US deficit forecast to widen as major economies face mounting fiscal pressure
The United States is projected to record a widening budget deficit in 2027, while Germany, France and Japan are also expected to face increased pressure on their public finances, according to the latest figures supplied.
The projections point to differing fiscal paths among five major developed economies, with the UK forecast to narrow its deficit while the others are expected to run larger budget gaps.
The US deficit is projected to reach 6.1 per cent of gross domestic product (GDP) in 2027, according to the figures. This would place it above the projected deficits of the UK, Germany, France and Japan.
Germany’s deficit is forecast to rise from 2.7 per cent of GDP in 2025 to 4.1 per cent in 2027. The increase is linked in part to plans for higher public investment and defence spending, alongside tax relief measures, according to the European Commission’s economic forecast.
Japan’s deficit is projected to increase from 0.7 per cent of GDP in 2025 to 2.5 per cent in 2027, while France’s budget gap is forecast to widen to 5.2 per cent of GDP.
The UK is the only country in the comparison expected to improve its fiscal position, with its deficit projected to narrow from 4.3 per cent of GDP in 2025 to 3.1 per cent in 2027. The International Monetary Fund has urged the UK to maintain its deficit-reduction plans amid pressure from higher borrowing costs and spending demands.
Budget deficits occur when governments spend more than they receive in revenue over a given period, requiring them to borrow to cover the shortfall. They are different from public debt, which accumulates over time as governments borrow to finance deficits and meet other obligations.
Deficits can help governments fund infrastructure, public services and economic support. However, persistent borrowing can increase debt-servicing costs, particularly when interest rates are high, leaving governments with less room to respond to future economic shocks.
The projections should be treated as forecasts rather than settled outcomes. Economic growth, tax receipts, spending decisions and changes in borrowing costs can all affect the final figures. The International Monetary Fund also notes that its fiscal estimates can differ from official national figures because of differences in data and methodology.
The figures point to continuing pressure on public finances across several major economies, although the scale and causes of that pressure differ from country to country.
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