Ben Bernanke Retreats from V-Shaped Recovery Scenario After Two Weeks

US 2Q GDP Expected to Fall Over 30%
Economic Activity to Resume Gradually

[Asia Economy New York=Special Correspondent Baek Jong-min] Former Federal Reserve (Fed) Chairman Ben Bernanke forecasted that the economy would contract by more than 30% in the second quarter of this year due to the novel coronavirus disease (COVID-19). He explained that it would be difficult to quickly emerge from the recession phase.

At the end of last month, he described COVID-19 as a "natural disaster like a snowstorm" and said a V-shaped rebound was possible, but he retreated to a pessimistic stance in just two weeks. This is interpreted as reflecting the worsening situation, including the lack of a downward trend in the spread of COVID-19 in the U.S. and the sharp increase in unemployment.

On the 7th (local time), Bernanke attended a virtual discussion hosted by the Brookings Institution think tank and said, "I do not expect a quick economic rebound." He argued, "Economic activity will probably resume quite gradually and may remain at a low level for a considerable period." Dow Jones, the parent company of The Wall Street Journal (WSJ), also reported that Bernanke stated at the discussion that the U.S. GDP growth rate for the second quarter would be -38%.

He added, "Even if the economy restarts, it will not return to normal until there is a firm confidence that the (COVID-19) crisis will not start again."

This outlook is quite different from the view he expressed on the 25th of last month. He compared COVID-19 to a natural disaster, drew a line distinguishing it from the Great Depression of the 1930s, and predicted a sharp rebound after a short recession.

Bernanke's more pessimistic economic forecast aligns with remarks made by his successor, former Chair Janet Yellen. Yellen also projected a contraction of over 30% in the second quarter economy. On the 6th, the day before, Yellen appeared on CNBC and said, "The U.S. unemployment rate will probably rise to 12% or 13%, and GDP decline will be at least 30%. I have seen higher numbers."

However, Bernanke did not lose hope, anticipating that overcoming the economic impact of this COVID-19 would not take as long as the 2008 global financial crisis.

Bernanke highly praised the COVID-19 response measures of current Fed Chair Jerome Powell and the Donald Trump administration but advised that additional actions are necessary. He emphasized, "If well prepared, we can reach a better level than before within one to two years," stressing the need to protect small and medium-sized enterprises. On the same day, President Trump and Treasury Secretary Steven Mnuchin hinted at the introduction of an additional $250 billion loan program for small and medium-sized businesses and small establishments.

This content was produced with the assistance of AI translation services.