The US economy will grow 4.6 percent in 2021 after contracting 3.5 percent in 2020, powered by a resumption of business activity and coronavirus rescue spending, but growth will taper off to below 2 percent by the end of the decade, the Congressional Budget Office said on Monday.
The non-partisan budget referee said its latest forecasts are based on current laws passed by Jan. 12, and do not include any executive actions or stimulus proposals by President Joe Biden’s administration.
CBO said it expects US real gross domestic product growth to slow to 2.9 percent in 2022 and 2.2 percent in 2023. Real GDP will average 1.7 percent for the 2026-2031 period, according to the CBO forecasts.
The forecasts will form the basis for an update of the agency’s US budget projections for the 2021-2031 period, which will be released later in February. Those projections form a baseline for measuring the fiscal costs of proposed legislation, such as Biden’s $1.9 trillion COVID-19 stimulus proposal.
“Over the course of the coming year, vaccination is expected to greatly reduce the number of new cases of COVID-19, the disease caused by the coronavirus. As a result, the extent of social distancing is expected to decline,” CBO said in its economic forecast report.
The report assumes that the average US unemployment rate will fall to 5.7 percent in 2021 from 8.1 percent in 2020, with the number of people employed reaching pre-pandemic levels in 2024.
But it said inflation as measured by the Consumer Price Index excluding food and energy costs will rise from 1.6 percent in 2021 to 2.1 percent in 2022, above the Federal Reserve’s nominal 2 percent inflation target.