US economy set for solid growth, shrinking deficit: Congressional Budget Office

WASHINGTON (AFP) - The United States is expected to post solid economic growth of more than 3.0 percent through 2016, accompanied by a shrinking deficit, a government agency said Tuesday.

The Congressional Budget Office, the nonpartisan analysis arm of Congress, said in its latest report that the federal government's tax and spending policies would not constrain economic growth as much as they had in fiscal 2013, which ended Sept 30.

And state and local governments were expected to increase spending after several years of budget tightening, the CBO said.

In its economic and budget outlook report for 2014 to 2024, the CBO predicted growth in gross domestic product (GDP) at 3.1 per cent this year and 3.4 per cent in 2015 and 2016.

But growth would fall to 2.7 per cent in 2017 and continue to slow "to a pace that is well below the average seen over the past several decades," largely because of slower growth in the labour force due to the aging population and mild inflation under 2.0 percent for the next several years.

The CBO predicted the unemployment rate would end this year at 6.7 per cent, unchanged from December 2013.

The federal budget deficit was expected to continue to fall this year and the next before rising through the decade.

The deficit, which stood at 4.1 per cent of GDP in 2013, was seen falling to 3.0 per cent of GDP this year - at US$514 billion (S$653 billion) - and 2.6 per cent in 2015.

"That pattern of lower deficits initially and higher deficits for the rest of the coming decade would cause federal debt to follow a similar path," the CBO said.