The US government has been partially “shut down” for the longest period in American history. The measure came into force shortly before Christmas because Trump could not secure funding for his controversial border wall project, which was a key campaign pledge. The economic damage from the shutdown is now estimated to be higher than originally anticipated, according to the White House.
The original estimate the partial shutdown would subtract 0.1 of a percentage point from growth every two weeks has now been doubled to a 0.1 percentage point subtraction every week, according to a Trump administration official.
The new forecast means the cost of the shutdown is likely to be twice as much as anticipated.
Mark Zandi, chief economist at Moody’s Analytics, forecasted a half a percentage point hit to US GDP if the shutdown lasts throughout March, roughly a third of the administration’s new estimate.
Mr Zandi said: “We estimate the shutdown will reduce first-quarter real GDP growth by approximately 0.5 percentage points.
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“Of this, about half will be due to the lost hours of government workers, and the other half to the hit to the rest of the economy.”
As a result of the crisis shutdown, hundreds of thousands of government workers have gone without pay, with scores of federal institutions such as national parks closed off to the public.
On day 25 of the longest-ever US government shutdown, 800,000 federal employees have gone without pay with many missing their first pay check last week.
With no immediate end to the political standoff in sight, the Trump administration now believes the impact doubles, due to greater losses from private contractors also out of work and other government spending and functions that won’t occur.
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The change is due to greater losses from private contractors also out of work and other government functions that have been halted, CNBC reports.
If the shutdown lasts the rest of the month, it could subtract a sizeable half a percentage point from gross domestic product, the White House official said.
The growth subtraction would add to the troubles of an already struggling economy thought to be slowing due to the impact of waning tax stimulus, trade tensions and gathering global weakness.
The administration’s estimate is more aggressive than some forecasts from Wall Street economists.
Those estimates have centred around a 0.1 percentage point cut to growth every two weeks.