US government shutdown is expected to slightly dampen economic growth
(MENAFN) According to reports, the ongoing US government shutdown is expected to slightly dampen economic growth and increase uncertainty in the country’s outlook.
Analysts estimate that each week of a federal shutdown could trim gross domestic product (GDP) growth by around 0.1 to 0.2 percentage points. "This figure accounts mainly for direct costs and hence is a conservative estimate relative to the decrease, including hard-to-estimate indirect costs," the statement noted.
The projections are based on patterns observed in earlier shutdowns, with experts pointing out that part of the lost growth is usually offset when government employees receive back pay once the shutdown concludes.
The process of approving federal spending requires a simple majority in the House of Representatives and a 60-vote threshold in the Senate, meaning that bipartisan negotiations are necessary to reach a deal under the current distribution of seats.
Observers recalled that the 2013 shutdown, which lasted 13 days during former President Barack Obama’s second term, cut GDP growth in that year’s fourth quarter by an estimated 0.3 percentage points.
"It's important to note that the government shutdown is unrelated to the federal debt ceiling. The US debt limit was increased by $5 trillion in the July budgetary legislation passed under reconciliation. As a result, the government won't run out of borrowing capacity during the current shutdown," the statement added.
While the overall economic impact of shutdowns is generally considered limited, analysts cautioned that ripple effects could accumulate and pose greater risks the longer the closure continues.
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