Economic growth forecasts for 2021 drop due to coronavirus comeback fears

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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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