www.cbo.gov

CONGRESSIONAL BUDGET OFFICE Phillip L. Swagel, Director

U.S. Congress

Washington, DC 20515

June 1, 2020

Honorable Charles E. Schumer 

Democratic Leader

United States Senate

Washington, DC 20510

Re: Comparison of CBO’s May 2020 Interim Projections of Gross 

Domestic Product and Its January 2020 Baseline Projections

Dear Mr. Leader:

In response to your letter of May 27, I am writing to describe how the 

Congressional Budget Office’s May 2020 interim projections of gross 

domestic product (GDP) compare with the baseline projections the agency 

published in January this year.

1

Nominal GDP

In the May 2020 report, CBO projected that the level of nominal GDP in 

the second quarter of 2020 would be $790 billion (or 14.2 percent) lower 

than the agency had previously forecast in January 2020.2 The two largest 

differences between the two forecasts result from the economic effects of 

the COVID-19 pandemic in reducing output and the legislation enacted 

between January and early May in response, which partly offsets that 

reduction. Subsequently, the difference between those projections of 

nominal GDP narrows from $533 billion (9.4 percent lower in the May 

 1 See Congressional Budget Office, Interim Economic Projections for 2020 and 2021 (May 2020), 

www.cbo.gov/publication/56351, and The Budget and Economic Outlook: 2020 to 2030 (January 

2020), www.cbo.gov/publication/56020.

2 That reduction is expressed at a quarterly rate (not at an annual rate, as commonly presented by 

the Bureau of Economic Analysis) to capture the actual dollar amount lost. An annual rate would 

represent the drop in production in the second quarter as if it persists for a full year and therefore 

is less appropriate in understanding exactly how GDP changed in the second quarter alone.
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projection) by the end of 2020 to $181 billion (2.2 percent lower) by 2030 

(see Figure 1 after the text of this letter). As a result of those differences, 

CBO projects that over the 2020–2030 period, cumulative nominal output

will be $15.7 trillion less than what the agency projected in January (see 

Figure 2). That difference constitutes 5.3 percent of the value for 

cumulative nominal GDP for that period that the agency projected in 

January.

Real GDP

The revised forecast for nominal GDP reflects a significant markdown in 

CBO’s projection of real (inflation-adjusted) production in the United 

States as a result of the pandemic. Business closures and social distancing 

measures are expected to curtail consumer spending, while the recent drop 

in energy prices is projected to severely reduce U.S. investment in the 

energy sector. Recent legislation will, in CBO’s assessment, partially 

mitigate the deterioration in economic conditions.

CBO’s May projection of real GDP in the second quarter of 2020 was 

$724 billion (or 13.3 percent) lower in 2019 dollars than the agency’s 

projection from January. Beyond the second quarter of 2020, the difference 

between those projections of real GDP shrinks, to $422 billion in 2019

dollars (7.6 percent lower in the more recent projection) by the end of 2020 

and roughly disappears by 2030 (see Figure 3). As a result of those 

differences, CBO projects that over the 11-year horizon, cumulative real 

output (in 2019 dollars) will be $7.9 trillion, or 3.0 percent of cumulative 

real GDP, less than what the agency projected in January.

The Role of Inflation

CBO also marked down its projection of nominal output because the 

agency expects that inflation will be weaker as a result of the pandemic. 

Lower projected inflation rates, particularly in 2020 and 2021, reduce the 

level of prices and nominal GDP relative to what CBO projected in 

January. In the May projections, the downward revision to inflation derives 

mostly from lower projected rates of inflation for energy prices and the 

prices of travel and transportation services. 

Over the first few years of the 2020–2030 period, the revision to estimates 

of nominal GDP primarily reflects changes in real production, but as the 
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effect of changes in real production wane in later years, the lower price 

level has an increasing influence. The contribution of those lower prices to 

the lower estimates of nominal GDP can be seen by comparing the 

revisions to the projections for nominal and real output (see Figure 4). By

2030, lower prices account for roughly all of the revision to nominal GDP.

Uncertainty

An unusually high degree of uncertainty surrounds these economic 

projections, particularly because of uncertainty about how the pandemic 

will unfold this year and next year, how the pandemic and social distancing 

will affect the economy, how recent policy actions will affect the economy, 

and how economic data will ultimately be recorded for a period when 

extreme changes have disrupted standard estimation methods and data 

sources. Additionally, if future federal policies differ from those underlying 

CBO’s economic projections—for example, if lawmakers enact additional 

pandemic-related legislation—then economic outcomes will necessarily 

differ from those presented here.

Future Work

CBO will continue to evaluate the impact of the pandemic and the 

trajectory of the U.S. economy. Later this year, the agency will publish a 

more comprehensive economic forecast covering the years through 2030. 

The May projections for years after 2021 are preliminary because they do 

not fully reflect changes to CBO’s forecast. In particular, the agency did not 

update its estimates of the economy’s potential output in light of the 

pandemic beyond the effect that lower business and residential investment 

has on the nation’s capital stock (or productive resources). 
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I hope this information is helpful to you. If you have further questions, 

please contact me. 

Sincerely, 

Phillip L. Swagel 

Director 

cc: Honorable Mitch McConnell

 Majority Leader 

 United States Senate 

Identical letter sent to the Honorable Bernard Sanders. 
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