The United States 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 on Monday.
"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 U.S. economy and society," the IMF executive board said in a statement after concluding an annual Article IV review of the U.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," the executive board said, adding medium-term fiscal adjustment will be necessary to put U.S. public debt on a downward path once the pandemic is fully contained.
The federal government primary deficit is expected to rise from around 3 percent of gross domestic product (GDP) in fiscal year 2019 to 16 percent of GDP in fiscal year 2020 and the federal debt is expected to approach 100 percent of GDP by end-2020, according to the IMF.
The IMF executive board's assessment of the U.S. economy came as U.S. Congress failed to reach a deal on the new relief bill. U.S. President Donald Trump on Saturday signed a series of executive orders to extend certain COVID-19 economic relief, but they are 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 IMF executive board said, expecting the U.S. economy to contract by around 6.6 percent in 2020.
IMF executive directors also encouraged the U.S. authorities to "reverse trade restrictions" while working constructively with partner countries to resolve trade tensions and modernize the multilateral trading system.
"Many Directors noted that the planned introduction of currency-based countervailing duties could increase policy uncertainty, have negative spillovers, and undermine the multilateral trading and international monetary systems," said the executive board.
