Covid-19: US deficit could quadruple to $3.7 trillion; GDP to fall 40%

A nationwide business shutdown and surge in US government spending will nearly quadruple the federal deficit to a record 3.7 trillion US dollars this fiscal year as the country combats the coronavirus pandemic, congressional forecasters said on Friday.

US gross domestic product will plunge by nearly 40 per cent on an annualised basis in the second quarter, according to the nonpartisan Congressional Budget Office (CBO). But the CBO forecast an economic resurgence in the second half of the year, and said unemployment would crest at 16 percent but remain in double digits throughout 2021.

The CBO report illustrated the fiscal pressures lawmakers in Congress face as they prepare to craft new legislation to respond to the pandemic. Congress has already passed 3 trillion U.S. dollars in spending on healthcare, small businesses and other measures to combat the outbreak and its economic effects.

"If the laws currently in place governing spending and revenues generally remained unchanged and no significant additional emergency funding was provided, the federal deficit would be roughly 3.7 trillion U.S. dollars in fiscal year 2020 and 2.1 trillion U.S. dollars next year," the CBO said.