‘US needs additional sizable fiscal package to contain pandemic’

The US needs an “additional sizable fiscal package” to contain the COVID-19 pandemic and boost economic recovery, the executive board of the International Monetary Fund (IMF) said.

“Amid the resurgence in COVID-19 cases, a deep economic recession, and surging unemployment, (Executive) Directors underscored the need to deepen public health efforts while continuing to use all policy tools to support the recovery and mitigate the scarring effects of the pandemic on the US economy and society,” the IMF executive board said in a statement on Monday after concluding an annual Article IV review of the country’s economy.

“They agreed that an additional sizable fiscal package would be needed to strengthen health preparedness and sufficiently boost demand, including through increased federal transfers to state and local governments,” it said, adding medium-term fiscal adjustment will be necessary to put US public debt on a downward path once the pandemic is fully contained.

The federal government primary deficit is expected to rise from around 3 per cent of the GDP in fiscal year 2019 to 16 per cent of GDP in fiscal year 2020 and the federal debt is expected to approach 100 per cent of GDP by end-2020, reports Xinhua news agency.

The IMF executive board’s assessment of the US economy came as Congress failed to reach a deal on the new relief bill.

On August 8, President Donald Trump signed a series of executive orders to extend certain COVID-19 economic relief, but were unlikely to provide meaningful boost to the overall economy.

“Directors noted that the recovery will likely be gradual and subject to significant risks and uncertainty,” the executive board said, expecting the US economy to contract by around 6.6 per cent in 2020.

As of Tuesday morning, the US accounted for the world’s highest number of infections and fatalities at 5,089,416 and 163,425, respectively.