Economic growth forecasts for 2021 drop due to coronavirus comeback fears

Economic forecasters on Monday lowered their predictions for economic output growth in the coming months, partly due to the possibility of a coronavirus resurgence.

Economists now expect that inflation-adjusted gross domestic product growth for 2021 will be 3.6%, down from the 4.8% first forecast in June, according to a survey released Monday by the National Association for Business Economics. The group surveyed 52 professional forecasters in September.

“NABE panelists have become more optimistic, on balance, but remain concerned about a potential second wave of COVID-19,” said Eugenio Aleman, an economist at Wells Fargo and the chairman of the NABE forecasting survey.

The inflation-adjusted GDP, or real GDP, is expected to rise 25% in the third quarter of 2020, reversing much of the 31% decline in GDP that occurred during the second quarter. But the forecasters expect GDP to decline by 4.3% in total in 2020. This would be the economy’s first full-year contraction since it fell 2.5% during the Great Recession.

“The NABE Outlook panel sees a strong rebound in economic activity after the collapse experienced during the second quarter,” said NABE Vice President Manuel Balmaseda, who is also the chief economist at CEMEX, a Mexican multinational building materials company.

The forecasters were more confident there will not be a second downturn.

“About half of the panelists put the odds of a double-dip recession at 20% or less,” Aleman said. “In contrast, one out of eight panelists places those odds at 50% or higher.”

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