A Congressional Budget Office report on Friday, written by CBO Director Phillip Swagel (C), predicts a 39.6 percent annualized decline in the United States' gross domestic product in the second quarter of 2020, and an increase in debt to 101 percent of GDP. File Photo by Roger L. Wollenberg/UPI | License Photo
April 24 (UPI) -- Congressional Budget Office projections released Friday show an expected annualized 39.6 percent decline in gross domestic product in the second quarter.
The report also predicted a $3.7 trillion deficit, largely because of emergency stimulus measures to combat economic decline in the wake of the coronavirus pandemic. A fourfold increase, it is the United States' largest in history and indicates that the country's debt will be 101 percent of its GDP. It marks the first time since World War II that debt will be larger than national output.
The projections include a 12 percent drop in GDP in the second quarter, ending June 30, "equivalent to a decline at an annual rate of 40 percent for that quarter," wrote CBO Director Phillip L. Swagel. "The economy will experience a sharp contraction in the second quarter of 2020 stemming from factors related to the pandemic, including the social distancing measures put in place to contain it."
The report envisions a third quarter rebound of 23.5 percent annualized growth, and 10.5 percent growth in the fourth quarter. It calculates a total 5.6 percent decline in the economy for all of 2020, followed by 2.8 percent growth in 2021, adding that labor market issues are expected to persist. Unemployment will peak at 16 percent in the third quarter before falling, and staying at over 10 percent through 2021.
It also acknowledges uncertainty.
"These preliminary projections, which are subject to enormous uncertainty, reflect information from a number of sources, including high-frequency indicators, private-sector forecasts, and projections of the extent of social distancing. ... High-frequency indicators include more than 24 million new unemployment insurance claims reported since mid-March. Since social distancing began in early March, new information has generally suggested a worsening outlook, and private-sector forecasts have been revised repeatedly in that direction," the report says.
Mannequins with face masks and designer clothing fill a window at a Diane Von Furstenberg store in New York City on September 8, 2020. Photo by John Angelillo/UPI | License Photo