The International Monetary Fund said Friday that the U.S. is facing serious economic challenges – caused by both the coronavirus and long-term issues including growing inequality and declining socioeconomic mobility – and urged the country to deploy more fiscal stimulus in order to boost growth.
“The U.S. has fiscal space and it should be deployed quickly to hasten the recovery from the second-quarter contraction, permanently improve the social safety net, and facilitate a broader remaking of the U.S. economy,” the IMF said in a statement.
As part of its annual review of the U.S. economy, the international organization provided growth estimates for 2020. According to its analysis, the economy shrank 37% on an annualized basis in the second quarter and is projected to contract by 6.6% for the full year.
Looking ahead, the IMF said the U.S. still faces a significant economic risk from a resurgence of the coronavirus, which may be getting underway right now. Even without a second wave of the virus, though, negative effects from the pandemic contraction could linger. “[T]the risk ahead is that a large share of the U.S. population will have to contend with an important deterioration of living standards and significant economic hardship for several years to come,” the IMF said. “This, in turn, can further weaken demand and exacerbate longer-term headwinds to growth (e.g. by preventing the accumulation of human capital, eroding labor force participation, or contributing to social unrest).”