WASHINGTON (Reuters) – The head of the International Monetary Fund warned on Friday that the United States was facing a possible “dangerous wave” of bankruptcy and unemployment if it did not maintain fiscal support until the coronavirus health crisis ended.
IMF Managing Director Kristalina Georgieva told reporters that the United States, the world’s largest economy, had room for further action and doing so would provide positive spillover effects for the world economy.
Asked if she supported President Joe Biden’s $ 1.9 trillion aid plan, Georgieva said the IMF supported the plan’s focus on vaccinations, health care, support for the unemployed and aid to state and local governments.
Despite the incipient recovery of the economy, Georgieva said the risks remained, especially if support was not maintained enough.
“There is still the danger that if support is not maintained until we have a lasting way out of the health crisis, there could be a dangerous wave of bankruptcies and unemployment,” he said.
In 2020, he said U.S. bankruptcies were below average in normal years due to tax support and it was important to continue calibrating that support in 2021 as he carefully prepared for the time when some companies did not survive.
“We want to see careful and well-calibrated political action. We want there to be support for policies,” he said, adding, “We need to be very careful because we are not in a difficult situation.”
Georgieva acknowledged concerns raised by former Treasury Secretary Lawrence Summers about a possible overheating of the U.S. economy, but hoped that new Treasury Secretary Janet Yellen will closely monitor these risks.
“In fact, we need to keep an eye on the risks, but we have the best Secretary of the Treasury for that potential risk,” he said. in the face of these risks “.
Report by Andrea Shalal; Edited by David Gregorio