‘COVID-19 cases spike could cause double-dip recession in US’

The US is likely to be hit by a double-dip recession if its national spread of COVID-19 is not brought under control soon, a media report said.

Despite the continued rise in COVID-19 cases, fatalities and hospitalisations, US markets remain relaxed because investors are optimistic about trials for vaccines, Xinhua news agency on Tuesday quoted an opinion piece written by Gavyn Davies, chairman of Fulcrum Asset Management, published in the Financial Times.

Nevertheless, “even the most favourable outcome in vaccine development would come too late to save the US economy from the spread of the virus over the next three months”, the article pointed out.

“Unless public policy can control the rate of infections across the American sunbelt, there could be adverse consequences for any US economic recovery over the rest of this year,” it said, adding that experience has shown that delayed lockdowns will result in worse outcomes for cases and fatalities, at least in the short term.

Based on a model which tracks the epidemic on a state-by-state basis, Fulcrum economists forecast that a combined response of full, partial and no lockdowns to the virus in different US states “would lead to a large drop in activity — in effect, a double dip — of about 7 percentage points through the whole economy while the lockdowns last”, the article said.

If the situation lasted for three months, it would knock almost 2 percentage points from this year’s growth rate, it added.

The US currently accounts for the world’s highest number of infections and fatalities at 3,825,153 and 140,957, respectively, according to the Johns Hopkins University.