By David Morgan

WASHINGTON (Reuters) - The U.S. budget deficit is expected to grow to $590 billion in fiscal year 2016 due to slower than expected growth in revenues and higher spending for programs including Social Security and Medicare, the Congressional Budget Office said on Tuesday.

The estimate, which is $56 billion larger than CBO's forecast in March, shows the deficit increasing in relation to economic output for the first time since 2009. CBO said the deficit is expected to be $152 billion higher than in 2015 and will equal 3.2 percent of economic output.

The deficit peaked at $1.4 trillion in 2009 and shrank to $485 billion in 2014.

The nonpartisan research agency also said that debt held by the public will amount to nearly 77 percent of gross domestic product by the end of 2016, three percentage points higher than last year and its highest ratio since 1950.

The 2016 federal fiscal year ends Sept. 30.

Revenues have increased by less than 1 percent in 2016, while government outlays are predicted to rise by 5 percent as a result of mandatory spending for Social Security and Medicare, the federal retirement and healthcare programs for the elderly.

The CBO said the forecast indicates tepid U.S. economic growth of only 1 percent for the first half of calendar year 2016 but predicted the economy would expand more robustly in coming months and create growth of 2 percent for the year and 2.4 percent for 2017. Faster growth will spur hiring, increase wages and put upward pressure on inflation and interest rates.

But over the next 10 years, CBO said economic output would be restrained by a relatively slow increase in the U.S. labor supply.

(Reporting by David Morgan; Editing by Chizu Nomiyama and Alistair Bell)