Coronavirus impact: CBO estimates US economy to reduce by $15.7 trillion

Marco Green
June 3, 2020

Through fiscal 2030, the virus will reduce real economic output - nominal GDP adjusted for inflation - by 3% from initial economic estimates in January before the pandemic hit, the Congressional Budget Office said.

Media reports said that Congressional Budget Office has forecasted the current outbreak of novel coronavirus will cut USA economic output by 3% between this year and 2030.

The 2008 global financial crisis took a much smaller bite out of GDP than experts expect to see as a result of the pandemic.

In response to a request by Senate Minority Leader Chuck Schumer (D-NY), CBO Director Phillip Swagel laid out how the pandemic has caused the budget office to dramatically revise projections it had issued in January, reducing its forecast for total USA economic output by a cumulative, inflation-adjusted 3% from 2020 through 2030.

"Additionally, if future federal policies differ from those underlying CBO's economic projections - for example, if lawmakers enact additional pandemic-related legislation-then economic outcomes will necessarily differ from those presented here", the report said.

The CBO is forecasting that the GDP, which shrank at a 5 per cent rate in the first three months of this year, will fall at a 37.7 per cent rate in the current April-June quarter, the biggest quarterly decline on record.

Last week we learned that over 40 million Americans lost their jobs as a result of this horrific pandemic, Schumer and Sanders said in a joint statement.

Nominal GDP is expected to be $15.7 trillion, or 5.3%, less than originally forecast due to the coronavirus. Chuck Schumer (D-New York).

"How can Senator McConnell look at these catastrophic economic numbers and believe there is no "urgency" to protect America's working families?" they added. The American people can not afford to wait another month for the Senate to pass legislation.

The CBO also issued a separate report detailing a cost estimate for a $3.4 trillion COVID-19 rescue bill that passed the Democratic-controlled House in mid-May.

Neil Shearing, chief economist of the group at Capital Economics, said that most major economies are in a similar position - at least in the medium term - despite the recent recovery of high frequency data such as road traffic and electricity consumption. "[It is] needed but [it is] not high multiplier additive".

The CBO is a federal agency within the U.S. government that provides budget and economic information to Congress.

Other reports by Click Lancashire

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