Immigration restrictions on skilled immigration during Trump’s first term drove an uptick in skilled immigration to Canada. This inflow was associated with Canadian firms expanding in both domestic and foreign markets. @AgosBrinatti
By the end of 2018, there was a decrease of 140,000 H-1B approvals (relative to trend) and an unprecedented spike in H-1B denial rates. Denial rates increased from about 6% in 2016 to 16% in 2018. Our event-study estimates imply that a 10 percentage point increase in H-1B denial rates increases Canadian applications by 30%. A back-of-the-envelope calculation suggests that for every four forgone H-1B visas, there is an associated increase of one Canadian application. We find that firms that were relatively more exposed to the immigrant inflow increased sales. Consistent with the increase in production, we find that a firm hired approximately 0.5 additional native workers per new immigrant. We also find that the earnings per native worker at relatively more exposed firms dropped. This result together with the fact that more exposed firms are intensive in occupations that were more impacted by U.S. restrictions, is consistent with earnings per native worker in more affected occupations declining compared to less affected ones.
.@GoldmanSachs forecasts a 6% total return for the S&P 500 in 2024, with the Magnificent 7 growing sales at a CAGR of 11% vs. 3% for the rest of the S&P 500.
The massive outperformance of the “Magnificent 7” mega-cap tech stocks has been a defining feature of the equity market in 2023. The stocks should collectively outperform the remainder of the index in 2024. The 7 stocks have faster expected sales growth, higher margins, a greater re-investment ratio, and stronger balance sheets than the other 493 stocks and trade at a relative valuation in line with recent averages after accounting for expected growth. However, the risk/reward profile of this trade is not especially attractive given elevated expectations. Analyst estimates show the mega-cap tech companies growing sales at a CAGR of 11% through 2025 compared with just 3% for the rest of the S&P 500. The net margins of the Magnificent 7 are twice the margins of the rest of the index, and consensus expects this gap will persist through 2025.
Torsten Sløk @apolloglobal draws parallels between the current P/E of the Magnificent 7 and similar ratios from the 2000 tech bubble and the 1972 Nifty Fifty.
The divergence between the S&P7 and the S&P493 continues. Investors buying the S&P 500 today are buying seven companies that are already up 80% this year and have an average P/E ratio above 50. In fact, S&P7 valuations are beginning to look similar to the Nifty Fifty and the tech bubble in March 2000.
.@JohnHCochrane argues dollarization is the closest Argentina can likely get to an independent central bank. He notes that Argentina will need a way to access dollars.
Precommitment is, I think, the most powerful argument for dollarization (as for eurorization of, say, Greece): A country that dollarizes cannot print money to spend more than it receives in taxes. A country that dollarizes must also borrow entirely in dollars and must endure costly default rather than relatively less costly inflation if it doesn't want to repay debts. Ex post inflation and devaluation is always tempting, to pay deficits, to avoid paying debt, to transfer money from savers to borrowers, to advantage exporters, or to goose the economy ahead of elections. If a government can precommit itself to eschew inflation and devaluation, then it can borrow a lot more money on better terms, and its economy will be far better off in the long run. An independent central bank is often advocated for precommitment value. Well, locating the central bank 5,000 miles away in a country that doesn't care about your economy is as independent as you can get!
.@Brad_Setser finds “With reasonable adjustments, China’s ‘true’ current account surplus might be $300B larger than China officially reports,” or around $800B.
[In the official reports] both the goods surplus, which is much smaller in the balance of payments than in the customs data, and balance on investment income, which remains in deficit even with the rise in U.S. interest rates, are suspicious. With reasonable adjustments, China's “true” current account surplus might be $300 billion larger than China officially reports. That's real money, even for China. The model implies China's overall income balance should now be back in a surplus of around $70 billion thanks to the rise in U.S. short-term interest rates. So without the unexplained deficit in investment income and the discrepancy between customs goods and balance of payments goods, and China’s current account surplus would now be around $800 billion, over 4 percent of its GDP.
Han Feizi argues China’s deepening pool of human capital will offset demographic drag. 40% of China’s college graduates are STEM majors. Given current graduation rates, by 2043 China will have more STEM-educated workers than the rest of the world.
At the turn of the century, China produced one million college graduates. This represented 6% of the age cohort which we calculate by dividing graduates by births 24 years prior (the average age at college graduation is 23.7 in China). This has increased dramatically to 11.6 million graduates for the class of 2023, 63% of the age cohort. Over 40% of China’s college graduates are STEM majors. This compares to 18% in the US, 35% in Germany, and 26% in the OECD. While we await graduation statistics for 2024 and beyond, we believe recent university expansions have enrolled an additional 3 million students per year since 2017, taking them out of both the job and family formation market until graduation. This just so happens to coincide with both the sudden decline in births and the increase in youth unemployment.
Japan achieved GDP growth per working-age adult of 31.9% between 1998 and 2019, slightly faster than the US at 29.5%. @King_ofSweden
Due to population aging, GDP growth per capita and GDP growth per working-age adult have become quite different among many advanced economies over the last several decades. Countries whose GDP growth per capita performance has been lackluster, like Japan, have done surprisingly well in terms of GDP growth per working-age adult. Indeed, from 1998 to 2019, Japan has grown slightly faster than the U.S. in terms of per working-age adult: an accumulated 31.9% vs. 29.5%. Furthermore, many advanced economies appear to be on parallel balanced growth trajectories in terms of working-age adults despite important differences in levels. Motivated by this observation, we calibrate a standard neoclassical growth model in which the growth of the working-age adult population varies in line with the data for each economy. Despite the underlying demographic differences, the calibrated model tracks output per working-age adult in most economies of our sample. Our results imply that the growth behavior of mature, aging economies is not puzzling from a theoretical perspective.
A @GoldmanSachs forecast argues the FOMC will not moderate the pace of balance sheet reductions until late 2024. They write that the reduction is “likely already anticipated by financial markets” and therefore fully reflected in current rates.
We continue to expect the Fed’s balance sheet runoff to have modest effects on interest rates, broader financial conditions, growth, and inflation. Our rule of thumb derived from a range of studies is that 1% of GDP of balance sheet reduction is associated with a roughly 2bp rise in 10-year Treasury yields. In total, our projections for runoff imply that balance sheet normalization will have exerted around 20bp worth of upward pressure on 10-year yields since runoff started. Together with our rule of thumb that a 25bp boost to 10-year term premia from balance sheet reduction has roughly the same impact on financial conditions and growth as a 25bp rate hike, this implies that the total runoff process should have the effect of a little under one rate hike.
.@FedGuy12 writes that a recent SEC proposal for mandatory repo clearing will likely reduce Treasury liquidity by increasing the cost of repo.
The Fed’s recent Treasury market conference offered three notable insights that suggest Treasury market liquidity will continue its structural decline. First, dealer balance sheet constraints have moved from ones that could be solved through central clearing to those that would require other adjustments. Secondly, mandatory Treasury repo clearing may reduce market liquidity by raising the cost of financing due to higher collateral haircuts. Lastly, mutual funds may not become significant marginal investors in cash Treasuries as regulations encourage them to invest using Treasury futures. The official sector appears to be making adjustments that will make it more difficult for the market to absorb the upcoming deluge of Treasury issuance. At a high level, cash Treasuries can be held by investors using borrowed money or cash investors. The leveraged investors are more nimble participants as cash investor participation depend on asset inflows or the liquidation of other asset holdings. Going forward it looks like the costs of leveraged financing will increase due to mandatory cleared repo and a limited supply of repo financing that is constrained by regulatory costs. Major investors that could participate in the cash market remain incentivized to instead use Treasury futures. The Treasury market looks to continue its trend of becoming less liquid and more volatile.
10.5mm unauthorized immigrants lived in the US in 2021, under the 2007 peak of 12.2mm. This represented about 3% of the total U.S. population and 22% of the foreign-born population, among the lowest shares since the 1990s.
The unauthorized immigrant population in the United States reached 10.5 million in 2021, according to new Pew Research Center estimates. That was a modest increase over 2019 but nearly identical to 2017. The number of unauthorized immigrants living in the U.S. in 2021 remained below its peak of 12.2 million in 2007. It was about the same size as in 2004 and lower than every year from 2005 to 2015. The U.S. foreign-born population was 14.1% of the nation’s population in 2021. That was very slightly higher than in the last five years but below the record high of 14.8% in 1890. As of 2021, the nation’s 10.5 million unauthorized immigrants represented about 3% of the total U.S. population and 22% of the foreign-born population. These shares were among the lowest since the 1990s.
.@verdadcap uses Gross Profits/Assets as a proxy for quality, and notes that there has been a sharp deterioration in quality for US small caps. Chris Satterthwaite writes that foreign small caps have similar quality but lower price than US small caps.
Examined our favorite quality metric, gross profit/assets (GP/A), over time by sector for “small” US companies, which we define as between $400M and $4B in market cap today, or the equivalent percentile rank by market cap historically. We made the decision to exclude the health-care industry entirely given the significant proliferation of unprofitable pharma and biotech stocks, which tripled in proportion from 5% of small stocks in 1995 to 16% of stocks in 2021. We were curious whether the degradation in quality still held once we excluded this mix shift impact. The chart below shows the contribution to aggregate small-cap US GP/A by sector (e.g., IT GP/A multiplied by IT proportion of total market cap). Most notable is the broad-based decline in quality from the early 2010s to today. The most impacted sectors include IT, consumer discretionary, and industrials. We find it notable that US large caps trade at a premium to the rest of the world, while the median US small cap stock.
The self-reported work ethic of US high school seniors has plummeted: 54% of 18-year-olds were willing to work overtime at the start of 2020. This dropped to 36% by 2022, the lowest level in the 46-year history of the survey. @jean_twenge
What was each generation’s work ethic like when they were young? Nationally representative surveys like Monitoring the Future can show us this – it has asked U.S. 12th graders, most of whom are 18 years old, about their work attitudes since 1976. Up until a few years ago, the work ethic news was positive for Gen Z (those born 1995-2012, and 18 years old 2013-2030). After declining from Boomers to Millennials, work ethic made a comeback among Gen Z 18-year-olds in the 2010s. Until it didn’t. The number of 18-year-olds who said they wanted to do their best in their job “even if this sometimes means working overtime” suddenly plummeted in 2021 and 2022. In early 2020, 54% of 18-year-olds said they were willing to work overtime. By 2022, it was 36%. That’s a (relative) drop of 33% in just two years.
Robert Barro and @Francesco_Bia find that 40-50% of pandemic-era OECD government financing came from the effect of unexpected inflation on the real value of public debt, consistent with the fiscal theory of the price level.
We show for a sample of 21 economies—20 non-Euro-zone OECD countries and an aggregated version of 17 Euro-zone countries—that headline and core inflation rates in 2020-2022 responded positively to a theory-motivated government-spending variable. This variable includes cumulated increases in spending-GDP ratios divided by the pre-pandemic level of the debt-to-GDP ratio and by the average duration of the outstanding debt. In contrast, across 17 Euro-zone countries, differences in the government-spending variable do not generate significant differences in inflation rates. We also find in the sample of 21 economies that, while positive and statistically significant, the coefficient that gauges the response of the inflation rate to the scaled measure of government spending is significantly less than one, the value predicted when all of the extra spending is “paid for” through surprise inflation. The point estimates of coefficients of 0.4-0.5 suggest that 40-50% of the extra spending was financed through inflation, whereas the remaining 50-60% was paid for through the more conventional method of intertemporal public finance that involves increases in current or prospective government revenue or cuts in prospective future spending.
.@ojblanchard1 writes that the rapid and unexpected move up in rates means that advanced economies will need to move towards primary balance quickly to avoid an explosion of debt-to-GDP ratios.
Stabilizing the debt ratio implies reducing primary deficits to zero. For both economic and political reasons, there is no way governments can do this quickly. A drastic, immediate consolidation would most likely be catastrophic, both economically in triggering a recession, and politically, by increasing the share of votes going to populist parties. In the United States, where the primary deficit is around 4 percent and (r - g) looks positive at this point, the challenge is even stronger. And, given the current budget process dysfunction, one must worry that the adjustment will not take place any time soon. Thus, the debt ratio is likely to increase for quite some time. We have to hope that it will not eventually explode.
.@FedGuy12 argues the bond bear market is likely to resume, as issuance remains at a historical high, the Fed has left the market, and private demand looks weak.
The share of bills is set to gradually rise next year, but the trajectory of the increase may not be aggressive enough to support the market. Under Treasury Borrowing Advisory Council’s recommendation, the amount of new money raised next calendar year through coupons would be around $1.8t. Assuming $2.5t in privately held borrowing for 12 calendar months, net bill issuance next year looks to be around $700b. This would take some pressure off the market by increasing the share of bills to around 22% of marketable debt outstanding. A recession and rate cuts would likely boost Treasury demand, but current U.S. economic strength suggests they are more likely to occur later next year after the market is forced to digest a significant amount of issuance. The more likely sequence may be a sharp rise in yields that then leads to both a recession and rate cuts, which together finally create strong demand for Treasuries.
Gerald Auten and David Splinter have updated their income inequality estimate and find that the after-tax income share of the top 1% in the US has been steady since the 1960s, disproving Piketty-Saez-Zucman’s claims otherwise.
Using administrative tax data in combination with the Survey of Consumer Finances and other data sources, this paper develops new estimates of the distribution of income in the U.S. since the 1960s. Our analysis examines levels and trends in all parts of the distribution in addition to top income shares. Our estimates for pre-tax income, based on distributing total national income, show that the top one percent share declined from 11.1% to 9.4% from 1962 to 1979 and then increased to 13.8% by 2019. Viewed over the full period, the top share increased by only 3 percentage points. While our pre-tax income measure includes labor and investment income, it provides an incomplete picture of economic resources available to individuals. A broader measure that includes Social Security benefits and other transfers lowers top one percent shares and results in a smaller increase. Our estimates for after-tax income indicate that the top one percent share increased only 1.4 percentage points since 1979 and only 0.2 percentage points since 1962.
.@Brad_Setser finds that aggregate foreign demand for US bonds is in line with or above the post-crisis mean, but forecasts, “the bulk of new note issuance will need to be absorbed domestically (and obviously the Fed is adding to net supply)”
There is a lot of interest in foreign demand for US Treasuries (and US bonds generally) these days, given the scale of forthcoming issuance. And in aggregate foreign demand for US bonds has actually been pretty strong, in line or above the post-global crisis norm. The higher frequency data from the Fed (and now the Treasury) based on the valuation-adjusted monthly survey data tells the same story -- solid overall demand, with a modest shift toward Agencies in the last 12ms. Treasury demand appears to be coming largely from private investors -- which makes sense given that reserve growth has been weak and Treasuries offer an absolute yield pickup. China on net has sold Treasuries in the last 12ms of data even adjusting for Belgium/Euroclear. Foreign demand for long-term Agencies has been quite strong -- and China was a net buyer there over the last 12ms of data.
Nominal wage gains are running ahead of the pre-pandemic period and are now in line with the pre-crisis period and the late 1990s according to @M_C_Klein. He notes wage growth has slowed without an increase in unemployment.
The biggest source of underlying inflationary pressure in the U.S. economy—unusually rapid wage growth—has been receding rapidly in recent months, although not by enough (yet) for policymakers to be confident that they are on track to reaching their 2% yearly inflation goal. The question is whether this process will continue, and if not, what that would mean for interest rates. American workers’ wages are still rising faster than in the decade before the pandemic, but the pace of increases has slowed sharply and is now comparable to the late 1990s and 2006-2007. So far, wage growth has slowed substantially without much increase in joblessness or precarity. That is good news for workers, as well as a welcome vindication for those of us who believed that much of the outsized pay gains in 2021H2-2022H1 were one-offs associated with job market churn, reset expectations of working conditions, and sectoral shifts. The question is whether the slowdown we have already experienced is sufficient to satisfy Fed officials—and if not, what it would take for wage growth to slow even more.
Bridgewater analysis finds the US economy is close to a sustainable equilibrium, but equity earnings yields vs. bonds may indicate poor future equity returns.
The short-term interest rate is a key variable in managing these conditions and is once again the central bank’s primary policy lever (since interest rates are far enough above zero). The central bank pulls the lever in order to steer the economy toward equilibrium. This is challenging when you start from a major disequilibrium because policy actions affect changes in spending, output, and inflation with significant lags (the process can take years), and in the meantime, markets are responding to central bank actions and having their own impact on the path of the economy. Recently, equity yields have changed little as bond yields have risen significantly, such that equity pricing has moved further from equilibrium. The last time we were here was 2000, which was followed by a decade of poor equity returns.
According to new Census Bureau projections, the US population will stop growing by 2080 at 370mm and start to shrink by 2100. Nigeria and Pakistan are expected to be more populous than the US around mid-century.
Slowing growth would produce a peak U.S. population of almost 370 million before an ebb to 366 million in the final years of the century, according to the bureau. The projections outline a nation growing slowly compared with recent decades. Annual growth rates have fallen from 1.2% in the 1990s to 0.5% today and would fall to 0.2% by 2040. Small differences add up through compounding: The projected U.S. population in 2040 is 355 million, 25 million fewer than projected for that date in 2015. The difference is more than the current population of Florida. In 2022, preliminary data showed the U.S. birthrate was about 19% lower than in 2007. Death rates remain about 9% higher than 2019, the last year before the pandemic. By 2038, deaths would exceed births under the most likely scenario.
Noting for the past 15 years R < G, @MarcGoldwein argues that in a world where R > G, at current debt stocks and primary deficits, the US will face a debt spiral.
Debt Sustainability = When national debt grows slower than gross domestic product (GDP) or expected to stop growing before getting too high. Average interest rate on government debt (R) describes the growth of current debt, while G the average growth rate of U.S. economy represents its erosion (relative to GDP). When R<G, debt may be sustainable even when non-interest spending exceeds revenue. When R<G, one-time borrowing has little effect on long-term debt-to-GDP. For the last 15 years, R has been below G.
Enrico Moretti, Michel Serafinelli and @GagliarL show that, among cities worldwide that were hit by shocks that caused a decline in manufacturing, those that had a high share of college-educated workers recovered faster.
We study the employment consequences of deindustrialization for 1,993 cities in six countries: France, Germany, Italy, Japan, the United Kingdom, and the United States. We focus on former manufacturing hubs—defined as Local Labor Markets that in the year of their country’s manufacturing peak have a manufacturing employment share in the top tercile of their country’s distribution. While on average former manufacturing hubs lost employment after their country’s manufacturing peak, a surprisingly large share in each country was able to fully recover. We find that in the two decades before the relevant country’s manufacturing peak, cities with a high share of college-educated workers experienced a similar rate of employment growth as those with a low share of college-educated workers. By contrast, in the decades after the manufacturing peak, the employment trends diverge: cities with a high initial share of college-educated workers experience significantly faster employment growth.
US college graduates earn 40% more than their British counterparts despite comparable skill levels. @jburnmurdoch argues that this is driven by “much higher and more lucrative demand” for talent in the US economy relative to the UK.
Britons who left the education system at 18 without a degree were paid an average of £14 an hour in 2022 (about $18 after adjusting for price differences). Their US counterparts earned only marginally more, at $19 an hour. Last year [British graduates’] median hourly earnings were £21, or just over $26. US graduates pocketed almost $36 an hour. On the eve of the global financial crisis 15 years ago, British graduates made just 8% less than US grads; that gap has ballooned to 27%. Across most of Britain, more than a third of graduates are working in jobs that do not require a degree — even in London, the figure is 25%. America has mountains of highly lucrative and skilled jobs chasing the best candidates, while Britain has mountains of skilled candidates chasing a small number of world-class graduate employment opportunities.
Analysis by the UN projects that by 2050, 35% of the world’s population aged 15-24 will live in Africa, up from 23% in 2023.
In 1950, Africans made up 8% of the world’s people. A century later, they will account for one-quarter of humanity, and at least one-third of all young people aged 15 to 24, according to United Nations forecasts. The median age on the African continent is 19. In India, the world’s most populous country, it is 28. In China and the United States, it is 38. Within the next decade, Africa will have the world’s largest work force, surpassing China and India. By the 2040s, it will account for two out of every five children born on the planet. Adjusted for population size, Africa’s economy has grown by 1 percent annually since 1990, according to the global consulting firm McKinsey & Company. Over the same period, India’s grew 5% per year and China’s grew 9%.
Denmark is seeking to better integrate non-Danes into Danish society by demolishing social housing in neighborhoods with low income, low education, high unemployment, and high criminal convictions where at least half of the population is non-Western.
The housing plan was announced in 2018 by a conservative government, but it only started to take a tangible form more recently. It was part of a broader package signed into law that its supporters vowed would dismantle “parallel societies” by 2030. Among its mandates is a requirement that young children in certain areas spend at least 25 hours a week in preschools where they would be taught the Danish language and “Danish values.” The law mandates that in neighborhoods where at least half of the population is of non-Western origin or descent, and where at least two of the following characteristics exist — low income, low education, high unemployment, or a high percentage of residents who have had criminal convictions — the share of social housing needs to be reduced to no more than 40% by 2030. That means more than 4,000 public housing units will need to be emptied or torn down. At least 430 already have been demolished.
Since 1960, older Americans have increased their consumption relative to younger Americans. @petercoy, citing arguments by @Kotlikoff, writes that this has likely lowered domestic investment.
The horizontal axis is age, from birth to 85-plus. The vertical axis compares consumption at each age with the average labor income of people ages 30 to 49 in that year. So, for example, people age 40 in 2021 had total consumption of 0.7, which is to say around 70 percent of average labor income for people ages 30 to 49. The last data point in each chart covers all ages 85 and up, not just age 85. (That’s why there’s such a jump in 2021 from age 84.) Here’s why that matters for the economy: When a larger share of resources are in the hands of the elderly — those eager to spend sooner rather than later — the economy’s saving rate, which provides funds for new investment, drops.
In response to higher wages associated with the pandemic, the US restaurant sector has significantly improved productivity: from a 1.2%/year rate from 2014-20, productivity jumped 21% in 2021 and has retained most of those gains. @foxjust
It does seem as if employers in the sector have made peace with having fewer workers — and not unreasonable to think that higher minimum wages are playing some role in their calculations. The shock of the pandemic and the accompanying labor shortages allowed for and in many cases required a rethinking of how to do business in a way that the pre-pandemic wage increases did not, and restaurants overall appear to have found a way to do this with less labor. The best measure of this is real output per hour worked, aka labor productivity. After years of little to no growth at full-service restaurants, it rose at a 1.2% annualized rate from 2014 to 2020, then jumped 21% in 2021. It receded a little last year, but most of its gains are still intact.
China is offsetting reduced exports to the US and Europe with exports to the rest of the world, especially Brazil, Russia, India, and South Africa.
Chinese factories are replacing Western chemicals, parts, and machine tools with those from home or sourced from developing nations. China’s trade with Southeast Asia surpassed its trade with the U.S. in 2019. China now trades more with Russia than it does with Germany, and soon will be able to say the same about Brazil. German and Japanese automakers like Volkswagen and Toyota now account for about 30% of China’s auto market, down from almost 50% three years ago, as Chinese brands have expanded, according to the China Association of Automobile Manufacturers. U.S. imports from China in mid-2018 accounted for as much as 22% of all its imports. In the 12 months through August, that had shrunk to 14%, according to Census Bureau data, though in dollar terms bilateral trade has grown.
Firms that benefited from the corporate tax cuts in the 2017 Tax Cuts and Jobs Act responded with increased investment relative to firms that were not impacted, according to @gchodorowreich @omzidar Eric Zwick and Matthew Smith.
This paper combines administrative tax data and a model of global investment behavior to evaluate the investment and firm valuation effects of the Tax Cuts and Jobs Act (TCJA) of 2017. We have five main findings. First, the TCJA caused domestic investment of firms with the mean tax change to increase by roughly 20% relative to firms experiencing no tax change. Second, the TCJA created large incentives for some U.S. multinationals to increase foreign capital, which rose substantially following the law change. Third, domestic investment also increases in response to foreign incentives, indicating complementarity between domestic and foreign capital in production. Fourth, the general equilibrium long-run effects of the TCJA on the domestic and total capital of U.S. firms are around 6% and 9%, respectively. Finally, in our model, the dynamic labor and corporate tax revenue feedback in the first 10 years is less than 2% of baseline corporate revenue, as investment growth causes both higher labor tax revenues from wage growth and offsetting corporate revenue declines from more depreciation deductions. Consequently, the fall in total corporate tax revenue from the tax cut is close to the static effect.
According to IMF estimates, eurozone cumulative deficits will fall to 3.4% of GDP in 2023, relative to 6.3% in the US. Aside from Italy, the crisis-era PIGS are running even lower deficits, ranging from 1.6% in Greece to 0.2% in Portugal.
The IMF expects combined deficits of eurozone governments will fall to 3.4% of GDP this year from 3.6% in 2022, and further to 2.7% in 2024. Those countries that were in crisis a decade ago are expected to have much smaller budget gaps. In Greece, the deficit is forecast to fall to 1.6% of GDP from 2.3% last year, while Portugal’s is expected to fall to 0.2% of GDP from 0.4%. Ireland is forecast to have a budget surplus for the second straight year. Italy and France, among others, continue to have deficits of roughly 5% of GDP.