The US’ federal debt is projected to reach nearly twice the size of the economy in 2050, driven by the massive fiscal response to the Covid-19-induced recession, the Congressional Budget Office (CBO) said in a report.
“Even after the effects of the 2020 coronavirus pandemic fade, deficits in coming decades are projected to be large by historical standards,” Xinhua news agency quoted the report as saying on Monday, expecting the federal deficit to increase from 5 per cent of GDP in 2030 to 13 per cent in 2050.
The projected budget deficits will boost federal debt from 98 per cent of the GDP in 2020 to 195 per cent of GDP in 2050, just below twice the economy’s total size, according to the CBO.
“High and rising federal debt makes the economy more vulnerable to rising interest rates and, depending on how that debt is financed, rising inflation,” the report said, warning the growing debt burden also raises borrowing costs and increases the risk of a fiscal crisis.
The International Monetary Fund also warned in June that the US public debt is on an unsustainable path, and policy adjustments are needed to lower the fiscal deficit and to put public debt on a gradual downward path over the medium term.