LONDON (REUTERS) - The United States economy will shrink 5.5 per cent in 2020, the steepest drop since 1946, with a huge 38 per cent contraction predicted for the second quarter, Morgan Stanley said on Friday (April 3) in a new batch of forecasts on the economic damage from the coronavirus outbreak.

The US bank said it had cut its first-quarter forecast to an annualised 3.4 per cent contraction from a previous 2.4 per cent, while in the second quarter the economy is predicted to shrink 38 per cent, up from an earlier forecast of a 30 per cent contraction.

US unemployment will also peak at a record 15.7 per cent in the second quarter - that is up from a previous 12.8 per cent forecast by the bank's economists - with cumulative job losses of 21 million in the second quarter, Morgan Stanley said.

Projections released by the US Congressional Budget Office showed US gross domestic product will decline by more than 7 per cent in the second quarter as the health crisis intensifies.