Economist Frederic Emam Zade says that the DR will recover from the present crisis. In an interview with Hoy newspaper, Emam Zade explains that economic history shows no recession has lasted more than three years, and he says that in the past 50 years the country has suffered 10 recessions with only one lasting three years. Others were for durations of one or two years. The renowned economist expects the present recession to last two to three years, of which one is already behind us. Emam Zade is optimistic that by next year the country will be on the way out of the economic slump. Emam Zade traces the origins of the present crisis, which he has described as “stagflation”, to the government’s implementation of the fiscal reform package in January 2001, despite the red flags waved by many economists, Emam Zade included. The significant increase in taxes on the productive sectors caused a negative effect on growth. Parallel to penalizing of the business sector, the government went on a borrowing spree to finance increasing public spending. The debt taken on by the government from local banks displaced the private sector, making loans scarce and causing an increase in interest rates, and leading to the eventual liquidity crisis. The slowdown in the economy, plus the high interest rates and elevated taxes caused a solvency crisis in the private sector, with companies falling into default with the banks, of which the most vulnerable was Baninter, regardless of its internal institutional weaknesses.
Emam Zade feels that the government is combating the present crisis by giving it the same medicine that caused the malaise in the first place. “What got us into this situation was the increase in taxes and to confront the problem what the government is doing is raising them more,” said Emam Zade. He said if the government wants to correct the problem, it needs to change its economic policies. Emam Zade is in charge of economic development projects at the Global Foundation for Democracy and Development (FUNGLODE), the think tank organization under former President Leonel Fernandez.
See http://www.funglode.org