Washington - The US government's deficit exceeded projections for the just-ended 2007-08 budget year, hitting a record 455 billion dollars, federal officials announced late Tuesday.

Treasury Secretary Henry Paulson and Jim Nussle, director of the Office of Management and Budget, issued a joint statement summarizing the government's revenues and spending for the 12 months through September.

The deficit represents 3.2 per cent of gross domestic product in the 14-trillion-dollar US economy.

The 2006-07 deficit was 161.5 billion dollars, or about 1.2 per cent of GDP.

The previous record deficit was 413 billion dollars in 2004.

Total 2008 federal spending was 2.98 trillion dollars, compared to 2.5 trillion dollars in revenue. Spending grew at a rate of 9.1 per cent from the previous year, the fastest increase since 1990.

"This year's budget results reflect the ongoing housing correction and the manifestations of that in strained capital markets and slower growth," Paulson said.

"We are taking aggressive actions to stabilize our financial markets and strengthen our financial institutions so they can finance economic growth. While it will take time to work through this period, we will overcome the current challenges facing our nation."

Since the start of the 2009 budget year on October 1, the US Congress has passed a "rescue" package for the troubled banking and financial sector that could reach 700 billion dollars, which could put the 2008 budget deficit well over 1 trillion dollars. Next year's deficit could dwarf the 1983 deficit of 6 per cent of GDP, which is the highest since World War II, when the United States ran up huge deficits as measured by the size of the economy.

Another 250 billion dollars is to spent buying stakes in major banks to inject cash into the financial system, the government announced Tuesday.

Both bail-out actions would see the government obtaining financial assets that might later be sold, creating an opportunity for at least some of the costs or even a profit to be recovered for taxpayers in the months and years to come.

A sharp economic slowdown tied to the ongoing financial crisis is likely to hurt federal tax revenues while increasing costs in social welfare programmes.

The swelling deficit reinforces the need to "pursue policies that promote economic growth and fiscal responsibility," Paulson said.

Nussle attributed the spike in the 2008 deficit to the slowing economy and economic stimulus legislation passed in February, which cost 152 billion dollars this year alone, much of it through tax credit checks sent to most individual taxpayers. (dpa)