WASHINGTON – The US economy is recovering faster than previously predicted, but the government will see a deficit over US$3 trillion (RM12.5 trillion) again this year, the Congressional Budget Office (CBO) said yesterday.
The deficit is slightly lower than in the 2020 fiscal year, but higher han projected in the CBO’s February estimates due to the massive stimulus program approved in March with the projected total “triple the shortfall recorded in 2019.”
“Relative to the size of the economy, this year’s deficit is projected to total 13.4% of gross domestic product (GDP), making it the second-largest since 1945,” the non-partisan agency said in its update.
Meanwhile, federal debt is projected to rise to US$23 trillion – nearly 103% of GDP, the report said.
But with the surge in consumer demand and rapid employment gains in the second half of the year, CBO projects the economy will expand by 6.7% by this year – two percentage points higher than the February report.
And GDP is expected to grow 5% in 2022.
These improvements largely result from the nearly US$4 trillion stimulus package enacted in March aimed at helping individuals and businesses avoid an even worse downturn due to Covid-19 pandemic restrictions.
However, average annual growth is expected to slow in the second half of the coming decade to a below-average 1.6% “primarily because the labour force is expected to grow more slowly than it has in the past,” the CBO said.
The aging US population is reducing the pool of available workers, a demographic change that will only accelerate. And economists point to signs that retirements have accelerated during the pandemic.
But employment is still expected to surpass its pre-pandemic level in mid-2022, according to the CBO estimates.
Unemployment will drop to 4.6% by the end of the year from 5.8% currently and closer to pre-crisis levels in 2022. – AFP, July 2, 2021
