The coronavirus (COVID-19) is having an impact on economic growth in Iowa. The Bureau of Economic Analysis (BEA) released Gross Domestic Product (GDP) by state from the fourth quarter of 2019 to the first quarter of 2020, which demonstrates some of the economic impact of COVID-19. During this time Iowa’s economy declined by -3.5 percent. Other than Nebraska and South Dakota, Iowa’s economy shrank less than our neighbors.
Yet, COVID-19 continues to put Iowa and the national economy in a vise grip. When the pandemic broke out, Iowa responded by practicing strict social distancing, which forced many businesses to close. The shutdown resulted in skyrocketing unemployment in Iowa. Although Iowa’s economy has re-opened, unemployment remains at 8 percent.
Even though the economy is open, many consumers are still concerned about returning to normal activities with the ongoing threat of the virus. In addition, because of social distancing policies, many small businesses in Iowa are still operating at half or less capacity. How long can businesses afford operate at this rate?
Fear of a second wave is also weighing like an albatross on the economy. The economy is sending mixed signals with fears of a double-dip recession as consumers are cautious and many businesses looking at potential layoffs. It is clear that Iowa or the nation cannot afford another economic shutdown.
Dr. Ernie Goss, MacAllister Chair in Regional Economics at Creighton University, and Mr. Scott Strain, M.S., who is a Senior Economist with Goss & Associates estimate that, due to COVID-19, Iowa’s GDP could be reduced by 5.1 percent in 2020. Prior to pandemic Iowa was already struggling with slow economic growth. From 2018-2019, Iowa’s economy grew only 0.9 percent.
With all the COVID-19 uncertainty, how can Iowa create economic growth and weather an economic downturn?
At this time, it is difficult to determine what type of an economic recovery Iowa will have. The outcome may hinge dramatically on federal policy. If Congress increases taxes and regulations on the economy it will result in a massive setback. Nevertheless, Iowa needs to be prepared to focus on policies that lead to economic growth. Keeping spending low, avoiding tax increases, and regulatory relief are policies that will help grow Iowa’s economy.