structural deficit

Syllable breakdown

Dictionary meaning

the portion of a government's fiscal deficit that persists even when the economy is operating at its potential (full employment) level, after removing the temporary effects of the business cycle on revenues and expenditures; the structural deficit reflects underlying imbalances between the long-run levels of government spending and tax revenue, and cannot be eliminated simply by economic growth returning to trend; distinguishing structural from cyclical deficits is important for fiscal sustainability analysis — a government with a large structural deficit faces a genuine long-term fiscal challenge, while one whose deficit is primarily cyclical may see it diminish as the economy recovers; structural deficit estimates depend on judgements about potential output that are uncertain and revisable