Country Risk Service Dominican Republic Updater
The Economist Intelligence Unit, May 2013, Pages: 19
The president, Danilo Medina of the Partido de la Liberación Dominicana, will enjoy a two-thirds majority in Congress until the 2016 elections. This will facilitate the passage of reforms and support governability. Policy will focus on shrinking the fiscal deficit, which was 6.6% of GDP in 2012. The Economist Intelligence Unit forecasts that it will be reduced in 2013 to 3.1% of GDP, owing to tax increases and modest public spending cuts. After slowing to 3.9% in 2012, GDP growth will ease further in 2013, to 3%, as a consequence of fiscal adjustments and continuing weak external conditions. It will pick up in 2014, to 4%, and will be higher thereafter as global demand revives. Year-end inflation will rise to 5% in 2013, owing to tax rises and a weaker peso, before easing in 2014, but it will increase again from 2015 in response to higher oil prices. Currency depreciation will speed up slightly in 2013, with the peso weakening from Ps40.4:US$1 at end-2012 to Ps42:US$1 at end-2013. An increase in mineral exports and ongoing growth in tourism will narrow the current-account deficit to 5.1% of GDP in 2013 from an estimated 7.3% of GDP in 2012, but it will widen from 2015 as global oil and commodity prices begin to rise.
A feud between the two leaders of the opposition Partido Revolucionario Dominicano shows no sign of abating. This will sustain the party's weakness and prevent it from presenting a strong challenge to the government into the medium term.
With the fiscal deficit in the first quarter having been lower (at 0.1% of GDP) than budgeted (0.7%), the government is likely to accelerate spending to stimulate economic growth, which appeared to lag during the quarter.
Country Risk Service Dominican Republic Updater
Dominican Republic at a glance: 2013-17
OVERVIEW
Key changes from last month
Political outlook
Economic policy outlook
Economic forecast
Risk assessment
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Rating definitions
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Overall country risk
Central scenario for 2013-17: Political stability
Central scenario for 2013-17: Election watch
Central scenario for 2013-17: International relations
Central scenario for 2013-17: Policy trends
Central scenario for 2013-17: Fiscal policy
Central scenario for 2013-17: Monetary policy
Central scenario for 2013-17: Economic growth
Central scenario for 2013-17: Inflation
Central scenario for 2013-17: Exchange rates
Central scenario for 2013-17: External sector
Key risk indicators
Ratings summary
Quarterly indicators
International assumptions summary
Economic structure
Public finances
Exchange rates, interest rates and prices
Financial sector
Current account
International liquidity
Foreign payment and liquidity indicators
External trade
External financing requirement
External debt stock
External debt service
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