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Despite some fluctuations, from 2016 until the first quarter of 2020, real GDP was positive. The sharp decline in early 2020 was probably due to the global pandemic, which disrupted the export and import network and significantly reduced citizens’ consumer opportunities. However, the situation should not be expected to improve by the second quarter. Swagel believes that real GDP will decline by 12 percent between April and June 2020, which will be an even more severe decline (Swagel). Moreover, the author believes that the unemployment rate will approach 14%, while the federal budget deficit will be at $3.7 trillion. It should be predicted that when the situation with coronavirus infections begins to disappear, GDP will recover gently and slowly to positive values. At the same time, it is essential to assume that growth will not be significant and rapid, as the data show that positive quarterly GDP fluctuations rarely exceed two percent.
The main reason for the initial decline and then a gradual recovery by several points is the global situation concerning the pandemic. It is known that two levels, microeconomic and macroeconomic, justify GDP growth. From a microeconomic perspective, GDP growth is associated with increased consumer spending on goods and increased employment. Macroeconomic factors usually include a general increase in investment in business and housing construction, growth in exports, and an increase in federal spending. In practice, the situation in the first quarter of 2020 is the opposite — due to the pandemic, a large number of citizens were quarantined and unemployed (Makridis and Hartley 1). This has created a chain of interrelated events that have affected both the fall in exports and the rise in unemployment and impoverishment. As a result, this situation caused a severe drop in GDP. The situation is expected to improve over time, and by the second half of 2020, according to Swagel, GDP will start to grow positively. This is due to the recovery of damaged economic chains, the return of people to work, and increased exports of goods and services.
Works Cited
Aversa, Jeannine. Gross Domestic Product, First Quarter 2020 (Third Estimate). Web.
Makridis, Christos, and Jonathan Hartley. The Cost of Covid-19: A Rough Estimate of the 2020 US GDP Impact. Web.
Swagel, P. “CBO’s Current Projections of Output, Employment, and Interest Rates and a Preliminary Look at Federal Deficits for 2020 and 2021.” CBO, Web.
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