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The U.S. economy will recover but will not return to its pre-coronavirus level before the end of next year, the Congressional Budget Office (CBO) predicted in its latest forecast.

Interim Economic Projections for 2020 and 2021, released yesterday, predicts the economy will begin recovering in the third quarter of 2021 as social distancing policies ease, but it will not be enough to make up for the losses of the past two months.

“Despite a marked improvement in economic activity by the fourth quarter of 2021, real GDP and employment are expected to be lower than they were in the fourth quarter of 2019 if current laws governing federal taxes and spending generally remain in place,” the report stated.

Specifically, CBO projects real GDP to be 1.6% lower and the unemployment rate 5.1 percentage points higher, and the employment-to-population ratio 4.8 percentage points lower compared with their values two years earlier. The report is based on economic data available through May 12.

A big factor in the projections is the degree to which social distancing policies will persist. The agency projects that social distancing will decline by about two-thirds in the second half of this year but will not stop entirely. CBO sees social distancing continuing to be reduced through the third quarter of 2021, but to what degree depends on whether there is a resurgence in COVID-19 cases.

“That decline is in the middle of the distribution of possible outcomes, in CBO’s assessment, and allows for regional and seasonal variation,” the report stated.