Governor Walz Statement on Changing Economic Conditions Amid COVID-19

Statement

Due to the fast-moving COVID-19 outbreak and its negative impact on consumer spending from social distancing, Minnesota's macroeconomic consultant, IHS Markit, today said that it has taken the unusual step of updating its U.S. economic outlook between scheduled forecast releases. In its new, interim forecast, IHS Markit now expects a U.S. recession beginning in the second quarter of this year and continuing until the end of the year and a recovery to begin in the first quarter of 2021.

"This announcement confirms what we have suspected: deteriorating economic conditions caused by COVID-19 will stress Minnesota's economy," said Governor Tim Walz. "Doing the right thing to protect ourselves and one another--social distancing--is hard on our economy in the short run, but it will ultimately be the right thing for all of us. In these times of uncertainty, my Administration is working tirelessly to ensure our state is in the best position possible to weather whatever may come our way."

IHS Markit will continue to update these projections in response to incoming economic data and policy responses, so its forecast will continue to change. It notes that uncertainty is extraordinarily high about the size and duration of the negative impact on economic growth--partly because we do not yet know the effect of possible federal policy responses--but, a recession does appear likely.

"Minnesota Management and Budget is carefully monitoring how developments in the global and U.S. economies are being felt in Minnesota's economy and revenue system," said Commissioner Myron Frans. "Note, however, that economic data lag what we see day-to-day in the news. And tax revenues lag the economy, too. If we feel that action needs to be taken to maintain the state's fiscal soundness, we will develop a plan to take the necessary action."

"Prior to the COVID-19 outbreak, Minnesota's economic fundamentals were strong: unemployment was low and demand for workers was high," said State Economist Dr. Laura Kalambokidis. "We have a diverse industry base; some of the most well-known, innovative companies in the world; an effective and resourceful non-profit sector; and a talented, hard-working workforce. Minnesota's economy is not immune to a U.S. recession, but flattening the curve of COVID-19 infections will help us get back on our feet and back to work as soon as possible."

Minnesota Management and Budget will release a quarterly Revenue and Economic Update on April 10 that will explain the changes in the U.S. economic outlook and give updates on Minnesota's tax receipts.

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