A senior U.S. Federal Reserve official warned on Thursday that the United States could fall into recession again in 2021 if reopening the economy too quickly with a resurgence of the coronavirus.
"The less optimistic scenario is that we open too quickly and see a significant second wave of the virus. Not only would this be a health catastrophe, but it would reverse the recovery as well," Philadelphia Federal Reserve Bank President Patrick Harker told the Chicago Council on Global Affairs via Zoom.
"In this less hopeful scenario, I project a similar growth path to the baseline for 2020, followed by a painful economic contraction of GDP (gross domestic product) in 2021 as shutdowns are reintroduced," he said.
If the economy largely opens in June and there is no second wave of the virus in the fall, Harker expected a significant economic rebound in the second half of the year following a severe contraction in the second quarter.
"However, the second half rebound is not enough to fully offset the contraction in Q1 and Q2; 2021 would then show above-trend annual GDP growth," he said.
"Until the virus itself is under control, even as more states gradually open up, we can expect the economy to underperform relative to where it was just a couple of months ago," added the Fed official.
U.S. real GDP in the first quarter contracted at an annual rate of 4.8 percent amid COVID-19 fallout, the biggest quarterly decline since the 2008 financial crisis, the Commerce Department reported last week.
As of Thursday night, over 1.2 million people have been infected with the coronavirus across the country, with the death toll surpassing 75,000, according to Johns Hopkins University.