US Congressional Budget Office: Economic Recovery Difficult Until End of Next Year

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The Congressional Budget Office (CBO) of the United States released an interim forecast report stating that the U.S. Gross Domestic Product (GDP) will decrease by 38% in the second quarter of this year.

Regarding the timing of GDP recovery to the pre-COVID-19 pandemic level, the report specified "sometime next year." Treasury Secretary Steven Mnuchin and Federal Reserve (Fed) Chair Jerome Powell, who showed differing views on the economic outlook, also presented different approaches for future responses.

In the 2020-2021 interim forecast report released on the 19th (local time), the CBO predicted that real GDP will decrease by 37.7% in the second quarter, then grow by 21.5% in the third quarter. It further forecasted a 10.9% growth in the fourth quarter but anticipated a 5.4% decline again in the first quarter of next year. The CBO stated, "In the second half of the year, as the COVID-19 crisis diminishes, the economy will begin to recover, but social distancing is expected to continue for some time, which will constrain economic activities and labor market conditions." In this regard, the unemployment rate is expected to peak at 15.8% in the third quarter, up from 15.1% in the second quarter.

One foreign media outlet cited the CBO report, stating, "It will be difficult for the U.S. GDP to recover to pre-COVID-19 levels by the end of next year."

Despite this situation, the heads of U.S. fiscal and monetary policy appeared at a Senate Banking Committee hearing held via video conference and showed differences in opinions on the response.

While both officials agreed on concerns about a prolonged recession in facing the COVID-19 crisis, they differed on additional stimulus measures and the resumption of economic activities. Secretary Mnuchin focused on lifting restrictions on economic activities. He emphasized that waiting indefinitely for treatments or vaccine development while halting economic activities poses a greater risk.

Mnuchin said, "We will see higher unemployment rates and more negative indicators in the second quarter of this year," adding, "This is why people need to return to work." He also stressed, "If state governments extend shutdowns for several months, the U.S. economy could suffer permanent damage," and emphasized, "We want to restart economic activities safely while considering health issues."

On the other hand, Chair Powell expressed the position that "all policy tools will be mobilized to support the economy," indicating the need for additional support from fiscal authorities. In response, Senate Majority Leader Mitch McConnell reaffirmed his stance to reject the $3 trillion additional stimulus bill pushed by the Democrats that day.

Meanwhile, the White House still holds onto the payroll tax cut card. Larry Kudlow, Director of the National Economic Council (NEC), stated that President Donald Trump hopes for a payroll tax cut. President Trump reiterated his confidence in a V-shaped economic recovery that day as well. After having lunch with Republican lawmakers, he told reporters, "The third quarter will really get better. It is already happening."

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