An Update to the Economic Outlook: 2020 to 2030

This report presents the baseline economic forecast that CBO is using as the basis for updating its budget projections for 2020 to 2030. The agency currently plans to release those budget projections later this summer.

This economic forecast provides CBO’s first complete set of economic projections through 2030 since January and incorporates information available as of June 26. The baseline forecast is being published now, rather than later with the budget projections, to provide the Congress with CBO’s current assessment of the economic outlook in a rapidly evolving environment. This economic forecast updates the interim forecast that CBO published in May, which focused on 2020 and 2021. It is similar to the May forecast for those two years, except that the projection of growth in the second half of 2020 has been revised downward.

The 2020 coronavirus pandemic has brought about widespread economic disruption. To mitigate the contagion, governments, businesses, and households in the United States and around the world have taken measures to limit in-person interactions. Collectively referred to as social distancing, those measures include reducing social activities and travel, curtailing the activity of schools and business, and working from home. In the first quarter of 2020, the pandemic and associated social distancing ended the longest economic expansion and triggered the deepest downturn in output and employment since World War II.

CBO projects that if current laws governing federal taxes and spending generally remain in place, the economy will grow rapidly during the third quarter of this year.

• Real (inflation-adjusted) gross domestic product (GDP) is expected to grow at a 12.4 percent annual rate in the second half of 2020 and to recover to its prepandemic level by the middle of 2022.
• The unemployment rate is projected to peak at over 14 percent in the third quarter of this year and then to fall quickly as output increases in the second half of 2020 and throughout 2021.

Following that initial rapid recovery, the economy continues to expand in CBO’s projections, but it does so at a more moderate rate that is similar to the pace of expansion over the past decade:

• By 2028, real GDP reaches its long-run level relative to potential GDP (the maximum sustainable output of the economy) and grows at the same rate as potential GDP thereafter.
• The unemployment rate remains above its prepandemic level through the end of the projection period.
• Interest rates on federal borrowing throughout the decade remain well below the average rates in recent decades.

CBO’s projections reflect an average of possible outcomes. For example, the pace projected for the initial rapid recovery could continue until GDP returned to its potential, or the economy could grow much more slowly. The projections are subject to an unusually high degree of uncertainty, which stems from many sources, including incomplete knowledge about how the pandemic will unfold, how effective monetary and fiscal policy will be, and how global financial markets will respond to the substantial increases in public deficits and debt.