The U.S. economy is recovering faster than previously predicted, but the government will see a deficit of over $3 trillion again this year, the Congressional Budget Office (CBO) said on Thursday. 

The deficit is slightly lower than in the 2020 fiscal year, but higher than projected in the CBO's February estimates due to the massive stimulus program approved in March with the projected total "triple the shortfall recorded in 2019."  

"Relative to the size of the economy, this year's deficit is projected to total 13.4 percent of gross domestic product (GDP), making it the second largest since 1945," the nonpartisan agency said in its update. 

Meanwhile, federal debt is projected to rise to $23 trillion – nearly 103 percent of GDP, the report said. 

But with the surge in consumer demand and rapid employment gains in the second half of the year, CBO projects the economy will expand by 6.7 percent by this year – two percentage points higher than the February report. 

And GDP is expected to grow 5 percent in 2022. 

These improvements largely result from the nearly $4 trillion stimulus package enacted in March aimed at helping individuals and businesses avoid an even worse downturn due to pandemic restrictions. 

However, average annual growth is expected to slow in the second half of the coming decade to a below-average 1.6 percent "primarily because the labor force is expected to grow more slowly than it has in the past," the CBO said. 

The aging U.S. population is reducing the pool of available workers, a demographic change that will only accelerate. And economists point to signs that retirements have accelerated during the pandemic. 

But employment is still expected to surpass its pre-pandemic level in mid-2022, according to the CBO estimates. 

Unemployment will drop to 4.6 percent by the end of the year from 5.8 percent currently and closer to pre-crisis levels in 2022.