For the third straight year, the federal budget deficit diminished in fiscal 2007, dropping to $162.8 billion, according to figures released Thursday.

During the early years of the Bush administration the deficit grew steadily, peaking in fiscal 2004 at $412.7 billion, or 3.6 percent of gross domestic product. Since then it has declined each year, with the fiscal 2007 figure standing at 1.2 percent of GDP, which economists say is the best way to measure the relative size of the deficit.

The deficit for the fiscal year that ended Sept. 30 was down 34 percent from the $248.2 billion deficit in fiscal 2006.

The White House took credit for the improved deficit picture, calling it evidence that President Bush’s economic policies are working.

“This year’s budget results further demonstrate how the president’s tax relief, combined with spending discipline, has helped promote a sustained economic expansion, which led to revenue growth, and resulted in a declining deficit,” White House Budget Director Jim Nussle said in a statement.

Democrats continued to dismiss the administration’s claims about the declining annual deficits, pointing out that the nation’s overall debt has grown under Bush’s presidency.

“The fact is that the nation’s debt has exploded under [President Bush’s] watch — rising by $3 trillion since 2001, to $9 trillion today,” Senate Budget Committee Chairman Kent Conrad, D-N.D., said in a statement. “And now the president calls for more spending on Iraq and more tax cuts for the wealthiest and refuses to pay for any of it.”