The true economic cost of the coronavirus outbreak is not yet known. But economists expect it to be ugly.
Countries could be looking at “enormous deficits” from the expansionary policies during this crisis, said said former Federal Reserve President Janet Yellen in an interview with CNBC. America’s economic relief package to combat the corornavirus fallout, for example, is worth $2 trillion.
The US annual budget deficit, which has already topped $1 trillion, could soar well above $2 trillion, Yellen said.
Unemployment, meanwhile, “may go to depression levels,” Yellen said. Labor market reports lag behind what’s actually happening in the economy. But if we had real-time unemployment data, it would likely show a rate of up to 13%, Yellen said.
That said, the Covid-19 crisis is very different from the Great Depression or the recession that followed the Great Financial Crisis, in part because it will be much shorter-lived. Or so Yellen predicts.
“My hope is unemployment will come down to normal levels pretty quickly,” Yellen said.