Country Report Dominican Republic July 2009

Product Code EIU00147
Publication Date July 2009
Publisher EIU
Product Type Report
Pages 27
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Outlook for 2009-10

  • The government of the president, Leonel? Fernandez, will face growing popular discontent during the outlook period, as a severe economic downturn, alleged corruption and power outages fuel public anger.
  • We expect legislation to be centred on the economy, although the political focus will soon turn to campaigning for legislative elections set for May 2010.
  • Recent data suggest that the global economy is stabilising; however, growth over the next two years will be marked by a high degree of volatility. A weak US economy will dampen growth prospects for the Dominican Republic.
  • Tight financing conditions will mean government spending cuts in 2009, reducing the central government deficit to 2% of GDP, but lifting public debt to 42.7% of GDP. The deficit will remain at 2% of GDP in 2010.
  • We expect the weakening of real GDP to continue, but forecast a recovery toward the end of 2009, which will lead to a GDP contraction of 2% (previously 2.5%). Recovery will be slow as GDP grows by just 2% in 2010.
  • Annual inflation will continue to fall through most of 2009, turning negative for a few months, but will end the year at 5.6% owing to peso depreciation and higher oil prices. We expect inflation to average 7.3% in 2010.
  • We expect an adjustment in the currency, given the magnitude of the external financing requirement, and anticipate a real depreciation of 3.6% in 2009 followed by a slight further depreciation in 2010.
  • Weak export earnings and remittances inflows will lead to a current-account deficit of 5.5% of GDP in 2009, despite lower average import prices. This deficit will rise to 6.6% in 2010 as import costs increase.

Monthly review

  • A May political pact between Mr Fernandez and Miguel Vargas Maldonado of the opposition PRD has pushed forward the constitutional reform process, although the backroom-style deal could weaken democratic institutions.
  • The pact has catapulted Mr Vargas into the presidency of his party, even though party elections have yet to be convened.
  • On May 28th the government announced the purchase of the private energy distributor, EdeEste, in order to resolve three separate legal disputes.
  • Preliminary supply-side data published by the Central Bank reveal that the economy grew by 1% in the first quarter owing to heavy contractions in construction, mining and free zones.
  • FDI reached US$636.8m in the first quarter, stronger than during the same period in 2007, but 40% less than during the first quarter of 2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48;70;15;60
NAICS Code: 517;72;23;52

  • Highlights
  • Outlook for 2009-10: Domestic politics
  • Outlook for 2009-10: International relations
  • Outlook for 2009-10: Policy trends
  • Outlook for 2009-10: Fiscal policy
  • Outlook for 2009-10: Monetary policy
  • Outlook for 2009-10: International assumptions
  • Outlook for 2009-10: Economic growth
  • Outlook for 2009-10: Inflation
  • Outlook for 2009-10: Exchange rates
  • Outlook for 2009-10: External sector
  • Outlook for 2009-10: Forecast summary
  • The political scene: Political pact strengthens leaders, weakens parties
  • The political scene: Mr Vargas ascends to PRD party presidency
  • The political scene: Electricity problems could damage PLD
  • Economic policy: Government increases role in failing energy sector
  • Economic policy: Government revenue down 15% in the first quarter
  • Economic performance: GDP growth slows to 1% in first quarter
  • Economic performance: Current account improves, despite plummeting inflows
  • Economic performance: FDI inflows strong, but down sharply from highs in 2008
  • Data and charts: Annual data and forecast
  • Data and charts: Quarterly data
  • Data and charts: Monthly data
  • Data and charts: Annual trends charts
  • Data and charts: Monthly trends charts
  • Data and charts: Comparative economic indicators
  • Basic data
  • Political structure

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