Macro: COVID-19 US Economic Update Part 2: The fiscal shadow of the Coronavirus

After intensive negotiations, the US Congress passed the largest fiscal stimulus package in modern American history. It includes measures to fight the economic effects of the coronavirus totalling USD 2,000 bn or 9.3% of GDP. In addition to direct payments to households, it covers more extensive unemployment benefits, supports small and medium-sized enterprises, the healthcare system and the aviation sector, and initiates an extensive liquidity program which supports various market segments. The federal budget balance was already in deficit before the corona crisis hit. As a result of the new stimulus package and the economic downturn, we project the budget deficit to rise significantly reaching -12.5% of GDP in 2020. Public debt continues to rise and, despite lower interest rates, consolidation measures will be necessary to ensure debt sustainability.
This Research was produced and first published by Raiffeisen Bank International AG which is supervised by the Austrian Financial Market Authority and the National Bank of Austria.