US federal budget deficit forecast to hit $3.3tn this year

Stimulus measures to limit the economic damage caused by Covid-19 will push the shortfall to the equivalent of 16% of GDP

The deficit forecast of $3,3tn by the non-partisan CBO is lower than the $3.7tn initially estimated in April, but does not include a further potential stimulus package of up to $1tn. Getty Images

The non-partisan US Congressional Budget Office on Wednesday said the federal budget deficit for fiscal 2020 will hit $3.3 trillion (Dh12.1tn), or 16 per cent of gross domestic product, down from its April 24 preliminary estimate of $3.7tn.

Federal deficits were projected to fall to $1.8tn in the fiscal year beginning October 1, the CBO said, and will total $13tn over 10 years.

So far this year, more than $3tn in emergency coronavirus pandemic aid has been enacted into law.

These huge federal outlays have caused a surge in this year's already large deficit and federal debt.

CBO's latest forecast does not include another round of coronavirus aid that Congress might consider, which could exceed $1tn. Deep disagreements among lawmakers have slowed work on that measure.

The $3.3tn budget deficit this year, if realised, would be more than triple the shortfall recorded in 2019. And a budget deficit at 16 per cent of GDP would be the largest since 1945.

Meanwhile, federal debt held by the public is projected to rise sharply, to 98 per cent of GDP in 2020, compared with 79 per cent at the end of 2019 and 35 per cent in 2007, before the start of the previous recession, CBO said.