Unprofitable period: in the USA, the country's GDP was predicted to fall by almost 38% in the second quarter of 2020

From April to June 2020, United States GDP may decline immediately by 37.7% in annual terms. This is stated in the report of the Office of Congress on Budget (CBO).

According to the agency, economic activity in the country will begin to recover only in the second half of the year, but at the same time, the overall dynamics for all 12 months will remain negative. So, by the end of 2020, US GDP may decline by 5.6%. The last time such a serious drop occurred back in 1946, according to the Federal Reserve Bank of St. Louis. 

The main reason for the record economic collapse, American experts call the consequences of the COVID-19 pandemic. Currently, the United States remains the leader in the number of coronavirus infected. At the same time, the introduced quarantine restrictions provoked a massive reduction in trade and passenger traffic, as well as the closure of companies and industries.

“The pandemic and social distancing measures necessary to contain it caused massive damage to economic activity, triggering a wave of rising unemployment and interrupting the longest boom since World War II,” CBO economists say.

According to RT, BKS Broker stock market expert Albert Koroev, in the first place, the pandemic hit the American services sector. According to the World Bank, the sector accounted for over 77% of US GDP in 2017.

“In many ways, the country's economy is focused on the services sector and the consumer sector. Now there is a dramatic decline in consumption, ordinary Americans are starting to save, which translates into huge losses for small and medium-sized businesses. Under these conditions, according to our forecasts, the recession will continue until the advent of the vaccine against COVID-19, ”RT Koroev said.

Moreover, the current situation in the American economy is exacerbated by the growing demographic crisis. This point of view in a conversation with RT was expressed by the head of the analytical department of AMarkets Artyom Deev. According to him, the number of people over 65 in the United States is growing rapidly and in the next decade may exceed the number of working youth. 

“In the past five years, the so-called pension crisis has progressed in the United States. The number of employees is reduced, and the number of pensioners is growing, which leads to an additional burden on insurance funds. Moreover, even before the pandemic, the medical healthcare system was operating at its limit, and now it is objectively unable to cope with the influx of patients, ”the expert notes.

Labor stupor

According to the US Ministry of Labor, against the backdrop of a pandemic in April, the US unemployment rate more than tripled - from 4.4% to 14.7%. At the same time, the CBO believes that by the end of September this value can reach 15.8%. 

“Some employees who are currently on temporary leave will have nowhere to return, as their jobs will be reduced due to the closure of the business. Moreover, due to the nature of the law, employees are not protected from layoffs. As a result, those who lose their jobs will not be able to service their debts, pay bills, which will lead to a drop in consumer demand, ”Peter Pushkaryov, TeleTrade chief analyst, told RT.

To help the economy and the population, the US authorities have already agreed on a support program in excess of $ 2 trillion. In particular, it is about paying benefits and promoting business. Moreover, on May 16, the US House of Representatives approved an additional package of measures for another $ 3 trillion. At the same time, according to Peter Pushkaryov, the actions of the authorities significantly increase the burden on the country's budget, but at the same time remain insufficient to stimulate consumer activity.

“This is the key difference between the current crisis and the similar times of the Great Depression. By 1929, there was a “fork” situation between the gigantic global overproduction and the relative poverty of a society incapable of consuming as much. Now, Americans cannot increase consumer activity, largely because of quarantine measures. At the same time, pouring a huge amount of funds into the economy also does not produce results yet, but only accelerates the budget deficit, ”the expert notes. 

According to CBO experts, in 2020, US treasury spending may exceed revenues by $ 3.7 trillion, or 18% of GDP. The last time a similar value could be observed during the Second World War.

According to Ivan Kapustyansky, to cover the budget deficit of the Trump administration, it is necessary to further increase the public debt, which has already reached the highest level in history - $ 25.3 trillion. At the same time, from January to early May 2020, the total debt of the US government increased by almost $ 2 trillion, although previously the growth rate did not exceed $ 1.5 trillion per year, the expert recalls. 

“Now we are witnessing a very rapid growth in US government debt. This is due to measures to support the population and business and a simultaneous drop in budget revenues due to the closure of a number of enterprises. In order to pull the economy out of the “red zone”, the authorities will continue injections, which will lead to new records in the total amount of debt, which may still increase by $ 2 trillion, ”the analyst concluded.