(Reuters) - The U.S. budget deficit for fiscal 2022 will shrink to $1.036 trillion from $2.775 trillion in fiscal 2021 as a strong economic recovery from the COVID-19 pandemic produces a surge of tax receipts, the Congressional Budget Office said on Wednesday.
The CBO said in new economic and baseline budget forecasts based on current tax and spending laws that its fiscal 2022 deficit forecast is now $118 billion less than an estimate made last July. The government's fiscal year starts Oct. 1 and runs through Sept. 30.
The non-partisan fiscal referee agency also issued new economic forecasts, showing U.S. real GDP growth at a solid 3.1% for calendar 2022, driven by strong consumer spending, down from a sharp 5.5% rebound in 2021.
But CBO said that U.S. economic momentum would slow as the Federal Reserve hikes rates to control inflation, and forecast 2.2% growth for 2023 and 1.5% for 2024.
The CBO forecasts that inflation would remain elevated during 2022, in line with the strongest pace in 40 years, with the consumer price index increasing at 6.1% and the personal consumption expenditures index increasing at 4.0%, due to continued supply constraints in the face of high demand and a tight labor market.
Slowing economic growth also means that reductions in the deficit will reverse, CBO said. While it projected that the fiscal 2023 deficit will shrink slightly to $984 billion, deficits will rise in subsequent years, averaging about $1.6 trillion between 2023 and 2032, for a cumulative 10-year deficit of $15.74 trillion.
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