WASHINGTON–As the coronavirus surges again in many areas of the United States, CUNA has revised its expectations for economic recovery and credit union performance, including a significant decline in earnings in 2021.
“We had expected a recession and recovery, but as we’ve seen a resurgence in COVID-19, it’s led to an increase in stay at home orders and more than likely a protracted recovery,” said CUNA Economist Jordan van Rijn. “Unfortunately, we don’t expect full economic recovery until a vaccine is widely available and there is some way to contain the virus, and that’s not expected until 2021.”
van Rijn, who had predicted in early 2019 the U.S. would see a recession within the next two years, although not due to a pandemic, said CUNA does expect Congress to step up with a new relief package within the next few weeks, although it’s likely to be significantly smaller than CARES Act.
Other Projections
CUNA’s updated economic forecast also notes:
- It’s likely GDP will fall 5.3% this year, up from CUNA’s earlier estimate of 2.9%.
- van Rijn said he does expect to see unemployment continue to fall, but probably at a slower pace. He forecast the unemployment rate at the end of 2020 will be 10%, which is the same as the peak during the Great Recession.
- Credit unions will likely see record asset and savings growth of 20% this year, up from the earlier forecast of 17% and 15%, respectively.
- Van Rijn said credit unions have also seen an increase in loan growth a bit faster than originally expected, mostly as the result of 13% growth in fixed-rate mortgages. As a result, CUNA has increased its forecast for loan growth to 6% from 3.5%, as auto lending has also picked up.
- CUNA is forecasting a deterioration in portfolio quality, but not to the point seen in The Great Recession.
- CUNA expects to see a “pretty significant” fall in CU earnings due in part to the increase in provisions and the decrease in interchange income, combined with low interest rates. The trade group is forecasting earnings will fall to 35 basis points in 2020 (down from 95 basis points in 2019) and will fall even further to just 10 basis points in 2021.