Economy to resume growth this year

NEW YORK (CNNMoney.com) – The economy will start growing in the second half of 2009, but it will be several years before the positive effects of a turnaround will be felt, the Congressional Budget Office said Thursday.
„Even if the economy returns to positive growth this year, the loss in output, income and employment during the recession and the next few years will be huge,“ said Doug Elmendorf, director of the CBO, in testimony before the House Budget Committee.
The CBO is updating its economic forecasts and will release new estimates in August. Elmendorf expects the new numbers will be less optimistic than the estimates the agency released in March.
„CBO’s forecast in August is likely to show even larger shortfalls in output over the next few years,“ he said.
The agency is expecting that the unemployment rate will continue to rise into the second half of next year and will peak above 10%. In March, CBO forecast unemployment would hit 9.5%.
The $787 billion economic stimulus package enacted in February is helping to boost GDP this year and, to a lesser extent, will do so in 2010 as well. Thereafter, economic growth will be hindered if private demand does not pick up, he told lawmakers.
And even if private demand picks up, „it still takes a long time to catch up with the weak growth last year and this year,“ Elmendorf said.