Derrell Peel: Slow Recovery Projected for U.S. and Global Economy

The COVID-19 pandemic continues to have devastating impacts on public health and the economies of the U.S. and many other countries.  There is much uncertainty about the future impacts of COVID-19 but even in the best of circumstances, the economic impacts are enormous.  Table 1 shows a range of estimates for changes in U.S. Gross Domestic Product (GDP) in 2020 and 2021.  All of the estimates for 2020 are significantly worse than the 2.8 percent decrease in GDP in 2008, during the last recession. 

Table 1.  Change in U.S. GDP (Percent).

 

2019

2020*

2021*

U.S. Federal Reserve  [1]

+2.3

-6.5

+5.0

OECD  [2]

+2.3

-7.3 (-8.5)^

+4.1 (+1.9)^

IMF  [3]

+2.3

-8.0

+4.5

*2020 and 2021 forecast; ^Impact with second COVID-19 outbreak

OECD = Organization for Economic Cooperation and Development

IMF = International Monetary Fund

The 2020 U.S. unemployment rate is forecast at 9.3 percent, replacing pre-COVID estimates of a continuation of the 3.5 percent rate from late 2019 [1].  The Fed estimate for the 2021 unemployment rate is 6.5 percent, persisting at a 5.5 percent rate in 2022 [1].  The impact of unemployment and reduced income in the U.S. economy is likely to grow at some point as government support reduces or ends.

Like the pandemic, the economic impacts are global as well.  The most recent projections from the Organization for Economic Cooperation and Development (OECD) includes the following summary:

“The global economy is now experiencing the deepest recession since the Great Depression in the 1930s, with GDP declines of more than 20% and a surge in unemployment in many countries.  Even in countries where containment measures have been relatively light, early data are already making clear that the economic and social costs of the pandemic will be large.  Growth prospects depend on many factors, including how COVID-19 evolves, the duration of any shutdowns, the impact on activity, and the implementation of fiscal and monetary policy support.  Uncertainty will likely prevail for an extended period.” [2]

Likewise from the International Monetary Fund (IMF):

“Global growth is projected at –4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 percent. Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020.” [3]

The OECD, with estimates for single-hit and double-hit (second COVID-19 outbreak) scenarios, state that, “In both scenarios, we won’t be back at 2019-Q4 level for at least two years”.

The magnitude of the impact on domestic and international beef demand is uncertain though certainly reduced from previous estimates.  Beef demand will depend on a number of factors including; evolution and future impacts of COVID-19; type and duration of fiscal and monetary support; recovery of food service sector; rate of employment recovery; exchange rates; politics (including election year impacts, trade disputes, etc.) and others.  There will be many challenges for many months and a continuing atmosphere of uncertainty.

[1] https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20200610.pdf

[2] http://www.oecd.org/economic-outlook/

[3] https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020

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