A huge U.S. fiscal deficit from the first two years of COVID-19 spending should decline rapidly to near pre-pandemic levels, largely due to a rebound in economic growth, analysts at Morgan Stanley said on Thursday.
In a research note, the investment bank’s economists predicted the debt-to-gross domestic product ratio should decline 7 percentage points in 2022, after reaching the highest level since World War Two during the pandemic. Real growth will contribute about 6 percentage points and inflation a similar percentage, offset by interest expenses and primary deficit spending.