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GDP Forecast Lowered: Sachs Expects 4.6% Contraction in 2020

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EDITOR NOTE: Goldman Sachs recently announced a positive projection for the economy assuming that states impose tighter COVID-19 restrictions, namely wearing masks. Countries (and a few states) that have imposed strict social distancing and mask-wearing restrictions have been able to recover more successfully than those with looser restrictions. How positive is Goldman’s prediction? A 4.6% 'contraction' in GDP.

(Bloomberg) -- Goldman Sachs Group Inc. economists revised down their estimates for the U.S. economy this quarter, but predicted it will be back on track in September after some states imposed fresh restrictions to combat the coronavirus.

While consumer spending appears likely to stall this month and next, economists led by Jan Hatzius said other economies have proved it’s possible to resume activity and changes in behavior such as wearing masks will help too.

“A combination of tighter state restrictions and voluntary social distancing is already having a noticeable impact on economic activity,” the economists said in a report published on Saturday.

The economists said they now expect the economy to grow 25% in the third quarter having previously predicted 33%. That would result in the economy slumping 4.6% this year, worse than the 4.2% previously seen.

But the Goldman Sachs economists said they still expected growth of 5.8% next year and now project unemployment will be at 9% at the end of this year, down from the previous estimate of 9.5%.

Originally posted on Yahoo! Finance

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