US in coronavirus dilemma

Sunday, 2020-05-17 09:47:00
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A handful of pedestrians walk through Times Square as streets remain relatively quiet due to the continuing outbreak of COVID-19 in the Manhattan borough of New York, US, May 5, 2020. (Photo: Reuters)
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NDO – Fighting COVID-19 while turning the switch to restart the economy is becoming a difficult dual task for the US now, as the easing of control could make the pandemic strike in a more serious direction.

>>> US CDC issues guidelines on how to reopen schools, transit and workplaces

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The coronavirus pandemic is creating unprecedented challenges for the US economy and blowing away the achievements that President Donald Trump has worked hard to achieve since the beginning of his term.

The US is facing a wave of bankruptcy as local businesses are increasingly swayed by the pandemic. Chairman of the US Federal Reserve (FED) Jerome Powell has warned that a wave of corporate bankruptcy could cause long-term damage to the US economy. Despite the government's financial support measures, a series of airlines, retail chains, oil companies and American businesses are still in trouble and many are on the brink of bankruptcy. Experts say that even the rescue package of nearly US$3 trillion, which was previously approved by the US Congress to support small businesses, large industries and workers, is only capable of "delaying" this wave.

The pandemic has also blown away the US government's achievements in economic growth and job creation of recent years. Statistics show that in April 2020, 20.5 million American people lost their jobs, the highest level ever in nearly a century. The US unemployment rate has increased rapidly from 3.5% in February to 14.7% last month. However, the New York Times cited economists' predictions that the US unemployment rate will remain high until at least the end of 2021 or even longer. Many experts forecast that the US economy will continue to sink deeper into the recession and it will take five years to fully recover.

In the above context, US Treasury Secretary Steven Mnuchin stated that the US government is ready to spend more money in the future to salvage the economy. FED believes that continuing financial support for US businesses and the economy is necessary. The US central banking system is promoting loans to companies, as well as pumping money into the financial system and easing lending rules for banks. Along with strengthening the economy with financial measures, US officials also reassured the public about the prospects for economic growth. According to the head of FED, the post-pandemic US economic recovery may take place more slowly than expected, but unemployment will gradually decline and the economy will recover significantly once the epidemic is under control.

President Trump recently called on the local government to reopen the economy and many American leaders and people also agreed with this view. However, the early opening of the economy in the context of the continued rise in the number of infections and deaths due to COVID-19 may be a dangerous double-edged sword. As COVID-19 continues to spread, turning on the switch to put the economy into a ‘new normal’ state could put the US at risk of further increasing new infections as well as deaths.

Furthermore, many experts believe that hasty moves to restart the economy are not necessarily guaranteed to save businesses and the economy as expected. When the pandemic has not been completely controlled, even if the economic restarts, consumer activities will remain weak because the public is still not able to shop or bustle in the market again as before. On the other hand, for businesses, the unpredictable consumer trend after the pandemic makes it difficult for them to plan a return to operation. Some businesses have expressed concern that their companies cannot build a business model based solely on the belief that the economy will recover strongly in the next six months.

Last week, White House boss Trump voiced encouragement that jobs will return soon and next year will be an impressive year for the US, with a V-shaped economic recovery. However, the US economy is still in a ‘dilemma’ and the negative affect of the global coronavirus pandemic, if prolonged, may make a V-shaped economic recovery even more difficult.