US fiscal outlook has some alarming points - Goldman Sachs

Joshua Gibson FXStreet

Goldman Sachs' analysts delivered a weekend note on the United States' fiscal outlook, which carries some worrisome projections looking forward.

Key highlights

The US fiscal outlook is not good.

We project the federal deficit will increase from $825bn (4.1% of GDP) to $1,250bn (5.5% of GDP) by 2021. By 2028, we expect it to rise to $2.05 trillion (7.0% of GDP) in our baseline scenario.

We believe the risks are tilted in the direction of larger deficits than projected.

A recession would widen the deficit and boost the debt/GDP ratio.

An expanding deficit and debt level is likely to put upward pressure on interest rates, expanding the deficit further.

A chronic deficit in the range of 6-7% of GDP in the next decade would imply a cumulative boost of around 70bp over time.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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