The Tribune

By AVA TURNQUEST

Tribune Staff Reporter

aturnquest@tribunemedia.net

AFTER four days with no pay for 800,000 US federal government workers, another former finance minister yesterday expressed concern over the trickle-down impact on the Bahamian economy.

Economist Sir William Allen warned that a prolonged federal government “shutdown” will ultimately impact tourism and foreign direct investment.

His comments echo statements by CFAL Chairman James Smith to Tribune Business earlier this week. Mr Smith warned that consumer spending would be the first to feel the effects of a drop in the US economy and disposable income.

Sir William said: “Initial impact will not be severe, but of course if it goes on for a while, for a couple days or months, it will get serious because it will affect financial markets and it will affect the wealth of a lot of people.

He said: “Once you begin to affect their wealth, you’re gonna feel the impact pretty heavily, not only from tourism, but from the investment side as well.

At midnight on Tuesday, the US government partially shut down for the first time in 17 years, after Congress failed to agree measures to continue funding basic services.

The federal government is the United States’ largest employer. Only federal employees, who are considered essential, will continue working. Those deemed non-essential – more than 800,000 – will be furloughed, unsure when they’ll be able to work or get paid again.

According to the international press, the shutdown could cost the still-struggling US economy about $1 billion a week in pay lost by furloughed federal workers.

According to the Congressional Research Service, the two previous government shutdowns – in late 1995 and early 1996 – cost the country $1.4 billion.

Sir William said: “With tourism it’s mainly hotels and travel that would be the first thing (impacted) because as people lose jobs, a lot of people that come here are working, if they lose their jobs they’re not travelling, their discretionary income is gone.

“When it becomes very worrisome for us is when it affects financial markets, and the influence to affect foreign direct investment, that could be very worrisome for us. Foreign direct investment is how we balance our payments – and we haven’t been balancing our payments.”