Too early to know Wall Street fallout in Caribbean

Published: Monday September 22, 2008

ECONOMIC analysts in New York are saying that Barbados and other Caribbean islands have to wait to see how last week’s Wall Street stock market turmoil will affect their economies.

“It is much too early to say how it is going to impact on Barbados and other Caribbean countries,” said Richard Francis, a senior economic analyst at Standard & Poor’s, the major credit rating firm on Wall Street.

“We may have a clear indication in the next couple of weeks basically. There are some major financial institutions with question marks around them, such as AIG, the insurance giant, and Washington Mutual, the commercial bank. So, we have to wait and see what happens with those as well. As far as the Caribbean nations are concerned we simply have to be patient and see what the overall knock-down effect would be on the economies.”

Francis, who monitors the Barbados economy, said, “It's clear that many of the financial institutions are under pressure, their earnings were down and they need to raise a lot of capital. They have been somewhat successful in that.”

The analyst pointed out that the absence of many major American banks from the Caribbean may be working in favour of the island nations.

“This situation has happened pretty quickly and (US) banks don’t have a large presence in the Caribbean.

“So, it’s not going to have a direct impact that way. We believe the (US) is moving towards a recession but we have to wait and see how deep and long that recession is going to be. That ultimately is going to have the greatest knockdown effect on the Caribbean.”

Interestingly, he said another related aspect of the crisis, the fall in oil prices, could help Barbados and other regional countries, but may hurt oil-rich T&T.

The current situation was triggered with the collapse of Lehman Brothers, a major Wall Street investment bank for more than a century. Its decision to file for bankruptcy and the refusal of the US government to step in and save it created considerable uncertainty within the financial markets, triggering a massive sell-off in shares.

In addition, Merrill Lynch Pierce Fenner & Smith, perhaps the world’s largest stock brokerage firm that had sustained immense losses, was taken over by Bank of America.


Source: Trinidad Guardian Newspapers
http://www.guardian.co.tt/business1.html