{"id":53497,"date":"2025-10-01T04:54:09","date_gmt":"2025-10-01T04:54:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/53497\/"},"modified":"2025-10-01T04:54:09","modified_gmt":"2025-10-01T04:54:09","slug":"why-a-us-government-shutdown-could-shake-the-world-economy","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/53497\/","title":{"rendered":"Why a US government shutdown could shake the world economy"},"content":{"rendered":"

What happens in US shutdown<\/p>\n

A shutdown doesn\u2019t mean America stops functioning. The military still runs, Social Security cheques still go out, and law enforcement remains in place. But \u201cnon-essential\u201d government staff are furloughed\u2014forced to stay home without pay. Others must work without salaries until Congress agrees on a budget.<\/p>\n

The impact builds week by week. Economists estimate that each week of shutdown trims about 0.1% off US quarterly economic growth. In 2018\u201319, a 35-day shutdown\u2014the longest in history\u2014shaved off around 0.4% of output. Once workers return and receive back pay, much of that loss is clawed back.<\/p>\n

Markets have also proved resilient. Since 1976, the S&P 500 has actually risen in the year after shutdowns. In the last major episode, stocks climbed more than 10%.<\/p>\n

So why the concern this time?<\/p>\n

US economic voes at wrong time<\/p>\n

The timing makes this showdown more dangerous. The US economy is already flashing warning signs:<\/p>\n

Job creation has slowed sharply.<\/p>\n

Inflation has remained stubbornly high.<\/p>\n

Consumer confidence is fragile.<\/p>\n

Crucially, a shutdown would halt the release of key data like the monthly jobs report. That matters because the Federal Reserve relies on those numbers to decide whether to cut or raise interest rates. Without data, the Fed is steering blind at a moment when it is juggling inflation pressures with a weakening labor market.<\/p>\n

In normal times, this would be a nuisance. In fragile times, it\u2019s riskier.<\/p>\n

Ripple effects for global markets<\/p>\n

The US dollar and Treasury bonds are global reference points. They anchor everything from oil pricing to emerging market borrowing costs. In past shutdowns, both have been relatively stable\u2014but short bursts of volatility can occur.<\/p>\n

Here\u2019s what could happen:<\/p>\n

Oil: A weaker dollar can lift crude prices. For oil exporters like the UAE, that boosts revenue but risks higher global inflation.<\/p>\n

Markets: Investors may briefly move into \u201csafe havens\u201d like gold or bonds. Equities, historically, have shrugged off shutdowns.<\/p>\n

Credit rating: While a shutdown doesn\u2019t mean the US defaults, rating agencies have warned about America\u2019s fiscal position. Any downgrade would rattle global markets.<\/p>\n

Confidence: The bigger danger is psychological. If businesses and consumers worldwide see Washington unable to govern, it chips away at trust in the world\u2019s largest economy.<\/p>\n

Why UAE readers should care<\/p>\n

For the UAE, the link is direct.<\/p>\n

Oil, the region\u2019s key export, is priced in US dollars. Dollar swings affect revenue and budget planning.<\/p>\n

Investors in Dubai and Abu Dhabi are tied to global market sentiment. A sharp sell-off in New York often ripples into the Gulf.<\/p>\n

The UAE dirham is pegged to the dollar. Any shift in US monetary policy\u2014complicated further by shutdown uncertainty\u2014feeds directly into UAE interest rates.<\/p>\n

In short: while a shutdown may not crash the global economy, it can stir turbulence at a sensitive time.<\/p>\n

The real likelihood?<\/p>\n

Shutdowns in the US are not rare. Since 1977, there have been 20. The average one lasts just over a week. Lawmakers usually patch things up quickly.<\/p>\n

But the politics today are more polarised than ever. If the stalemate drags on, the risks grow. For now, most analysts still expect limited economic damage\u2014unless this shutdown breaks records.<\/p>\n

\"Justin<\/a><\/p>\n

Justin is a personal finance author and seasoned business journalist with over a decade of experience. He makes it his mission to break down complex financial topics and make them clear, relatable, and relevant\u2014helping everyday readers navigate today\u2019s economy with confidence. <\/p>\n

Before returning to his Middle Eastern roots, where he was born and raised, Justin worked as a Business Correspondent at Reuters, reporting on equities and economic trends across both the Middle East and Asia-Pacific regions. <\/p>\n","protected":false},"excerpt":{"rendered":"What happens in US shutdown A shutdown doesn\u2019t mean America stops functioning. The military still runs, Social Security…\n","protected":false},"author":2,"featured_media":53498,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,65,219,111,139,69,11233],"class_list":{"0":"post-53497","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-donald-trump","10":"tag-economy","11":"tag-new-zealand","12":"tag-newzealand","13":"tag-nz","14":"tag-uae-economy"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/53497","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=53497"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/53497\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/53498"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=53497"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=53497"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=53497"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}