US Economy Unlikely to Recover Until First Half of 2025... Q2 GDP Forecasted at -24%

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] It is forecasted that the U.S. economy will need to wait until the first half of 2022 to fully recover.

According to a survey conducted over three days starting from the 23rd among 36 economists and investors by CNBC on the 28th (local time), 33% of respondents anticipated the full recovery of the U.S. economy to occur after the second quarter of 2022. Until then, it will be difficult to enjoy growth rates similar to those before the COVID-19 pandemic. Nineteen percent of respondents expected recovery by the end of this year, while another 19% predicted recovery earlier than the year-end.

Respondents expressed the greatest concerns about the decline in Gross Domestic Product (GDP) and the worsening unemployment rate due to COVID-19. The quarterly U.S. GDP growth rate this year is expected to record an average of -24% in the second quarter, rebound to 4.7% in the third quarter, and show an even higher growth rate in the fourth quarter. However, the increase in GDP in the second half of the year is not expected to surpass the decline in the first half, estimating an annual GDP growth rate of -5% for this year.

Regarding the U.S. unemployment rate, it is projected to peak at 19% in August, then gradually decrease to 11% in December and 7% by the end of 2021. Considering that the unemployment rate was 3.5% in February, this means that the unemployment rate will remain more than twice as high as before the COVID-19 crisis until the end of next year.

They forecast that the U.S. Federal Reserve (Fed) and Congress will continue to pour trillions of dollars in additional funds to mitigate the economic shock caused by COVID-19. In particular, the Fed's asset holdings are expected to expand from the current $6.45 trillion to $9.8 trillion. Through additional asset purchases, $3.35 trillion will be injected into the market. Additionally, Congress is expected to introduce an additional $2 trillion support package. So far, the budget size related to COVID-19 measures passed by Congress is $2.5 trillion.

Respondents expected the Fed to maintain the current near-zero benchmark interest rate until the end of this year and then raise it to around 1.9% next year.

Kevin Hassett, Senior Economic Advisor to the White House, did not withdraw his negative outlook on the U.S. economy. On the same day, he appeared on CNN and said that the unemployment rate in the second quarter could rise to 16-20%, and GDP growth could decrease by 30-40% (annualized). He specifically mentioned that the first quarter GDP growth rate, scheduled to be announced on the 29th, would be negative, adding, "This is just the tip of the iceberg of negative news to come in the next few months." He reiterated his previous statement from the 26th in other media that "we will fall into the biggest shock since the Great Depression." His remarks attracted attention as they differed from those of Treasury Secretary Steven Mnuchin, who said that if state governments lift lockdowns and businesses resume, the economy would rebound after late summer.

This content was produced with the assistance of AI translation services.