US GDP to recover from pandemic by mid-2021: Budget office

The world's largest economy will recover from the coronavirus pandemic by the middle of 2021, the US Congressional Budget Office (CBO) said Monday, sooner that it had forecast last year.

However employment will take longer to recover, after business shutdowns to stop COVID-19 from spreading caused mass layoffs in the United States beginning last March.

"CBO currently projects a stronger economy than it did in July 2020, in large part because the downturn was not as severe as expected and because the first stage of the recovery took place sooner and was stronger than expected," the nonpartisan office serving Congress said.

"In CBO's projections, the unemployment rate gradually declines through 2026, and the number of people employed returns to its pre-pandemic level in 2024," while the labor force recovers by 2022.

As it grappled with the world's largest outbreak of COVID-19, the United States last year endured its worst economic contraction since 1946, while the unemployment rate has shot up from historic lows prior to the pandemic.

Congress has passed nearly $4 trillion in stimulus measures aimed at helping individuals and small businesses during the pandemic, and analysts say spending has helped the economy avoid an even worse downturn.

The CBO said a $900 billion measure passed in December will raise GDP by 1.5 percent this year and next, while adding $872 billion to the deficit over the two years.

Over the long term, CBO expects the economy to grow by an average of 1.6 percent a year from 2026 to 2031.

The office also predicts that the Federal Reserve will keep its borrowing rates at near-zero through mid-2024 then begin raising them gradually.

Inflation is expected to cross the two percent mark -- when the central bank says it would consider raising rates -- after 2023.