- Real gross domestic product for the US economy is set to return to pre-coronavirus levels this quarter, economists say.
- It’s a feat took more than 3 years after the last financial crisis, Commerzbank analysts said.
- The IMF has said the scarring from COVID will be far less than after 2008 in advanced economies.
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Real gross domestic product for the US economy is likely to retake its pre-coronavirus levels this quarter, economists predict.
The measure of GDP – which provides an inflation-adjusted snapshot of overall economic value – is set for a much faster recovery than after the financial crisis that ran from 2007 to 2009, when the economy took more than three years to regain its pre-crisis size, according to economists at German lender Commerzbank.
“GDP is expected to return to pre-crisis levels as early as the current quarter,” wrote Commerzbank economists Bernd Weidensteiner and Christoph Weidensteiner in a note.
They added that US real GDP took 13 quarters to reach its pre-crisis peak following the financial crisis.
“High-frequency data show that the US economy gained noticeable momentum in March,” they said. “Corona-related restrictions are being relaxed in more and more states, and fiscal policy is pumping trillions of dollars into the economy.”
Goldman Sachs economists have a similar timeline, predicting that real GDP should be well above its pre-coronavirus level by the end of the quarter.
By the firm’s measure, real GDP stood at $19.24 trillion in the final quarter of 2019, and forecasts that it will recover to reach $19.62 trillion in the second quarter of 2021, thanks in large part to strong growth in the first and second quarters.
The US economy shrank 3.5% in 2020, marking its biggest annual contraction since World War II.
But the temporary nature of many of the coronavirus restrictions, the arrival of vaccines, and huge amounts of stimulus mean the economy is set to rapidly rebound in 2021, analysts say.
Commerzbank expects the US economy to grow 6% or more in 2021. Goldman has forecasted growth of 7.2%, more optimistic than the consensus estimate of 5.7%. Both of those estimates would put real US GDP well above its pre-coronavirus level by the end of the year.
On Tuesday, the International Monetary Fund predicted that the world’s richest economies would suffer little lasting damage from the coronavirus pandemic.
The Fund said in a major report that output is expected to be around 1% lower than it would have been by 2024 in advanced economies. That compares to a medium-term loss of output of around 10% after the financial crisis.
The IMF said the unprecedented policy response during the coronavirus crisis had “helped preserve economic relationships, cushioned household income and firms’ cash flow, and prevented amplification of the shock through the financial sector.”
However, it said the loss of output would be much bigger in developing economies, particularly in those with weaker public finances or a reliance on tourism.