US current economic stimulus efforts seem larger than after the 2008 crisis, said FT analyst at Société Générale Keith Jux. Then the administration of Barak Obama allocated $ 800 billion to overcome the effects of the crisis, writes Bloomberg. If the funds allocated by the US Federal Reserve System are added to the measures proposed by the Senate, then the total amount of economic support will be not $ 2 trillion, but about $ 6 trillion – about 30% of the annual US GDP, the adviser said Trump on economic issues Larry Kudlow.
What will the funds go for
The bill on the anti-crisis package of measures agreed by the Senate provides for:
- providing financial support to large and small enterprises that have lost all or most of their customers in recent weeks;
- financing forced to stop the work of companies in order to prevent the dismissal of employees;
- direct payments of $ 1.2 thousand to individuals with an annual income of up to $ 75 thousand, while families with children will also receive payments of $ 500 per child;
- temporary increase in benefits for those who have lost their jobs;
- payment of benefits to those whose salaries were cut;
- $ 367 billion in loans for small businesses;
- Allocation of $ 130 billion for the needs of hospitals.
The terms of the agreement exclude the possibility of providing financial support to companies owned by members of the Trump family or other senior officials. In addition, companies that have received money from the state will have to refuse any form of repurchase of their shares for the entire time they use state funds, plus one year.
Markets reacted positively
Markets reacted positively to news about the agreement, the S&P 500 index rose 1% at Wednesday’s auction, writes The New York Times. “Markets are enthusiastic about the bill, which has a record $ 2 trillion to support the economy,” said The Financial Times (FT) Stephen Aniston, head of financial markets analytics at Vixcontango.com.
If Congress approves the package, this will be the third bill passed in the United States to combat COVID-19. Congress had previously voted on a bill providing $ 8.3 billion to fight the epidemic, including a vaccine against coronavirus. Lawmakers also supported measures worth $ 100 billion to help those who were forced to go on vacation due to COVID-19.
The number of infected COVID-19 in the United States is more than 55 thousand, the deaths – more than 800 people. Most cases in the states of New York (more than 25.6 thousand) and New Jersey (more than 3.6 thousand), as well as in Washington (more than 2.4 thousand).
To slow the spread of coronavirus, most US states have taken measures to limit social and economic activity. In almost all states, schools are closed and bars and restaurants are suspended (with the exception of delivery services), and mass gatherings are prohibited in some states. The most stringent measures apply in California, Illinois, Indiana, Michigan, Ohio, Washington, West Virginia and Wisconsin. Not only schools, bars and restaurants are closed there, but also companies whose activities are not critical for the country. In eight states, there is also a ban on crowds and mandatory home quarantine.
The recession has already begun
The measures agreed by the Senate will create an additional incentive for the economy to return to growth later this year, said US Presidential Advisor Larry Kudlow. Last week, Bank of America (BofA) experts noted the start of a recession in the United States. “We believe that the US economy has fallen into recession [и] we forecast a record decline in GDP in the first quarter by 12% relative to the previous one, ”the bank said in an analytical note received by RBC. With the fact that the United States is in an economic recession, analysts of the American Institute of International Finance (IIF) also agree. Analysts BofA and IIF expect the end of the recession in the second half of this year. At the same time, the uncertainty in the global economy is very high, and forecasts can be revised, they make a reservation.
In general, in 2020, US GDP may fall by 5% in annual terms, it follows from the calculations of the Center for Economics and Business Research, based in Britain. In 2021, GDP growth will be 3%, experts predict.
About 24 million Americans, or about 15% of the country’s workforce, may be at risk, according to Politico. As a rule, these are workers in medium- or low-paid professions in those areas that could be affected by the coronavirus — bartenders, cleaners, drivers, cooks, etc. In a pessimistic scenario in which Washington will have to introduce large-scale strict quarantine measures, reduction can to get about 15 million jobs, it follows from the report of economists Deutsche Bank (available to RBC).
A total of 73% of the surveyed American workers, whose income does not exceed $ 40 thousand per year, said they were afraid of losing their income or job due to coronavirus. These data are presented in a public opinion poll prepared by the Kaiser Family Foundation. The survey was conducted from March 11 to March 15.
Trump announced his desire to resume normal economic activity as soon as possible. On Tuesday, he expressed the hope that businesses closed due to coronavirus would resume work on April 12. “I would like them to open for Easter,” the president said. “We need to get back to work. Thousands of people die because of the flu, and we never “cut off” the country because of this, ”Trump explained. In his opinion, although COVID-19 poses a threat to people’s lives, nevertheless, the beginning of a large-scale recession or depression in the economy may pose an even greater threat to their health.