BBVA Research Weighs in on U.S. Economic Recovery from the Infection

Staff Report

Tuesday, March 31st, 2020

According to the publication released from BBVA Research, When will the U.S. economy recover from the infection?, the experience of countries that have transitioned beyond the worst phase of the pandemic suggest that the number of coronavirus cases in the U.S. could peak in the spring or early summer.

The supply-side shock brought about by the pandemic is forcing factories to close, resulting in cutbacks in the provision of products and services, as well as lower labor force participation and productivity. That being said, advances in technology have increased firms' and employees' ability to operate remotely and remain productive, while innovations in on-line delivery and direct to consumer shipping supply chains (e.g. Amazon) could soften part of the impact on the supply side for the consumer, according to the BBVA Research team.

The paper's authors, BBVA chief economist Nathaniel Karp, along with senior economists Boyd Nash-Stacey and Marcial Nava, also noted that monetary and fiscal policy responses, while not well equipped to contain the effects of supply-side shocks, can be effective at mitigating the drop in demand and the stress in the financial sector. 

Karp added that, from a behavioral perspective, COVID-19 could have long-term implications, including increased reliance on virtual technology for activities such as e-schooling and telecommuting. Innovation and entrepreneurship could also expand in such areas as food security, smart transportation, healthcare and sustainability.