Assessing the United States’ policy response to the coronavirus outbreak, “the US fiscal strength will deteriorate faster than expected, driven by much larger fiscal deficits and weaker growth,” Moody’s Investors Services said on Monday.
“Although Moody’s expects these measures to help limit the depth of the economic shock, downside risks to growth are high, due to potentially higher rates of unemployment and business closures,” Moody’s added in its report. “As a result of the very large increase in fiscal stimulus spending and likely marked decline in revenues due to the economic contraction and surge in unemployment, we expect the 2020 federal fiscal deficit to reach nearly 15% of GDP in 2020, from 4.6% in 2019.”
Market reaction
Wall Street’s main indexes continue to push higher on Monday despite Moody’s gloomy outlook. As of writing, the Dow Jones Industrial Average was up 4.75% on the day while the S&P 500 and the Nasdaq Composite were adding 4.7% and 4.5%, respectively.
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