Based on post-pandemic conditions, the projections from the Congressional Budget Office for the immediate future are grim, but look better for the future.
On April 24, the Congressional Budget Office released projections for the current fiscal year and the next. The document is CBO’s Current Projections of Output, Employment, and Interest Rates and a Preliminary Look at Federal Deficits for 2020 and 2021.
CBO’s current projections include a sharp drop in gross domestic product: “Inflation-adjusted gross domestic product (real GDP) is expected to decline by about 12 percent during the second quarter, equivalent to a decline at an annual rate of 40 percent for that quarter.”
Also, a rising unemployment rate: “The unemployment rate is expected to average close to 14 percent during the second quarter.”
The budget deficit is projected at $3.7 trillion for the fiscal year 2020, which ends on September 30, 2020. For the fiscal year 2020, CBO projects $2.1 trillion for the deficit. Before the pandemic and the response, CBO projected a deficit of $1.0 trillion for 2020, with future deficits averaging $1.3 trillion from 2021 to 2030.
In terms of the deficit to the size of the economy, CBO states, “With the expected weakness in economic output and the larger federal deficits, the deficit would be 17.9 percent of GDP in 2020 and 9.8 percent of GDP in 2021, CBO projects, compared with 4.6 percent in 2019.”
The good news is that CBO sees GDP rebounding in the third quarter of the calendar year 2020, which starts on July 1. GDP growth in 2020 is forecast at 2.8 percent, which compares to an annual average of 2.3 percent from 2010 to 2019. A nearby excerpt from CBO illustrates.
For the unemployment rate, CBO now projects 11.4 percent for the calendar year 2020 and 10.1 percent for 2021. This compares to 3.5 percent recorded for 2019.