Country Forecast Dominican Republic October 2017 Updater

Country Forecast Dominican Republic October 2017 Updater

  • October 2017 •
  • Report ID: 325654 •
  • Format: PDF


  • The president, Danilo Medina of the Partido de la Liberación Dominicana (PLD), will benefit from the PLD's control of Congress until his term ends in 2020. The Partido Revolucionario Moderno will be the main opposition force during the forecast period. The party's candidate in 2016, Luis Abinader, is likely to run again in 2020, but term limits currently prohibit Mr Medina from doing so.
  • Mr Medina will pursue policies to upgrade the education system, alleviate poverty, support farmers, and help small and medium-sized enterprises. Much-needed electricity and labour reforms will also be part of the agenda, but are unlikely to materialise in the medium term. Corruption will become a greater public concern, and will remain a problem, with a damaging effect on the business climate.
  • The fiscal deficit will narrow to 1.9% of GDP in 2018, down from an estimated 2% of GDP in 2017, but will subsequently widen in 2019-20-ahead of the elections-before being reined in thereafter. The fiscal deficit and the debt burden will remain manageable throughout the forecast period.
  • GDP growth will slow to an annual average of 3.6% in 2018-22, bottoming out at 3.1% in 2020 owing to a recession in the US. After that, growth will pick-up, averaging 3.6% in 2021-22.
  • Inflation will rise from 3.1% in 2017 to an average of 3.8% in 2018-22, as the peso will weaken at a steady crawl. From an average of 2.1% of GDP in 2017-18 the current-account deficit will widen to an average of 3% of GDP in 2019-22 as oil prices rise. Inflows from mineral exports, tourism and remittances will be strong, but debt interest payments will also grow. Foreign direct investment will average 3.2% of GDP in 2018-22, sufficient to cover most of the current-account deficit.
  • Government social spending and workers' remittances will bolster consumer demand and household consumption. The population is relatively young, and the old-age dependency ratio will remain low. However, high rates of poverty and inequality will restrict broader market opportunities.
  • The business climate will be suboptimal, reflecting infrastructure deficiencies and low skill levels. Roads are improving, but energy supply problems will affect business until structural reforms to the sector are introduced. Foreign investment will be drawn mainly into tourism, real estate, energy, commerce and communications.






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