The Banking Executive Magazine - October 2023

The Wider Impact of Us Government Shutdown • Stock market: A government shut- down can cause uncertainty in the stock market and lead to a decline in stock prices. • Small businesses: Small businesses that rely on government contracts may be affected by a shutdown if they are unable to receive pay- ments from the government. • Tourism: National parks and muse- ums may close during a shutdown, which can affect tourism and re- lated industries. • Housing market: A shutdown can delay mortgage approvals and closings, which can affect the housing market. THE WIDER IMPACT The US government shutdown can have a negative impact on the coun- try's credit, according to Moody's. The shutdown could also cost the country's travel economy as much as $140 million per day. However, economists from Goldman Sachs ex- pect the shutdown to have no harm on US gross domestic product. A shutdown affects nearly every cor- ner of the US government, from the delivery of welfare cheques and pub- lishing of national economic data to the operation of federal courts, mu- seums and national parks. GOVERNMENT SHUTDOWNS AROUND THE WORLD Shutdowns are usually a result of po- litical disagreements and can happen in any country where there is a dem- ocratic system. Shutdowns can have a significant impact on the economy and people's lives, so it is important for governments to work together to avoid them. Government shutdowns are not unique to the US, but they are less common in other countries. In other countries, governments keep func- tioning even in the midst of wars and constitutional crises. For most of the world, a government shutdown is very bad news and it may be the re- sult of revolution, invasion or disas- ter. During COVID-19 pandemic coun- tries around the world have re- sponded in different ways and various types of shutdowns where imposed. RISK ON BANKS The impact of a government shut- down on banks is not direct. How- ever, it can have an indirect impact on banks and their customers. Dur- ing a government shutdown, public sector employees may not receive ISSUE 178 OCTOBER 2023 the BANKING EXECUTIVE 29