CBO warns of rising US budget deficit; projects $1.5 trn for 2023

16 May '23

2 min read

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US' Congressional Budget Office (CBO) has raised its 2023 federal budget deficit forecast to $1.5 trillion, $100 billion more than February's estimate, due to low revenue collections.
The report also warns that annual deficits could nearly double to $2.7 trillion by 2033, increasing the projected cumulative deficit for 2024-2033 to $20.2 trillion.

US’ Congressional Budget Office (CBO) has revised its federal budget deficit projection for 2023, now forecasting a shortfall of $1.5 trillion, $100 billion more than its February estimate. The 2023 deficit estimate is shrouded in uncertainty, largely due to lower-than-expected revenue collections reported in April and could significantly impact total revenues for fiscal 2023, ending on September 30.

The final outlay could also differ substantially from the CBO's current projections, largely contingent on a Supreme Court case concerning the cancellation of outstanding student loan debt, CBO said in a report titled ‘An Update to the Budget Outlook: 2023 to 2033’.

Looking ahead, the CBO’s updated projections show annual deficits nearly doubling over the next decade, surging to $2.7 trillion by 2033. This figure has been adjusted to exclude the effects of shifts in the timing of certain payments when the fiscal’s first day, October 1, falls on a weekend. Despite this, the projected cumulative deficit for the 2024-2033 period remains steady at $20.2 trillion, consistent with the CBO's February forecast.

Expressed in relation to the size of the economy, deficits are predicted to grow from 6 per cent of GDP next year to 6.9 per cent in 2033, significantly exceeding their 50-year average of 3.6 per cent of GDP. These projections highlight the urgent need for effective fiscal policy measures to address the burgeoning deficit and ensure long-term economic stability, the report said.

As a result of those deficits, debt held by the public also increases in CBO’s projections, from 98 per cent of GDP at the end of this year to 119 per cent at the end of 2033.

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