Preliminary economic forecast for Washington projects real GDP to fall 5.8% in 2020; grow again in 2021.

The Economic and Revenue Forecast Council has released its preliminary economic forecast. It’s the first economic forecast to capture the pandemic recession. There’s a lot of good information in the report. We’ll highlight just a few points.

We have adjusted real gross domestic product (GDP) to match the Blue Chip “Consensus” GDP forecast for 2020 and 2021. We now expect Real GDP to decline 5.8% in 2020 followed by a 4.0% increase in 2021. In February we expected GDP to grow 1.9% in 2020 and 2.0% in 2021.

The impact of federal assistance is clear in the personal income numbers.

We expect an 11.0% decline in Washington employment this year compared to the 1.8% increase in the February forecast. We expect above-average growth through the remainder of the forecast as the economy recovers from this deep recession. We expect employment growth to average 4.1% per year in 2021 through 2025 compared to the 0.9% average rate expected in February. Our forecast for nominal personal income growth this year is 2.1%, down from 4.7% in the February forecast. The adverse effects of the recession on personal income this year are mitigated by substantial income support through the CARES Act. Our new forecast for nominal personal income growth in 2021 through 2025 averages 3.8% per year, which is down from the 4.7% rate expected in the February forecast. The effect of the recovery on growth in 2021-25 is offset by the loss of CARES Act support.

This forecast sets the stage for the June official revenue forecast.