While the economic effects of the COVID-19 crisis will be substantial, CUNA economists expect the fallout to be concentrated in the second quarter of 2020 and short-lived—assuming social distancing and other measures slow the spread of the coronavirus, and the virus doesn’t make a significant return later in the year.

Significant changes to CUNA’s previous forecast include:

• The 2020 economic growth forecast was revised down from 1.8% to -2.25%.
• Unemployment is now expected to peak at 6.5% in the third quarter before settling at 6% at year-end 2020.
• The federal funds rate will end the year at 0% to 0.25%, compared to the previous expectation of a target range of 1.50% to 1.75%.
• Savings will grow 12%, up from a previously forecasted 8%.
• Loan growth will slow to 3.5%, down from the 5.5% baseline in the earlier forecast.
• Membership growth will reach only 1.5%, down from 2.5%.
• Delinquencies will be higher than suggested in our earlier forecast, reflected in an increase from 0.7% to 1%.
• Expectations for earnings rates have been lowered, with return on assets now expected to total 0.5%, down from 0.8% in our previous forecast.

While no credit union is immune to financial disruption, those serving vulnerable populations and members employed by affected industries, plus smaller credit unions with less diversified portfolios, will be most affected by the downturn, says Mike Schenk, CUNA’s chief economist and deputy chief advocacy officer.

“Most credit unions have strong balance sheets and are very well-capitalized,” he says. “For many credit unions, the best course of action is to avoid overreacting and to let their capital do its work. If there was ever a need to allow capital ratios to fall to meet member needs and preserve the credit union, this is it.”

Visit cuna.org/economics for the complete forecast.

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