The United States' gross domestic product is expected to fall 12 percent in the second quarter of 2020 as a result of the novel coronavirus pandemic, the Congressional Budget Office said in a Friday blog post.
A 12 percent drop is equivalent to an annual rate decline of 40 percent for the second quarter, the CBO said.
The federal deficit is also expected to reach $3.7 trillion for fiscal year 2020, and federal debt held by the public is projected to be 101 percent of the GDP by the end of the year, according to CBO's projections.
"The economy will experience a sharp contraction in the second quarter of 2020 stemming from factors related to the pandemic, including the social distancing measures put in place to contain it," CBO Director Phil Swagel wrote in the blog post.
He added that in the third quarter, economic activity should increase as COVID-19 fears subside and state and local governments ease stay-at-home policies.
"However, challenges in the economy and the labor market are expected to persist for some time. Interest rates on federal borrowing are expected to remain quite low in relation to rates in recent decades," he said.
The CBO in January estimated a $1 trillion deficit for 2020 despite a healthy economy. Projections exceeded $1 trillion for the first time since 2012 when President Obama completed his second four-year term with more than $1 trillion in budget deficits.
The pandemic came on top of heavy spending and several tax repeals in 2019.
U.S. unemployment is also expected to reach a high of 14 percent during the second quarter as a result of the pandemic that forced millions of businesses to shutter and lay off employees.
The Labor Department reported Thursday that by April 18, total job losses reached more than 26 million, erasing the entirety of the 22.78 million labor market gains since the Great Recession more than a decade ago.
With a labor force that totals about 162 million people, the claims figures suggest the unemployment rate is about 16 percent, or roughly one in six Americans — significantly higher than the 10 percent peak seen during the 2008 financial crisis.
Just before the COVID-19 outbreak struck the U.S., the unemployment rate was at an all-time low and had been for several previous quarters. In December, the unemployment rate was 3.5 percent.
FOX Business' Megan Henney contributed to this report.