The parliamentary budget officer says the federal deficit isn't as deep for now as the government expects, largely because the Liberals haven't been able to spend infrastructure money fast enough.

The report released this morning says the federal budget is on track to be $20.5 billion in the red this fiscal year, compared to the $25.1 billion deficit Finance Minister Bill Morneau projected in his November economic update.

The $4.6 billion difference is largely attributed to slower than expected infrastructure spending.

The report also pegs growth in real gross domestic product in 2016 at 1.3 per cent, up one-tenth of a percentage point from projections in the fall, on the back of better-than-expected revenues from exports and more government spending in the first half of last year.

The budget watchdog's report estimates that nominal GDP, the broadest single measure of the tax base, surpassed $2 trillion last year.