US economy, US Government Shutdown

The five-week partial shutdown of the United States government has cost the North-American country $11 billion, a report by the country’s Congressional Budget Office disclosed on Monday.

The report shows despite the resumption of economic activities in the United States, the multi-billion dollar loss won’t be recovered throughout the year 2019, stating it will impact economic growth.

The United States had entered a government shutdown after a disagreement between President Donald Trump and the House of Representatives over funding a border wall which Trump included in his budget.

In a CNN report, delayed paychecks, reduced working hours, and stalled contracts led to a loss of about $11 billion in gross domestic product over the five-week shutdown, which started on December 22, 2018, and ended on January 25, 2019.

Breakdown of shutdown impact on US economy

In CBO’s estimation, the shutdown dampened economic activity mainly because of the loss of furloughed federal workers’ contribution to GDP, the delay in federal spending on goods and services, and the reduction in aggregate demand (which thereby dampened private-sector activity).

It was reported that about $8 billion will be recovered as workers return, but $3 billion or 0.02% of gross domestic product in 2019 will never be recovered, according to the CBO.

For the last quarter of 2018, which only saw about a week of reduced activity, the level of GDP will be about $3 billion or 0.1% lower than expected, and the annualised growth rate will be 0.2% lower. For the first quarter of 2019, the level of economic output will be about $8 billion lower than expected or 0.2%. The growth rate will be 0.4% lower.

Most of that is expected to be regained through faster growth later this year, the report notes.

CBO’s note on the economic cost of the shutdown

CBO stated that the shutdown action will likely reflect on the productivity of government workers, impacting their quality of work. CBO Director Keith Hall in a briefing with reporters also noted that if the shutdown had prolonged beyond five weeks, the negative effects would have increased.

“When you do this sort of thing, you affect the morale of federal workers, and it may have an impact on the quality of federal workers going forward.

“The risks to the economy were becoming increasingly significant as the shutdown continued.

“Although their precise effects on economic output are uncertain, the negative effects of such factors would have become increasingly important if the partial shutdown had extended beyond five weeks.” hall said

Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: fakoyejo.olalekan@nairametrics.com.

1 COMMENT

  1. The few days shut down will surly cost alot of economic breakdown when there is low activities that will propagate alot of financial buy and sell activities .
    These will be either at merchant financial institutions or banks most introducinly afiliates.

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