US Government Forecasts Deficit to Stay Under 3% of GDP Until 2018

Solid economic growth over the next few years should help keep the annual federal deficit at a very modest level until 2018. But after that, the deficit will start growing again.

That’s according to the Congressional Budget Office’s latest 10-year budget and economic outlook released Monday.

The CBO projects the deficit for this fiscal year will be $468 billion, or 2.6% of GDP. That’s just slightly lower than where it was in fiscal 2014.

Going forward, the deficit – which reflects the gap between how much the government spends and how much it takes in – is projected to remain at or below 2.6% as a share of the economy until 2018. Thereafter, the CBO expects it to gradually grow to 4% by 2025.

Three reasons were cited for the projected increase in the deficit after 2018. The CBO said it anticipates real growth in the economy will fall below the average growth rate seen in the 1980s and 1990s. At the same time, spending on the major entitlement programs – including Social Security, Medicare and health insurance subsidies – as well as interest on the country’s debt are projected to grow faster than the gross domestic product.

via CNN

via SOURCE

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza