Coronavirus will cost the economy nearly $ 8 trillion, according to the Congressional Budget Office

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New Jersey First Lady Tammy Murphy distributes bags containing meals, face masks and other personal protective supplies to residents in need outside of NAN Newark Tech World during the coronavirus disease epidemic (COVID-19) in Newark, New Jersey, May 6. 2020.

Mike Segar | Reuters

The coronavirus is likely to erode about $ 7.9 trillion in economic activity over the next decade, even though all bailout funds are being invested to offset the impact of the pandemic, according to a government estimate on Monday.

In fiscal year 2030, the virus will reduce real economic output – nominal GDP adjusted for inflation – by 3% from initial economic estimates in January before the pandemic, said the Congressional Budget Office.

“Business closings and social distancing are expected to reduce consumer spending, while the recent drop in energy prices should significantly reduce US investment in the energy sector,” said the director of CBO, Phillip L. Swagel, in a written response to an investigation by Sen. Chuck Schumer, DN.Y. “Recent legislation will, according to the CBO’s assessment, partially mitigate the deterioration in economic conditions. “

Nominal GDP is expected to be $ 15.7 trillion, or 5.3%, lower than initially forecast due to the coronavirus.

Congress passed the $ 2.2 trillion CARES law to cushion the blow from the pandemic and is debating another measure that could reach $ 3 trillion.

However, the second quarter is expected to experience the largest drop in GDP in US history, while the unemployment rate for May is expected to be close to 20%, the highest since the Great Depression.

Schumer said the CBO’s estimates underscore the need for swift action on another spending bill.

“To avoid the risk of another Great Depression, the Senate must act with a fierce sense of urgency to ensure that everyone in America has the income they need to feed their families and put a roof over their heads.” head, “said the senator. in a report.

The CBO said it was lowering its estimate for longer-term growth due to the expected low levels of inflation, despite all government spending and the Federal Reserve’s rescue loans. The bureau also warned that further adjustments to its projections are likely as more is known about the trajectory of the coronavirus, its ultimate economic damage and the impact of congressional funding measures.

“An unusually high degree of uncertainty surrounds these economic projections, in particular due to the uncertainty about how the pandemic will unfold this year and next year, how the pandemic and social distancing will affect the economy, how recent political actions will affect the economy and how Economic data will ultimately be recorded for a period when extreme changes have disrupted standard estimation methods and data sources, “wrote Swagel.

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