U.S. Economy at Coronavirus Risk

U.S. Economy at Coronavirus Risk

The outbreak of coronavirus (Covid-19) in China creates uncertainty for the global economic outlook, while experts say the American economy, which is projected to grow by 2 percent in 2020, will be adversely affected by disruptions in tourism and foreign trade. The Covid-19 outbreak, which is spreading rapidly across the globe, also poses risks for the United States, the world's largest economy with $ 20.5 trillion of GDP through investment, trade and manufacturing links. Finally, Goldman Sachs, the largest U.S. investment bank and financial services company, revised downwards its growth forecast for the first quarter of 2020 for the country's economy due to the Covid-19 outbreak, down from 1.4 to 1.2. The U.S. economy, which is projected to grow 2 percent this year, will be negatively impacted by disruptions in tourism and foreign trade, experts said. "WE EXPECT A 0.45 PERCENTAGE POINT DECREASE IN THE U.S. ECONOMY" Ryan Sweet, director of Analytics at Moody's, told an AA reporter that the Covid-19 outbreak will mainly affect the global economy in the first half of this year, but that the biggest impact of the outbreak will be felt by China. "We expect the Covid-19 outbreak to cause a 0.45 percentage point decrease in the U.S. economy in the first quarter of this year, but the risks remain downward," Sweet said, referring to the possible effects of the outbreak on the U.S. economy. The blow to the U.S. economy will come with a decline in tourism, which counts as service exports in gross domestic product. Disruptions to the supply chain are hard to quantify for now, but that could hurt the U.S. economy from the start of this year." Sweet pointed out that Kovid-19 would also disrupt the flow of trade, and that this would likely hinder the achievement of the targets set out in the first phase Trade Agreement between the United States and China. "FED WILL RESPOND IF MARKETS CONTINUE TO TIGHTEN" "This is possible, especially if financial markets continue to tighten," Sweet said of views that worries about the outbreak could force the Fed to cut interest rates." in his assessment. The Fed's monetary policy stance, pointing to the sweet, "the Fed is necessary to change the course of a significant change in the economic outlook monetary policy says, though, that according to Fed Funds futures, the market discount is priced in two 25 basis points for this year. A bad day in equity markets will not meet the Fed's benchmark, but if conditions in the financial market continue to tighten and there is continuity, the Fed will respond., "he said. "FACTORY CLOSURES IN CHINA DISRUPT SUPPLY CHAIN" Ahu Yılmaz, head of the ADP Research Institute, said the U.S. economy was negatively affected by the Covid-19 outbreak. Noting that the epidemic threatens global growth due to China being the world's second-largest economy, Yıldırım said: "factory closures in China have disrupted supply chains and this is negatively affecting many businesses." Yıldırım said that the lack of products and parts from China affects the production of all companies in the world, according to Moody's global economy model calculations, in the first quarter of 2020, growth in the Chinese economy will decrease by 2 percent in real terms. CORONAVIRUS THREAT IN U.S. TRADE Pointing out that tourism was one of the first sectors affected by the Covid-19 outbreak in the U.S. economy, Yildirimmaz said flights to China were halted and airline revenues were affected. Yildirimmaz stressed that uncertainty is making financial markets " vulnerable, "adding:" another impact of the outbreak will be felt by US manufacturers in a significant way on foreign trade. In particular, U.S. exports to Asia will decline from a lack of demand. Sectors linked to imports from Asia will also see a slowdown. The construction industry is one of them. U.S. manufacturers will not be able to buy parts from Asia, which will affect employment with their production. If layoffs begin, that will reduce consumer spending." EXPECTATION OF INCREASE IN TRADE OF MEDICINAL PRODUCTS "According to the first phase agreement, China would increase its imports from the United States," said Yildirimmaz, who also evaluated the possible effects of the outbreak on the first phase economy and Trade Agreement signed between the United States and China. How long that will be is very uncertain at the moment. The trade-in medicinal products alone are predicted to see an increase due to coronavirus. , "he said. Yildirimmaz recalled statements by U.S. Treasury Secretary Steven Mnuchin that the outbreak was not expected to affect the agreement between the United States and China, adding that uncertainty grew as the outbreak progressed. "FED'S INTEREST RATE DECISION WILL DETERMINE OUTBREAK'S PROGRESS" Referring to the views that the Covid-19 outbreak could force the Fed to cut interest rates, Yildirimmaz said: "it will determine how far the outbreak will go. What matters to the Fed is how the U.S. economy is affected or will be affected." Yildirimmaz reminded Fed Chairman Jerome Powell's statements that the outbreak will have some impact on the economy, but it is premature to talk about them and said that the recent declines in the markets have been closely followed by the Fed.