Washington DC, Apr 24 (efe-epa).- The Congressional Budget Office (CBO), a federal agency within the legislative branch of the United States government, forecast that the country’s fiscal deficit would triple to $3.7 trillion while unemployment would reach 16 percent owing to the COVID-19 crisis.
According to the CBO, a nonpartisan agency that provides budget and economic information to the Congress, the deficit at the end of the 2020 financial year would stand at $3.7 trillion and would come down to $2.1 trillion the following fiscal year.
Prior to the pandemic, the CBO had projected a $1 trillion budget deficit for both fiscal years.
The country’s budget deficit had topped $1 trillion in 2019 for the first time since 2012.
The projected budget deficit would be 17.9 percent of the US’ gross domestic product in 2020 and 9.8 percent of the GDP in 2021.
Last year, the deficit was 4.6 percent of the country’s GDP.
Meanwhile, federal debt held by the public would be 101 percent of the GDP by the end of the current financial year.
The CBO also projected a contraction of the US economy with the GDP falling by 5.6 percent this year, dragged down by a 39.6 percent drop in the second quarter.
The CBO expects the economy to rebound in the third quarter with a growth of 23.5 percent and grow at 10.5 percent in the fourth quarter.
“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,” CBO Director Phillip Swagel said in the report.
With regard to the rate of unemployment, the CBO projected an increase of 16 percent in the third quarter of the 2020 fiscal year but said that the labor market was expected to improve after that to leave the rate at 11.7 percent in the last quarter of the year.
“The labor market is expected to improve after the third quarter, with a rebound in hiring and a significant reduction in furloughs as the degree of social distancing diminishes—leading to an increase in business activity and an increase in the demand for workers,” the CBO said.
By the end of 2021, the unemployment rate would have fallen to 9.5 percent – about 6 percentage points higher than the rate in CBO’s economic projection in January 2020 – according to the agency.
The unemployment rate before the coronavirus crisis was 3.8 percent. However, in the last five weeks, nearly 27 million jobs have been destroyed due to the halt in economic activity in the country on account of the COVID-19 outbreak.
The Congress has already approved four economic bailout packages worth nearly $3 trillion.
The US is the worst affected country in the world with nearly 925,000 cases of people infected with the virus and more than 52,000 deaths. EFE-EPA