The US budget deficit will decline slightly to $468 billion this fiscal year, the lowest level since President Barack Obama took office, congressional forecasters said on Monday in a report heralding the end of a brief period of dramatically shrinking red ink.

The deficit, down sharply from the $1 trillion-plus levels of Obama's first four years and a $483 billion gap in fiscal 2014, will stay largely flat in 2016 but then begin a steady march upward due to rising costs for servicing the national debt and caring for the fast-retiring Baby Boom generation.

Estimates by the Congressional Budget Office kick off what promises to be a contentious budget debate in Washington this year, as Republicans now in control of Congress seek to eliminate deficits within 10 years with cuts to social safety net programs while lowering tax rates and boosting military spending.

Meanwhile, President Obama and his Democrats have proposed a range of new spending and tax breaks aimed at helping middle class Americans and setting the agenda for the 2016 presidential election.

The CBO report shows that the respite in deficits will be relatively short-lived, giving policy makers less breathing room to ease spending constraints or provide tax relief.

"Today's CBO report is a sober reminder of the fiscal and economic challenges we face as a nation," Republican House Budget Committee Chairman Tom Price said in a statement. "If nothing is done, we will continue down an unsustainable path full of rising annual deficits that will add to an already $18 trillion debt. Our vital health and retirement programs will continue to grow further toward insolvency."

Relative to the size of the US economy, the federal deficit after 2018 will be back above its 50-year average of 2.7 percent of gross domestic product, reaching 4.0 percent, or $1.1 trillion by 2025, a level many economists view as unsustainable.

In 2015, CBO said increased revenues generated by a strengthening US economy will be partly soaked up by a one-year retroactive extension of several business tax breaks by Congress.

The non-partisan budget referee agency also said it does not expect massive economic growth during the 10-year budget window, with real GDP growth peaking at 3 percent in 2016, then slowing to 2.1 percent in 2018-2019 as retiring Baby Boomers constrain the growth of the labor force.