US Economic Outlook – Split government and third wave of COVID-19 likely to curb growth in 2021

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This article was written By Jerome Jean Haegeli, Group Chief Economist, Swiss Re Institute & Thomas Holzheu, Chief Economist Americas, Swiss Re Institute & Fernando Casanova Aizpun, Senior Economist, Swiss Re Institute & Mayank Raturi, former Senior Economist, Swiss Re Institute
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Without the blue wave that pollsters had anticipated in the US elections, the prospects of a large (USD >1 trn) fiscal stimulus are diminished and we therefore see the results as a headwind for economic growth in 2021. The COVID-19 outbreak is now on its third wave and likely to trigger a new set of mobility restrictions, both formal and behavioral. Weighing these downside risks and accounting for a stronger bounce back than expected in Q3, we increase our real GDP growth forecast from -4.6% to -4.1% for 2020, and decrease from 3.8% to 3.5% for 2021.

Key takeaways

  • Political power remains fragmented, a > USD 1.5 trn new fiscal stimulus seems to be off the table now.
  • The COVID-19 outbreak reached new highs in October, opening the prospects for more mobility restrictions.
  • We revise our '20 and '21 growth forecast to -4.1% and 3.5%, from - 4.6% and 3.8% respectively.

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Economic Outlook US Economic Outlook - Split government and third wave of COVID-19 likely to curb growth in 2021

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