unemployment rate may stand at only 7%.
Meanwhile, the US Federal Reserve (FED) has also made positive comments on the US economic outlook. 17 members of the Federal Open Market Committee, the FED's interest rate planning agency, forecasted that the US economy would shrink by 6.5% in 2020, then regain a growth rate of 5% in 2021 and 3.5% in 2022. The FED is also optimistic about the prospect of job creation and unemployment reduction across the US in the near future. Accordingly, the FED has predicted an average unemployment rate of 9.3% in 2020 which will fall to 6.5% in 2021 and 5.5% in 2022. The FED's forecast has given hope for a faster economic recovery after the recession caused by the pandemic. In May, 2.5 million jobs were generated in the US.
Many economists have also shared the same view that although "dark clouds” are still covering the US economy, the economic picture has seen "bright spots of hope” for a V-shaped economic recovery after the pandemic. Last week, US stock prices rebounded sharply after figures showed that the US economy still created more jobs in May. Positive signals from Wall Street made investors indicate that US economic health will recover faster than expected after the pandemic. According to economists, when more US states ease their blockades in the coming weeks, the number of new jobs will increase strongly in June and over the remaining months of the year.
Confidence in a strong recovery of the US economy is also based on the FED's stimulus measures. In order to reduce the impact of the COVID-19 pandemic on the US economy, this financial institution lowered the basic interest rate to 0%, while at the same time pumping intrillions of dollars in support of severely affected businesses. Thus, even when the US economy is still "struggling” against the epidemic, the US stock market still had "green” sessions in early June. The FED announced that it will continue to expand lending programme for small and medium-sized enterprises, something which is expected to be a useful "energy tonic” for the US economy.
In the context of "dark clouds and storms”, the FED’s readiness to fight the economic recession together with the optimistic attitude of experts on the prospects of US economic growth will support a confident feeling in the market as well as with investors. Analysts are expecting that when the world’s number one economy sees "the light at the end of the tunnel”, the global economy will also have the prospect of soon getting out of the current "recession puddle”.
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