US budget deficit to shrink this year

THE US budget deficit is expected to dip in fiscal year 2017 but expand later in the decade, the nonpartisan Congressional Budget Office said in a report on Tuesday that showed President Donald Trump inheriting a tricky longterm deficit picture.

The CBO projected the deficit to fall slightly to $559bn in fiscal year 2017 compared to $587bn a year earlier, and it was seen lower still in 2018 at $487bn. After that, according to the CBO, deficits are expected to grow steadily due to costs associated with the retiring baby-boom generation.

The CBO also forecast US real gross domestic product growth in calendar year 2017 at 2.3 per cent, slowing to 2 per cent in 2018.

Swelling deficits will be a challenge for Trump and congressional Republicans after many in the party for years advocated budget restraint. Trump has promised tax cuts, new infrastructure projects, and a military expansion plan projected to cost hundreds of billions of dollars.

During his presidential campaign, Trump promised to slash government spending elsewhere but never detailed where the cuts would occur. He signed an executive order on Monday imposing a federal government hiring freeze.

The CBO said the dip in projected deficits in 2017 was partly due to a quirk in the calendar in which the first day of the fiscal year fell on a weekend, meaning some payments were shifted.