Deficit definition

A deficit is a shortfall that arises when outgoings exceed incomings over a set period, such as spending above revenue or imports above exports. The entity running a deficit has to fund the gap from borrowing, reserves, or outside support.

A budget deficit happens when a government, business, or household spends more than it earns in a period. A trade deficit happens when a country imports more goods and services than it exports. Either kind adds to borrowing needs and the interest costs that come with them.

A deficit is not the same as debt. A deficit is the shortfall for a single period; debt is the running total owed from all past borrowing, so repeated deficits build up debt over time. The opposite of a deficit is a surplus, where incomings exceed outgoings.