WASHINGTON—The Congressional Budget Office on Thursday lifted its forecasts for economic growth, inflation and federal budget deficits this year, following the $1.9 trillion Covid-19 relief package enacted in March.
Beyond 2021, however, the agency sees smaller deficits as a recovering economy boosts federal revenues. Forecasts for the federal debt are also slightly lower than in the February report. The federal debt will grow to 103% of the economy at the end of 2021 before dipping slightly between 2023 and 2025, CBO said.
The agency estimated real gross domestic product growth of 7.4% in the fourth quarter of 2021 compared with a year earlier, up from the 3.7% projected in February, when the CBO last issued updated projections on the federal budget and U.S. economy.
The agency also sees inflation accelerating by 2.8% in the fourth quarter from the previous year, before slowing to 2% in 2022, as measured by the personal-consumption expenditures price index. In February, before the enactment of the stimulus bill, the agency saw inflation accelerating by 1.7% this year.
The CBO’s deficit projection for this year is $3 trillion, more than it forecast in February but less than the $3.2 trillion deficit in fiscal year 2020.
