CBO Updates Budget Projections In Wake of COVID-19

Today, the Congressional Budget Office (CBO) released a blog post outlining its latest projections of near-term federal debt and deficits in the wake of the novel coronavirus (COVID-19) pandemic. These projections are an update to those in CBO's March baseline, which do not incorporate the effects of COVID-19. CBO's projections are very close to our own estimates published on April 13, in which we project this year's budget deficit will total $3.8 trillion and that debt will eclipse the size of the economy by the year's end. 

Specifically, CBO notes that: 

  • CBO projects the federal budget deficit will total $3.7 trillion (17.9 percent of GDP), a $2.6 trillion increase compared to the March 2020 projection of $1.1 trillion (4.9 percent of GDP). 
  • The agency expects debt as a share of the economy, to reach 101 percent by the end of this fiscal year, whereas it projected debt would end the year at about 81 percent of GDP in the March baseline. 
  • CBO projects that interest rates on 3-month Treasury bills and 10-year Treasury notes will average 0.1 percent and 0.6 percent, respectively during the second quarter of 2020; in January, CBO projected rates would average 1.6 percent and 1.9 percent, respectively. 
  • The agency expects the unemployment rate to average 14 percent during the second quarter of 2020 and 11.4 percent during calendar year 2020 before falling slightly to 10.1 percent in 2021. 
  • CBO projects GDP will fall by 11.8 percent this quarter and 5.6 percent in 2020, before growing by 2.8 percent in 2021. GDP at the end of 2021 will remain lower than it was in 2019 and well below prior projections. 

In crafting its near-term debt and deficit projections, CBO accounts for the budgetary effects of the four pandemic-related relief bills enacted by Congress over the past two months and makes a rough estimate of the changes in federal spending and revenue brought on by the sharp downturn the U.S. economy has experienced since January.

Importantly, CBO emphasizes that these projections are highly uncertain and will continue to change as the pandemic unfolds further.