THE U.S is in recession and the downturn will be worse than the 2009 financial crisis, the head of the International Monetary Fund has said.
Kristalina Georgieva said the chaos caused by the coronavirus outbreak will mean the IMF is ready to use its $1 trillion reserves to help countries around the world struggling.
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“We have stated that the world is now in recession and that the length and depth of this recession depends on two things – containing the virus and having an effective, coordinated response to the crisis,” she told CNBC’s Sara Eisen.
“I’m very encouraged by what I see now. I see much clearer understanding that if we don’t beat it everywhere we won’t be able to get out of it.”
Fears of a meltdown in the economy come as warnings were sounded the U.S might have to stay in lockdown as it battles the coronavirus.
Economists have forecast the rate of unemployment could reach as high as 13 percent in May.
Those worries have led to the Senate unanimously passing a $2.2 trillion stimulus bill to help sure up the economy.
That would exceed the last peak of 10.0 percent reached in October 2009 following the financial crash the previous year.
The unemployment rate has been stable at around 3.5 percent since September last year.
One provision in yesterday's bill would provide an additional $600 a week to the unemployed on top of aid provided by states.
Another would add 13 weeks to the six months' of unemployment benefits offered by most states.
What's in the bill? Highlights of the $2.2tn coronavirus stimulus package
THE package, written by Trump administration officials and Democratic and Republican Senate leaders, was released late Wednesday night and unanimously approved by the Senate.
- Loans and guarantees to businesses, state and local governments: $500 billion. Includes up to $50 billion for passenger airlines, $8 billion for cargo carriers, $17 billion for businesses critical to maintaining national security.
- Small businesses: Includes $350 billion in loans for companies with 500 employees or fewer, including nonprofits, self-employed people and hotel and restaurant chains with no more than 500 workers per location. Government provides eight weeks of cash assistance through loans to cover payroll, rent and other expenses, much of which would be forgiven if the company retains workers. Also $17 billion to help small businesses repay existing loans; $10 billion for grants up to $10,000 for small businesses to pay operating costs.
- Emergency unemployment insurance: $260 billion. Includes extra 13 weeks of coverage for people who have exhausted existing benefits. Also covers part-time, self-employed, gig economy workers. Weekly benefit increase of up to $600.
- Health care: $150 billion. Includes $100 billion for grants to hospitals, public and nonprofit health organizations and Medicare and Medicaid suppliers.
- Aid to state and local governments: $150 billion, with at least $1.5 billion for smallest states.
- Direct payments to people: One-time payments of $1,200 per adult, $2,400 per couple, $500 per child. Amounts begin phasing out at $75,000 for individuals, $150,000 per couple.
- Tax breaks: Temporarily waives penalties for virus-related early withdrawals and eases required minimum annual disbursements from some retirement accounts; increases deductions for charitable contributions. Employers who pay furloughed workers can get tax credits for some of those payments. Postpones business payments of payroll taxes until 2021 or 2022.
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