The U.S. will fall into recession in 2013 if federal spending cuts and tax hikes are automatically put in place, the Congressional Budget Office says in a new report today.
The CBO estimates the economy could shrink as much as 0.5 per cent if the fiscal cliff is hit.
The non-partisan agency estimates that U.S. GDP could grow 1.7 per cent if leaders in Congress are able pass provisions to maintain current spending and tax levels.
Below, key highlights from the new CBO report.
Economic Outlook for Fiscal 2013 If We Go Over Fiscal Cliff :
- Unemployment will rise to 9 per cent by Q4 2013
- GDP will shrink by 0.5 per cent in 2013
- The deficit will shrink to $641 billion in fiscal 2013 — roughly 4.0 per cent of projected GDP
- Inflation will remain low in 2013
The CBO also released its alternative scenario for Fiscal 2013 if the fiscal cliff is not hit and spending cuts are not automatically put in place:
- Unemployment will fall to 8 per cent by Q4 2013
- GDP will grow by 1.7 per cent in 2013
- The deficit will shrink to $1 trillion from $1.1 trillion in 2012