Goldman Sachs economists now expect slower growth after abandoning the coronavirus stimulus

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With coronavirus lockdowns still in place in some parts of the country, it’s not surprising that economic growth has been slow and the US has officially fallen into recession.

However, there were signs of good news for the future as leading economists and business leaders predict an imminent, albeit fragile, recovery. However, economists at Goldman Sachs Group Inc. are far less rosy with future economic growth for one simple reason: They have given up Washington lawmakers passing more coronavirus relief laws this year.

The lack of additional aid to struggling Americans is expected to have a profound effect on the country’s economic prospects.

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Economists and business leaders warn that a lack of coronavirus incentives will have ramifications

For the fourth quarter of 2020, Goldman Sachs economists are forecasting 6% quarterly growth. However, that forecast was based on the assumption that Congress would provide at least another $ 1 trillion in coronavirus aid to fuel the economic recovery.

Expectations that Washington would provide more aid have so far proven too optimistic, so Goldman economists have revised their forecast and expect no further aid is on the way.

“It is now clear that Congress will not add any additional fiscal stimulus to the ongoing resolution,” said a report released this week. “This means that after one final round of additional unemployment benefits currently being paid out, any further fiscal support will likely have to wait until 2021.”

Without further financial support, Goldman economists are now warning that Americans will experience a sharp decline in disposable income and that their purchasing power will decline to pre-pandemic levels. When people can spend less, it reduces demand and slows economic growth.

Their revised forecast is that US gross domestic product will only grow by 3% on an annualized basis in the fourth quarter. In other words, the growth will halved, and the economic recovery will be much slower.

Goldman’s report suggests more fiscal support will arrive in 2021 and forecasts 5.8% growth over the next year. But next year’s results will likely depend on what happens in the November election.

This report is not the first warning to highlight the damage a lack of economic funds could do to the country’s fragile economic recovery. The Business Roundtable, a nonprofit group that includes some of America’s top CEOs, also raised the alarm that economic conditions could deteriorate if politicians fail to find consensus on a new coronavirus alleviation law.

Unfortunately, these warnings – along with requests from moderate lawmakers for action – appear to be breaking a month-long deadlock that has prevented further COVID-19 stimulus laws from being passed. Legislators are far apart on what to include in another bill, and many are busy re-electing or focusing on the battle to confirm a new Supreme Court Justice to fill the seat of the late Ruth Bader Ginsburg.

As leading economists and industry leaders warn, it is consumers who will feel the pain resulting from the lack of economic funds. If you are among the millions hoping for more relief from Washington, it is important to act now – most signs suggest it is unlikely to come.

While there are other sources of government and government assistance, it is wise to secure your own financial position whenever possible and, if possible, increase the amount you put into the bank for emergencies. Other forms of assistance or temporary solutions like a personal loan or a mortgage refinancing loan are not a complete substitute for further fiscal relief from Washington, DC, but perhaps – as the economists at Goldman Sachs hope – those reliefs will come in 2021.


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