US economy will drop 6.6% in 2020 amid pandemic: IMF

WASHINGTON: The International Monetary Fund has predicted that the United States economy will shrink 6.6 percent this year, pounded by the coronavirus pandemic and the lockdowns enforced to contain it.

The grim forecast is an upgrade from one the IMF made last month when it foresaw the American economy contracting 8 percent in 2020. The global lender warned that the US economy faces downside risks from a resurgence in COVID-19 cases.

The US economy virtually shut down in March and April as Americans stayed home and businesses shut down to keep the coronavirus from spreading.

The economy shrank at a 5 percent annual pace in the January-March quarter and is expected to contract a record 35 percent from April through June. Employers cut a record 20.8 million jobs in April but brought back 7.5 million workers in May and June as states began to reopen for business.

COVID-19 cases started rising again in early June, especially in the South and West, putting the economic recovery in jeopardy. “The recent increase in infection rates in some states is already leading to a slowdown or partial reversal of reopening decisions,” the IMF said in its annual assessment of the US economy.

The IMF now expects the U.S. economy to rebound to 3.9 percent growth next year. The unemployment rate (11.1 percent in June) will remain elevated, the IMF said, averaging 7.4 percent the last three months of 2021.

In February, before the pandemic spread rapidly in the United States, unemployment was near historic lows at 3.5 percent.