Thursday, October 02, 2008

Premier Forecasts Long-Term Effects of US Financial Issues on BVI Economy

While the U.S. government tries to minimize the effects of large-scale financial crisis on its citizens, BVI proves to be one of the countries whose economy can also be affected by the problems in the U.S. financial system. However, by words of Hon. Ralph T. O’ Neal, Premier and Minister of Finance, the BVI has not yet been afftected because its commercial banks have not been involved to the sub-prime crisis and subsequent credit. Financial Services Commission has not reported any fallout because of the financial crisis in the U.S.

The Premier noted that BVI economy, based on tourism and financial services sectors, is highly dependent on the US and Europe. BVI tourism is more dependent sector, while financial services are dependent just to some extent, because largest part of BVI financial business comes from Asia, which is also the major market for incorporation of offshore business companies.

Ralph O'Neal said that the BVI government is concerned over the long term effects, because “given the depth of the financial crisis the BVI's financial services industry could also be affected.” He noted that the financial crisis has already resulted in the U.S. economy recession, and the recessions in the United Kingdom and Europe are very probable, followed by unemployment and inflation.

The recession can affect consumer and business confidence, spending and financing, which directly impact the economy of the BVI. Premier O'Neal also explained that “the global credit crunch could affect the Government's ability to secure overseas financing and borrowing locally could hamper private investment.”

In the beginning of this week, investors still expected larger bank turmoil, and banks continued to put aside cash. The Federal Reserve and other Central Banks of the U.S. are working on measures to make billions available to troubled banks, and solve the financial problem that continues to move ahead.

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