Peel: Slow Recovery Projected for U.S. and Global Economy
The
COVID-19 pandemic continues to have devastating impacts on public
health and the economies of the U.S. and many other countries. There is
much uncertainty about the future impacts of COVID-19 but even in the
best of circumstances, the economic impacts are enormous. Table 1 shows
a range of estimates for changes in U.S. Gross Domestic Product (GDP)
in 2020 and 2021. All of the estimates for 2020 are significantly worse
than the 2.8 percent decrease in GDP in 2008, during the last
recession.
The
2020 U.S. unemployment rate is forecast at 9.3 percent, replacing
pre-COVID estimates of a continuation of the 3.5 percent rate from late
2019 [1]. The Fed estimate for the 2021 unemployment rate is 6.5
percent, persisting at a 5.5 percent rate in 2022. The impact of
unemployment and reduced income in the U.S. economy is likely to grow at
some point as government support reduces or ends.
Like the
pandemic, the economic impacts are global as well. The most recent
projections from the Organization for Economic Cooperation and
Development (OECD) includes the following summary:
“The global
economy is now experiencing the deepest recession since the Great
Depression in the 1930s, with GDP declines of more than 20% and a surge
in unemployment in many countries. Even in countries where containment
measures have been relatively light, early data are already making clear
that the economic and social costs of the pandemic will be large.
Growth prospects depend on many factors, including how COVID-19
evolves, the duration of any shutdowns, the impact on activity, and the
implementation of fiscal and monetary policy support. Uncertainty will
likely prevail for an extended period.”
Likewise from the International Monetary Fund (IMF):
“Global
growth is projected at –4.9 percent in 2020, 1.9 percentage points
below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19
pandemic has had a more negative impact on activity in the first half
of 2020 than anticipated, and the recovery is projected to be more
gradual than previously forecast. In 2021 global growth is projected at
5.4 percent. Overall, this would leave 2021 GDP some 6½ percentage
points lower than in the pre-COVID-19 projections of January 2020.”
The
OECD, with estimates for single-hit and double-hit (second COVID-19
outbreak) scenarios, state that, “In both scenarios, we won’t be back at
2019-Q4 level for at least two years”.
The magnitude of the
impact on domestic and international beef demand is uncertain though
certainly reduced from previous estimates. Beef demand will depend on a
number of factors including; evolution and future impacts of COVID-19;
type and duration of fiscal and monetary support; recovery of food
service sector; rate of employment recovery; exchange rates; politics
(including election year impacts, trade disputes, etc.) and others.
There will be many challenges for many months and a continuing
atmosphere of uncertainty.
Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist