'US could fall into recession again in 2021 if economy reopens too quickly'

A senior US Federal Reserve official warned that the country could fall into recession again in 2021 if the economy reopens too quickly with a resurgence of the coronavirus pandemic.

"The less optimistic scenario is that we open too quickly and see a significant second wave of the virus. Not only would this be a health catastrophe, but it would reverse the recovery as well," Philadelphia Federal Reserve Bank President Patrick Harker told the Chicago Council on Global Affairs via the Zoom video conference app on Thursday.

"In this less hopeful scenario, I project a similar growth path to the baseline for 2020, followed by a painful economic contraction of GDP (gross domestic product) in 2021 as shutdowns are reintroduced," he said.

If the economy largely opens in June and there is no second wave of the virus in the fall, Harker expected a significant economic rebound in the second half of the year following a severe contraction in the second quarter, reports Xinhuaa news agency.

"However, the second half rebound is not enough to fully offset the contraction in Q1 and Q2; 2021 would then show above-trend annual GDP growth," he said.

"Until the virus itself is under control, even as more states gradually open up, we can expect the economy to underperform relative to where it was just a couple of months ago."

US real GDP in the first quarter contracted at an annual rate of 4.8 per cent amid COVID-19 fallout, the biggest quarterly decline since the 2008 financial crisis, the Commerce Department reported last week.

Watch Zee Business live TV below:

As of Friday morning, 1,257,023 people have been infected with the coronavirus across the US, while the death toll has surged to 75,662, according to the Johns Hopkins University.