In 2023, economic activity is projected to stagnate, with rising unemployment and falling inflation. In 2022, the economy’s output (gross domestic product, or GDP) grew modestly, inflation continued at a high rate, the Federal Reserve sharply increased interest rates, and the labor market was tight, with many more job vacancies than available workers. (That initial assessment, which was based on proposals under discussion in early December, is 4 percent lower than CBO’s current estimate of total discretionary funding for fiscal year 2023.) The economic projections cover such key variables as economic output, inflation, interest rates, and conditions in the labor market. CBO’s economic projections reflect several factors: economic developments as of Decemthe assumption that current laws governing federal taxes and spending generally remain in place and CBO’s initial assessment of full-year discretionary funding for the federal government for fiscal year 2023. This report summarizes the Congressional Budget Office’s February 2023 economic projections, which the agency used in updating its projections of federal revenues and spending through 2033. The projections of output, prices, labor market measures, interest rates, and income used for the Congressional Budget Office’s budget projections are available on CBO’s website ( The Economic Outlook for 2023 to 2033 in 16 Charts Numbers in the text and charts may not add up to totals because of rounding. Unless this report indicates otherwise, all years referred to are calendar years.
(A recession extends from the peak of a business cycle to its trough.) In addition, some of the charts use shaded vertical bars to indicate periods of recession. Some of the charts portray the difference in underlying data by using thin lines for actual values before 2023 and thick lines for projected values and by showing a break between those lines. The historical data shown in the charts and discussed in the text reflect more recent fourth-quarter data available from the Bureau of Economic Analysis and other sources in early February 2023. The economic projections described in this report reflect economic developments and information available as of December 6, 2022. CBO has increased, on average, its projections of short- and long-term interest rates over the next five years, mostly because it has raised its near-term projections of inflation since May. However, CBO is now projecting much faster growth of nominal GDP in the 2024–2026 period than it did last May after 2026, growth rates for nominal GDP are roughly similar to those in the May projections.
(That growth reflects both inflation and the growth of real GDP-that is, GDP adjusted to remove the effects of inflation.) Since May 2022, when CBO published its previous baseline projections, the agency has lowered its projection of the growth of nominal GDP in 2023 from 4.5 percent to 3.1 percent. The unemployment rate is projected to increase from 3.6 percent at the end of last year to 5.1 percent at the end of 2023 before gradually declining to 4.5 percent by the end of 2027.ĬBO’s projections for the federal budget depend in part on the agency’s projection of the growth of nominal GDP.Interest rates on Treasury securities are projected to rise further in early 2023 and then gradually fall beginning in late 2023.The annual growth of that price index is projected to remain above the Federal Reserve’s long-term goal of 2 percent through 2024 and then fall near to that goal by 2026. Inflation was higher in 20 than in any other years of the previous four decades: 5.7 percent and 5.5 percent, respectively, as measured by the price index for personal consumption expenditures.Output is projected to start growing again during the second half of 2023 as falling inflation allows the Federal Reserve to reduce interest rates, causing rebounds in sectors of the economy that are sensitive to interest rates. Economic output (gross domestic product, or GDP) is projected to stop growing early this year in response to last year’s sharp rise in interest rates.This report summarizes-with an emphasis on graphic presentation-the information about CBO’s economic forecast that was published in The Budget and Economic Outlook: 2023 to 2033 (February 2023). The Congressional Budget Office regularly publishes its baseline projections of what the federal budget and the economy would look like in the current year and the following 10 years if current laws governing federal taxes and spending generally remained unchanged.
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