US Economy Will Recover But COVID-19 Bruises Will Last Several Years: Moody’s

New York, March 30: Moody’s Investors Service expects US economic activity as measured by GDP to return to its pre-coronavirus path by the end of 2021, but an elevated unemployment rate and a lagging recovery in the hardest-hit sectors will leave visible bruises.

Moreover, the legacy of higher government and corporate debt is likely to last for several years, said Moody’s in its latest credit outlook. As Covid-19 vaccinations increase and pandemic-related disruptions fade, several factors augur GDP recovery to the pre-Covid-19 path by year-end. The economic downturn has not stressed the financial sector.

It does not result from a burst credit or real estate bubble. And pandemic-related supply disruptions will pass.
After a financial crisis, Moody’s said recovery is typically slow because damage to banking system balance sheets keeps banks from providing credit to the economy for years afterward.

Similarly, when a burst credit or real estate bubble damages corporate and household balance sheets, repair takes years of deleveraging. Aided by unprecedented government stimulus and central bank support, Moody’s expects a strong rebound of the US economy so that by mid this year, US GDP will have surpassed its year-end 2019 level.