Goldman Sachs has grown more optimistic about the timing for a coronavirus vaccine saying it expects at least one treatment to be widely available by next year, leading the firm to raise its economic growth outlook for 2021.
Goldman raised its economic forecasts for next year as it expects “at least one vaccine” to be widely distributed by the second quarter of 2021.
While the firm left its economic forecasts for 2020 unchanged—with annualized GDP gains of 25.2% and 8% in the third and fourth quarter, respectively, it upgraded its full-year outlook for 2021.
Goldman is forecasting 2021 GDP growth to hit 6.2% on an annual average basis, up from a previous estimate of 5.6% (and higher than the Federal Reserve’s projection of 5%).
That breaks down to quarterly increases of 10%, 8% 4% and 3% in 2021, compared to previous estimates of 8%, 6.5%, 5% and 4%.
Goldman says the quicker arrival of a vaccine would boost prospects for an economic recovery—with consumer spending set to accelerate in the first half of 2021 as Americans “resume activities that would previously have exposed them to Covid-19 risk.”
The firm maintained its unemployment rate forecast for 2020 at 9% (down from the current 10.1%), but revised its 2021 figure to 6.5% from 7%.
“Vaccines for Covid-19 are being developed at a rapid pace… despite substantial uncertainty, the most likely outcome is that at least one vaccine will gain FDA approval this fall,” Goldman analysts said in their recent note.
The U.S. government has funded three potential coronavirus vaccines for Phase 3 trials. The companies behind them include Moderna, AstraZeneca (partnered with the University of Oxford), and Pfizer and BioNTech. There are a total of 42 companies that have vaccines currently under development, according to the Regulatory Affairs Professionals Society.
Big number: 5.1 million.
That’s how many coronavirus cases have been confirmed in the United States so far, with just over 164,000 deaths, according to the latest data from Johns Hopkins University.
What to watch for
One caveat which could threaten an economic recovery is the danger that Congress won’t agree on another round of coronavirus stimulus, Goldman says. Democrats and the White House remain deadlocked over what the next coronavirus relief package should look like, with disagreements on key issues like extending federal unemployment benefits. “Despite these forecast upgrades, the near-term downside risks have risen due to Congress’s failure to pass a Phase 4 fiscal package,” Goldman said in its note. “We still expect a package worth at least $1.5 trillion to become law by the end of August, but the risk of no further legislative action has increased and could pose a threat to the budding recovery.”
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