US crisis may trickle down

[NewsWhore]

Government officials have recently been trying to allay fears that the Dominican economy is not well prepared to handle any trickle-down effect from the financial crisis affecting the US economy. Nonetheless, economists Arturo Martinez Moya and Guillermo Caram don't agree with the assurances provided by government officials. Both economists are urging the government to take preventive measures and reduce public spending as a way of preparing for any possible fallout. Economist Isidoro Santana explains that the crisis has yet to affect developing nations, but says it is difficult to ever determine how that crisis could affect the DR. Martinez Moya criticized President Leonel Fernandez's optimism at the UN General Assembly, and said that Fernandez's statements demonstrate a lack of understanding of financial issues. According to Martinez Moya, quoted in Hoy, the crisis is already being felt in the DR as some Dominican banks have already received notices from US banks to pay off certain percentages of their outstanding loans. As the US crisis deepens, their ability to get loans will be reduced and the need to pay loans will become a priority for US banks. According to Caram, the recent Central Bank report on the Dominican economy proves the instability the nation is facing. Caram says that during the first part of the year the DR had a fiscal surplus, but a recent Central Bank report reveals that the country is facing a deficit three times greater than the previous surplus. Caram says the crisis could affect two key pillars of the Dominican economy: remittances and tourism.
On the other hand, there has been a marked influx of US dollars into Dominican banks for deposits in dollars, or exchange into pesos.

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