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U.S. deficit in 2015 to drop to lowest level since 2007: budget office

Xinhua, January 27, 2015 Adjust font size:

U.S. deficit to gross domestic product (GDP) ratio in 2015 fiscal year will drop to the lowest level since 2007 thanks to the solid economic growth, according to estimates from the Congressional Budget Office (CBO).

In a statement released on Monday, CBO estimates the deficit will amount to 468 billion U.S. dollars in 2015 fiscal year, which runs from Oct. 1, 2014 to Sept. 30, 2015, slightly less than the 483-billion-dollar deficit in 2014. The deficit to GDP ratio will be 2.6 percent this year, the smallest since 2007 and close to the 2.7 percent that deficits have averaged over the past 50 years.

It projects the deficits will remain stable as a percentage of GDP through 2018 but will rise after 2018 as economic growth slows and health and retirement costs rise. The deficit in 2025 is projected to reach 1.1 trillion dollars, or 4 percent of GDP.

According to the statement, the CBO expects the U.S. economy to grow about 3 percent in 2015 and 2016 before slowing down slightly to 2.5 percent in 2017.

Increases in hourly compensation, rising wealth, the recent decline in oil prices, and household formation rate (as more people are more willing and able to set up new homes) will drive consumer spending, business investment and residential investment over the next few years, says the CBO.

It projects the unemployment rate will gradually decrease to 5. 3 percent in the fourth quarter of 2017 which is close to the expected natural rate of unemployment. In the fourth quarter of 2014, the rate stayed at 5.7 percent.

Along with the elimination of slack in the economy, the downward pressure on the U.S. inflation rate will be gradually reduced, says the CBO. It expects the price index for personal consumption expenditures will move up gradually and hit the Federal Reserve's 2 percent target in 2017 and beyond. Endite