This Year’s US Fiscal Deficit Hits 2600 Trillion Won... 7% of GDP

This year, the United States' fiscal deficit is projected to reach 7% of its Gross Domestic Product (GDP).

On the 18th (local time), the Congressional Budget Office (CBO) estimated the fiscal deficit for this year at $1.9 trillion (approximately 2,624 trillion won) in its "2024-2034 Budget and Economic Outlook Update." This figure is 27% higher than the $1.5 trillion (approximately 2,072 trillion won) forecasted by the CBO in February.

The CBO expects the U.S. fiscal deficit to increase to $2.8 trillion (approximately 3,867 trillion won) by 2034. Accordingly, the deficit-to-GDP ratio is projected to be 7.0% in 2024 and 6.9% in 2034. Philip Swagel, Director of the Congressional Budget Office, stated, "When comparing the total fiscal deficit of $24 trillion from 2024 to 2034 to economic output, it is about 70% higher than the historical average over the past 50 years."

The reasons for the upward revision of this year's fiscal deficit include the student loan forgiveness policy, increased costs related to Medicaid for low-income groups, and delayed recovery of bank bailout costs by the Federal Deposit Insurance Corporation (FDIC).

Additionally, the CBO raised the cumulative deficit forecast for 2025-2034 by $2.1 trillion (10%) compared to the February outlook. This is due to the recent passage in Congress of a $95 billion security assistance bill for Ukraine, Israel, and the Indo-Pacific region.

The CBO expects the U.S. economic growth rate to slow to 2.0% this year, down from 3.1% last year. However, this is a 0.5 percentage point upward revision from the 1.5% forecast made in February. The economic growth rate is expected to remain at 2.0% in 2025 and then decline to 1.8% in 2026 and beyond, according to the CBO.

Regarding the timing of interest rate cuts, the Federal Reserve (Fed) is expected to begin lowering rates early next year.