Coronavirus pandemic expected to batter South Carolina economy, new report reveals
The COVID-19 pandemic will likely cause a steeper but shorter economic decline in South Carolina than the 2008 Great Recession or the aftermath of the 2001 terrorist attacks, a top state analyst said Thursday.
Compared to earlier forecasts, South Carolina's tax revenues are projected to plunge by $507 million, or 15.5%, during the next three-and-half months before starting to level off, said Frank Rainwater, executive director of the state Revenue and Fiscal Affairs Office.
During the 2008 economic downturn, state revenues fell 6.6% in a 12-month period. Revenues dipped 3.3% in the year after the Sept. 11, 2001, terrorist attacks in New York City, Washington, D.C., and Pennsylvania.
Still, the ongoing pandemic may cause a $49.3 billion reduction in economic activity in South Carolina and trim personal income growth by 44%, according to a report that Rainwater and his office's top economist presented Thursday afternoon during a teleconference with the state Board of Economic Advisors.
The report's assessment is based on an assumption that the national gross domestic product will decline by 20% from April to June.
Revenues from the state's income tax are expected to fall by $359 million and sales-tax collections will likely drop by $101 million before June 30, according to the report, which offers a first look at how the pandemic may affect South Carolina's economy.
Rainwater said personal incomes likely will stagnate until January before growing annually at 2.5%, below an earlier projection of 4.5%.
He also said projections could change based on how long the threat from the pandemic affects economic activity.
"We are kind of flying in the dark here," he said.
Thursday's report was released hours after the state Department of Employment and Workforce announced that 180,928 workers have filed for unemployment benefits in the past three weeks.
As recently as last month, state legislators believed they had a $1.9 billion budget surplus for next year as a result of the state's healthy economy.
The proposed $9.6 billion general fund spending plan passed by the state House of Representatives on March 11 included $213 million to provide teachers with a $3,000 annual raise and a one-time $100 income-tax credit for the state's residents.
Eight days later, the Bureau of Economic Advisors issued a rosy report summarizing economic conditions from February that touted "strong consumer confidence."
But all of that has changed as a result of COVID-19, which has led to a statewide stay-at-home order and the closure of nonessential businesses ranging from barbershops to department stores.
"Our economy has been decimated by this unfortunate virus," Rep. Murrell Smith told lawmakers Wednesday. The Republican from Sumter is chairman of the budget-writing House Ways and Means Committee. "Right now this is an ever-changing landscape."
But things could be worse.
The report prepared by Rainwater's office predicted that federal stimulus spending will help ease the economic damage from COVID-19 in South Carolina.
Edward Grimball, chairman of the Board of Economic Advisors, said the strength of the state's economy before the pandemic also is a silver lining.
“If there is a positive to be found, it is that South Carolina is in a strong financial position to withstand this disruption,” he said.
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