Reporte de The Economist sobre política económica presidente Abinader

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Country Report

Dominican Republic

Generated on March 16th 2021 Economist Intelligence Unit 20 Cabot Square London E14 4QW United Kingdom

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ISSN 2047-4652

Symbols for tables "0 or 0.0" means nil or negligible;"n/a" means not available; "-" means not applicable

Dominican Republic

1

Dominican Republic Summary 2

Briefing sheet

Outlook for 2021-25 4

Political stability

4

Election watch

5

International relations

5

Policy trends

6

Fiscal policy

6

Monetary policy

6

International assumptions

7

Economic growth

7

Inflation

8

Exchange rates

8

External sector

8

Forecast summary

Data and charts 9

Annual data and forecast

10

Quarterly data

10

Monthly data

12

Annual trends charts

13

Monthly trends charts

14

Comparative economic indicators

Summary 14

Basic data

16

Political structure

Recent analysis Economy 18

Forecast updates

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Dominican Republic

2

Briefing sheet Editor:

Laurent Weil

Forecast Closing Date: March 9, 2021

Political and economic outlook The Dominican Republic is one of the fastest-growing economies in Latin America. The country is heavily reliant on tourism, free-trade zone manufacturing and mining, but it is gradually moving up the global industrial value chain.

Governability risks will be contained in the medium term, as the Partido Revolucionario Moderno (PRM), the party of the president, Luis Abinader, holds a comfortable legislative majority in both houses of Congress.

In 2021 Mr Abinader will continue to provide fiscal support to mitigate the economic impact of the coronavirus (Covid-19) pandemic by extending major policies from 2020, such as a wage subsidy scheme and cash transfers intended to encourage people to stay at home.

The Dominican economy will recover faster than most in the region; The Economist Intelligence Unit expects real GDP to return to its 2019 level by 2022. Strong macroeconomic fundamentals and a favourable business environment will drive growth.

After widening in 2020, the current-account deficit will narrow gradually in the 2021-25 forecast period as exports of goods and services increase slowly and the import bill remains subdued owing to softer oil prices.

Mr Abinader's recent success in securing enough coronavirus vaccines to immunise 100% of the population was an important milestone and puts the country in a stronger position by regional comparison in its efforts to return to normality.

The recovery of tourism—one of the country's main sectors—will be slow, hinging on a recovery in foreign consumer confidence. This poses risks to the external sector.

Key indicators 2020a -6.6 3.8 -7.9 -1.9 3.5 8.8

Real GDP growth (%) Consumer price inflation (av; %) Government balance (% of GDP) Current-account balance (% of GDP) Money market rate (av; %) Unemployment rate (%) Exchange rate Ps:US$ (av) a

2021b 5.3 4.2 -4.6 -2.6 3.6 7.1 58.77

2022b 4.5 4.0 -4.2 -2.5 4.9 7.0 60.54

2023b 4.4 4.0 -3.3 -2.1 5.3 6.6 62.11

56.52c Economist Intelligence Unit estimates. Economist Intelligence Unit forecasts. c Actual.

Country Report March 2021

2024b 4.5 4.2 -2.6 -1.8 5.5 6.6 63.73

2025b 4.5 3.9 -2.0 -1.0 5.7 6.4 65.50

b

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Dominican Republic

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Key changes since January 26th The latest travel restrictions imposed in North America amid the coronavirus pandemic will hurt Dominican services export earnings. In response, we have revised our current-account forecast for 2021, to a deficit of 2.6% of GDP (from 2.4% of GDP previously).

The government has recently signed an "electricity pact", signalling its commitment to reducing electricity distribution losses. This provides some upside risk to our forecasts, and we now expect the country's business environment to improve in 2021-25.

The month ahead March 12th—Inflation (February): The annual inflation rate has risen in recent months, increasing to 6.2% in January, its highest level in seven years. However, price pressures were mainly driven by transitory shocks produced by the pandemic and weather events. We expect inflation to return to the central bank's 3-5% target range later in 2021.

TBC—Coronavirus vaccine rollout: The government has secured enough vaccines to inoculate 100% of its population and as at March 4th had inoculated 2% of its population.

Although the rollout is moving at a good pace, logistical bottlenecks will hamper the government's plan to immunise 70% of the population by year-end.

Major risks to our forecast Scenarios, Q1 2021 The government fails to overcome the electricity crisis The US suspends international flights to the Caribbean The coronavirus crisis leads to increased corruption, eroding public trust Constraints on government capital spending leave some infrastructure needs unmet

Probability Impact Intensity Very high High 20 Very High 20 high High High 16 High

Moderate

12

Very 10 high Note. Scenarios and scores are taken from our Risk Briefing product. Risk scenarios are potential developments that might substantially change the business operating environment over the coming two years. Risk intensity is a product of probability and impact, on a 25-point scale.

The banking system suffers another crisis

Low

Source: The Economist Intelligence Unit.

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Dominican Republic

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Outlook for 2021-25 Political stability The political climate will improve in 2021, as the president, Luis Abinader of the centrist Partido Revolucionario Moderno (PRM), benefits from having spearheaded well-received anti-corruption and good-governance initiatives since his administration took office in August 2020. The government's solid majority in both houses of Congress and control of most municipalities will also strengthen the president's position and support his pro-business agenda. However, amid the coronavirus (Covid-19) pandemic, uncertainties relating to the vaccine rollout will pose risks to political stability. Although the government has proven capable of combating the virus and has secured enough vaccines to immunise the country's entire population, the vaccination process will be slow owing to huge logistical challenges. As a result, the pandemic will pose risks to the political landscape until early 2022.

The president will continue to fulfil his reform agenda, fighting against corruption and implementing other elements of his electoral manifesto, such as reducing red tape, fighting crime, improving infrastructure and liberalising labour laws. Still relatively new to his role, the president has already delivered on some of his promises; he has provided pensions to former sugarcane workers, increased the number of citizens insured under the national health system and improved transparency in bureaucratic processes. These measures should allay anti-establishment sentiment in the 2021-25 forecast period and boost public support for the government.

However, despite the president's efforts, The Economist Intelligence Unit expects him to make only piecemeal progress on reducing crime and corruption during the forecast period. Progress will be limited by the country's weak institutions, limited fiscal space to strengthen judicial institutions and rising income inequality. Structural reforms will take time to have a material effect on endemic corruption, which is ingrained in the country's political culture. As a result, we are sceptical about the chances of substantial progress being made on these issues in 2021-25.

Election watch The next general election will take place in 2024. In the most recent election, on July 5th 2020, Mr Abinader won the presidency with 53% of the vote, defeating Gonzalo Castillo of the then incumbent Partido de la Liberación Dominicana (PLD), who won 37% of the vote, and Leonel Fernández, a former president, who won 9%. Mr Abinader's PRM won a majority of seats in both the Senate (the upper house) and the Chamber of Deputies (the lower house). The PRM also controls a large majority of municipalities, having performed strongly in municipal elections on March 15th 2020. Since the PRM's landslide successes in 2020, the political landscape has undergone a drastic recomposition. Having been in power in 1996-2000 and 2004-20, the PLD has lost the dominance over domestic policies that it enjoyed over the past two decades. However, that party is far from being a spent force, and the July election confirmed its position as the main opposition, as it won the most seats in both houses of Congress of any party other than the PRM.

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Dominican Republic

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International relations The Abinader administration is unlikely to alter foreign policy drastically. Relations with the US will remain close under the new US president, Joe Biden, anchored by strong trade and investment ties, and by the Dominican Republic-Central America Free-Trade Agreement (DR-CAFTA). Trade and investment links with the EU will continue to grow under an Economic Partnership Agreement that was signed in 2008.

Relations with Haiti will remain strained owing to disputes over Haitian immigration and border control. Both countries will try to reactivate a long-dormant binational commission on trade and migration to reboot co-operation efforts, but progress in this area will be limited against a backdrop of xenophobic sentiment towards Haitian migrants in the Dominican Republic and the unpopular nature of a possible rapprochement with Haiti. At end-February Mr Abinader announced that the Dominican Republic would begin constructing a border wall between the two countries later this year, in a move that is likely to place further strain on bilateral relations. Mass deportations of Haitians and temporary retaliation by Haiti (in the form of import barriers on Dominican goods) will continue in the medium term. In parallel, Haiti's precarious security situation means that unrest there may lead to temporary border closures and increasingly xenophobic rhetoric in the Dominican political scene.

Policy trends Policymaking in the near term will focus on the rollout of coronavirus vaccines. By early January the Dominican Republic had already secured enough doses to immunise its entire population, partly owing to an emergency amendment to the Procurement and Contracting Law that was passed in Congress to allow the expedited purchase of vaccines. The government began the first phase of its immunisation campaign in mid-February, targeting healthcare workers and vulnerable groups. The mass rollout of the vaccine will be more difficult given enormous logistical challenges. Of the doses acquired, 40% require extremely cold storage; the government has so far identified only eight suitable freezers, with the capacity to store 400,000 doses. Lack of trust in the vaccines is also likely to present hurdles. Although the government will offer free vaccinations to those over 18 years old, we expect insufficient public awareness to delay engagement with the process.

On the economic front, 2021 will be marked by continued government intervention to support consumer and investor confidence. The government had originally planned to tighten fiscal policy in 2021 in a bid to avoid jeopardising fiscal sustainability. The 2021 budget released in October proposed a 13.3% reduction in spending compared with the 2020 extraordinary budget that was executed to tackle the pandemic. However, given the need for continued mobility and travel restrictions, which will depress economic activity, the government has extended some fiscal stimulus policies from 2020 until April 2021. These include part of the FASE 1 wage subsidy programme and the "Stay at Home" benefit scheme, and will cost the country Ps21bn (US$360m, or 0.4% of forecast 2021 GDP). After April we expect the administration to continue to provide some support; however, any measures that are continued over the rest of the year will probably be much more limited than in 2020.

Stimulus measures are likely to moderate once economic activity recovers, from mid-2021 onwards.

Policy in 2021-25 will continue to be guided by the framework established by the Estrategia Nacional de Desarrollo 2010-30 (the national development strategy), under which the government forms pacts with civil society organisations to agree on education, fiscal, electricity and labour reform goals. Progress will be slow, as these are all politically contentious areas, although the signing in late February of the electricity pact (one of four pacts to be signed) poses some upside risks to this assumption.

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Fiscal policy The government will face challenges as it seeks to reverse the recent widening of the fiscal deficit without impeding the country's economic recovery (and fiscal revenue). The pandemic dealt a huge blow to fiscal performance in 2020, as it gave rise to a decline in tax revenue and a sharp rise in spending. Support measures amounted to 5.3% of GDP in 2020 and included tax cuts, cash transfers to households and businesses, salary relief for people who lost their jobs because of the pandemic, and grants. Having announced that it would extend stimulus measures until April 2021, the government is likely to partially extend these measures until at least mid-2021, as the economy continues to suffer.

Despite continued stimulus, the government expects some adjustment in spending and revenue in 2021, with spending moderating and revenue partly recovering to pre-coronavirus levels. On this basis, we expect the fiscal deficit to narrow from an estimated 7.9% of GDP in 2020 to 4.6% of GDP in 2021. Assuming that efforts to consolidate the public finances are maintained, the deficit will continue to narrow, shrinking to 2% of GDP in 2025.

Although we anticipate progress on fiscal consolidation, the pandemic response will weigh on the public debt burden well into the medium term. We expect consolidated public-sector debt, which includes domestic bonds and recapitalisation bonds issued by the Banco Central de la República Dominicana (BCRD, the central bank) to remain high. However, assuming high GDP growth rates, public debt will decline slightly, from an estimated 68.4% of GDP at end-2020 to 67.1% in 2025 (after peaking to 71.2% in 2022, as the government will continue to raise debt to finance its large deficit). There is some cause for concern about the profile of the public debt, as external debt accounts for more than half of it. However, the sovereign retains good access to international capital markets, raising US$2.5bn in bond issues in January: US$1bn in 11-year bonds at a coupon rate of 3.87%, and US$1.5bn in 20-year bonds at a 5.3% coupon rate.

Monetary policy The BCRD will tighten the policy rate gradually from the last quarter of 2021 as the economy recovers from the coronavirus-induced recession; we estimate that the central bank will keep the benchmark interest rate unchanged at its accommodative level of 3% until then, as inflation remains within its 3-5% target band.

The BCRD's mission will be to support liquidity and financial stability in the country's highly dollarised financial sector. Its large cushion of foreign reserves (recorded in February at US$11.96bn) represent about eight months of import cover. Assuming that external conditions improve in the medium term, exchange-rate volatility will decrease. However, should the currency come under pressure, the BCRD has sufficient capacity to intervene.

International assumptions Economic growth (%) US GDP OECD GDP World GDP World trade Inflation indicators (% unless otherwise indicated) US CPI OECD CPI Manufactures (measured in US$) Oil (Brent; US$/b) Non-oil commodities (measured in US$) Financial variables US$ 3-month commercial paper rate (av; %) Exchange rate Ps:US$ (av) Exchange rate US$:€ (av)

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2020

2021

2022

2023

2024

2025

-3.5 -5.0 -4.0 -9.6

4.3 3.8 4.5 6.7

3.0 3.5 3.7 6.5

2.0 2.1 3.0 5.2

1.8 2.0 2.8 4.6

1.9 1.9 2.7 3.8

1.2 1.2 -1.3 42.3 2.9

1.6 1.6 6.3 57.0 16.9

1.8 1.9 1.7 59.0 0.1

2.2 2.1 2.2 58.0 -6.8

1.9 2.0 1.8 55.0 0.8

2.0 2.1 1.5 52.0 1.6

0.6 0.2 0.2 56.52 58.77 60.54 1.14 1.21 1.19

0.2 62.11 1.15

0.6 63.73 1.17

1.0 65.50 1.22

© Economist Intelligence Unit Limited 2021

Dominican Republic

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Economic growth The Dominican Republic is set to be one of the fastest countries in the region to recover from the coronavirus-induced recession, returning to pre-pandemic real GDP levels by 2022 (compared with 2023 for most other economies). However, despite its comparatively strong growth prospects, the damage to productive capacity caused by the coronavirus crisis will impair the Dominican Republic's medium-term potential. After contracting by an estimated 6.6% in 2020, real GDP should recover partially in 2021, growing by 5.3%. This will be propelled by a sizeable stimulus package in 2020 and early 2021 (altogether worth 5.7% of GDP) aimed at supporting private consumption and boosting investment, although this assumes that citizens will have saved some of their government financial support for 2021. The external sector will struggle, as inbound tourism (one of the country's major economic sectors) will fail to return to pre-coronavirus levels owing to the international travel restrictions that have been imposed to tackle the virus, as well as continued aversion to travel amid a slow global vaccine rollout. This will have knock-on effects on private consumption amid slow jobs growth. However, the country entered the crisis with strong macroeconomic fundamentals following average annual growth of 6.1% in 2015-19. Assuming a gradual recovery of the US economy, we expect external demand for Dominican goods and services to pick up, driving a rebound in exports and fixed investments.

Real GDP growth will firm up in 2022-25, averaging 4.5% annually as private consumption, investment and US demand for Dominican goods and services all gain ground. However, modest job creation and weaker (but still positive) growth in remittances will lead to lower levels of private consumption growth than before the pandemic. This, alongside more moderate fixed investment growth (which, together with consumption, was the main driver of exceptionally firm rates of GDP growth in recent years), will temper the pace of expansion by Dominican standards.

On the supply side, agriculture will continue to account for a substantial share of employment, despite contributing only 5.2% of GDP per year on average in 2021-25. Free-trade zone (FTZ) manufacturing will benefit from diversification into higher-value-added, non-textile activities, such as tobacco products, and electrical and medical equipment. Local manufacturing will grow modestly, with overall industrial output bolstered by mining (especially of gold and ferronickel) and construction. The services sector—notably tourism—will perform poorly in the short term compared with before the pandemic, but should rebound in 2022 once vaccines have been deployed substantially in the US, Canada and Europe (the main sources of tourism arrivals).

Economic growth % 2020a 2021b 2022b 2023b GDP -6.6 5.3 4.5 4.4 Private consumption -2.0 4.4 1.8 3.8 Government consumption 7.0 4.5 2.0 3.0 Gross fixed investment -8.5 16.0 2.0 4.0 Exports of goods & services -32.5 14.1 20.4 7.0 Imports of goods & services -15.4 18.6 5.2 4.0 Domestic demand -3.0 7.1 1.8 3.7 Agriculture 4.0 4.0 4.7 3.8 Industry 2.5 3.5 4.0 4.2 Services 3.5 4.0 4.2 4.4 a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

2024b 4.5 4.0 3.0 6.5 4.3 4.5 4.5 3.8 4.2 4.4

2025b 4.5 4.5 3.0 6.5 4.0 5.4 4.9 4.8 5.2 5.4

Inflation The Dominican Republic depends heavily on imported hydrocarbons, and consumer prices will therefore remain highly sensitive to movements in global oil prices. As these are likely to remain moderate (by historical comparison) in 2021, and as demand-side pressures are weak (given suboptimal labour market conditions), we expect inflation to remain within the official 3-5% target range. Nevertheless, we expect currency depreciation and stronger oil prices later in the forecast period to lift price pressures, leading to inflation of 4% per year on average in 2022-25. Risks to our forecast include the pace of the economic recovery, a weaker peso than we currently project and supply shocks (related to the weather, for example). In this context, we will be looking closely at inflation expectations, as well as exchange-rate movements.

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Exchange rates After coming under stress in 2020—given a collapse in foreign­currency receipts from foreign direct investment (FDI), tourism and FTZ exports—the peso is likely to face less depreciation pressures in 2021-25, owing to renewed US dollar weakness and a global recovery in manufacturing. If substantial depreciation pressures arise, the BCRD is likely to intervene, having built up substantial international reserves over the years.

We expect the peso to depreciate to Ps66.24:US$1 by end-2025. This constitutes a weakening of 3% in nominal terms in 2021-25 compared with the 2020 average, and will keep the exchange rate competitive in real, trade-weighted terms.

External sector After widening to an estimated 1.9% of GDP in 2020, the current-account deficit will widen further in 2021. This will be driven by an expansion of imports as domestic activity slowly picks up pace.

In the medium term, the tourism-driven services surplus (4.8% of GDP on average during the forecast period) will expand, which will in turn narrow the current-account deficit, partly offsetting a widening trade deficit. Workers' remittances will produce a large secondary income surplus, which will average 9.4% of GDP in 2021-25. We expect the primary income deficit to grow slightly as a percentage of GDP, reflecting external debt interest payments and profit repatriation by foreign investors.

FDI inflows will remain close to their historical average during the forecast period, averaging 3.4% of GDP in 2021-25, which will largely cover the current-account deficit. Reserves will grow in nominal terms in the forecast period, but we expect import cover to decline to about 4.6 months in 2025, from 6.5 in 2020, reflecting a recovery of imports in the medium term. However, comfortable access to international financing should mitigate external sector risks.

Forecast summary Forecast summary (% unless otherwise indicated) Real GDP growth Gross agricultural production growth Unemployment rate (av) Consumer price inflation (av) Consumer price inflation (end-period) Average weighted lending rate Central government balance (% of GDP) Exports of goods fob (US$ bn) Imports of goods fob (US$ bn) Current-account balance (US$ bn) Current-account balance (% of GDP) External debt (end-period; US$ bn) Exchange rate Ps:US$ (av)

2020a 2021b 2022b -6.6 5.3 4.5 4.0 4.0 4.7 8.8 7.1 7.0 3.8 4.2 4.0 5.6 2.9 3.0 13.0 13.5 13.4 -7.9 -4.6 -4.2 11.0 11.3 11.4 16.4 18.9 22.4 -1.5 -2.3 -2.2 -1.9 -2.6 -2.5 41.0 44.5 45.6 56.52c 58.77 60.54

Exchange rate Ps:US$ (end-period)

58.33c

59.72

61.29

62.82

64.61

66.24

Exchange rate Ps:€ (av)

64.51c

71.11

71.89

71.28

74.25

79.74

71.30 71.57c 71.51 72.01 a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.

77.20

81.47

Exchange rate Ps:€ (end­period)

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2023b 4.4 3.8 6.6 4.0 4.9 14.5 -3.3 11.8 23.6 -1.9 -2.1 46.7 62.11

2024b 4.5 3.8 6.6 4.2 3.6 14.0 -2.6 12.7 24.5 -1.7 -1.8 47.6 63.73

2025b 4.5 4.8 6.4 3.9 4.4 15.0 -2.0 13.7 24.8 -1.0 -1.0 48.9 65.50

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Dominican Republic

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Data and charts Annual data and forecast GDP Nominal GDP (US$ bn) Nominal GDP (Ps bn) Real GDP growth (%) Expenditure on GDP (% real change) Private consumption Government consumption Gross fixed investment Exports of goods & services Imports of goods & services Origin of GDP (% real change) Agriculture

2016a

2017a

2018a

2019a

2020b

2021c

2022c

75.7 3,487 6.7

80.0 3,803 4.7

85.6 4,236 7.0

88.9 4,562 5.0

80.3 4,537 -6.6

85.4 5,017 5.3

86.6 5,242 4.5

6.0 2.0 12.3 7.5 8.1

4.4 0.8 -0.3 4.9 -3.0

5.7 2.8 13.3 6.1 8.5

4.6 6.3 8.1 1.5 5.8

-2.0 7.0 -8.5 -32.5 -15.4

4.4 4.5 16.0 14.1 18.6

1.8 2.0 2.0 20.4 5.2

5.7b

5.8b

5.5b

4.0b

4.0

4.0

4.7

Industry

7.3b

3.1b

7.9b

4.5b

2.5

3.5

4.0

Services Population and income Population (m)

5.9b

4.1b

5.9b

6.0b

3.5

4.0

4.2

10.4

10.5

10.6

10.7b

10.8

11.0

11.1

15,301b

16,138b

17,491b

18,506b

7.3

5.8

5.9

6.3b

8.8

7.1

7.0

-3.1 2.5 -0.6 46.5

-3.1 2.5 -0.5 48.1

-2.2 2.6 0.4 49.4

-2.2 2.7 0.6 52.2

-7.9 2.9 -5.1 68.4

-4.6 2.9 -1.7 69.1

-4.2 3.0 -1.2 71.2

46.71

48.30

50.28

52.96

58.33a

59.72

61.29

59.50 3.7 20.7 10.4 12.6

71.57a

71.51 2.9 10.0 11.6 13.5

72.01 3.0 9.2 10.8 13.4

GDP per head (US$ at PPP) Recorded unemployment (av; %) Fiscal indicators (% of GDP) Central government balance Debt interest payments Primary balance Public debt Prices and financial indicators Exchange rate Ps:US$ (end-period) Exchange rate Ps:€ (end­period) Consumer prices (end-period; %) Stock of money M1 (% change) Stock of money M2 (% change) Lending interest rate (av; %) Current account (US$ m) Trade balance Goods: exports fob Goods: imports fob Services balance Primary income balance Secondary income balance Current-account balance External debt (US$ m) Debt stock Debt service paid Principal repayments

49.23 1.7 11.0 10.0 15.1

57.93 4.2 12.2 10.3 13.9

57.57 1.2 6.6 4.5 12.5

17,438 18,472 19,478

5.6 7.0 1.6 13.0

-7,559 -7,600 -9,301 -9,069 -5,457 -7,534 -11,055 9,840 10,135 10,908 11,219 10,964 11,318 11,394 -17,399 -17,734 -20,209 -20,288 -16,421 -18,852 -22,449 4,940 5,550 5,886 5,452 15 1,077 4,500 -3,253 -3,794 -3,845 -4,274 -3,930 -4,068 -4,142 5,058 5,711 6,101 6,686 7,829 8,272 8,545 -815 -133 -1,160 -1,205 -1,543 -2,254 -2,152 28,291 31,168 33,974 35,919b 41,001 44,536 45,575 3,465 3,031 3,122 4,661b 4,529 4,042 4,034 2,189

1,961

1,478

2,719b

2,958

2,466

2,407

1,931b

Interest 1,276 1,069 1,644 1,571 1,576 1,626 International reserves (US$ m) Total international reserves 6,134 6,873 7,718 8,871 10,750 10,900 11,000 a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.

Source: IMF, International Financial Statistics.

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Dominican Republic

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Quarterly data 2019 1 Qtr

2 Qtr

3 Qtr

4 Qtr

2020 1 Qtr

2 Qtr 3 Qtr 4 Qtr Central government finance (Ps m) Revenue & grants 155,318174,645160,064166,660162,000122,423 164,707 n/a Expenditure & net lending 166,000155,960173,097217,822205,695233,713 250,054 n/a Balance -17,067 1,481 -13,033 -56,373 -32,906 n/a 103,800 106,509 Prices Consumer prices (Dec 2010=100) 95.7 96.7 97.3 98.6 99.0 98.3 101.9 103.9 Consumer prices (% change, year on 1.1 1.3 1.7 3.1 3.4 1.7 4.7 5.3 year) Financial indicators Exchange rate Ps:US$ (av) 50.47 50.61 51.25 52.84 53.41 55.84 58.43 58.42 Exchange rate Ps:US$ (end-period) 50.55 50.82 52.40 52.96 53.93 58.25 58.47 58.33 Deposit rate (av; %) 6.47 6.00 5.71 6.31 6.03 5.09 4.36 3.10 Lending rate (av; %) 12.92 12.53 12.27 12.22 12.80 10.69 10.47 9.96 Monetary policy rate (av; %) 5.50 5.49 4.74 4.50 4.36 3.50 3.33 3.00 Savings rate (av; %) 6.47 6.00 5.71 6.31 6.03 5.09 4.36 3.10 M1 (end-period; Ps bn) 358.6 375.6 379.8 437.9 425.9 479.3 497.9 564.4 M1 (% change, year on year) 4.8 8.7 14.0 20.7 18.8 27.6 31.1 28.9 M2 (end-period; Ps bn) 1,071.9 1,092.8 1,096.2 1,178.7 1,166.7 1,247.0 1,284.3 1,366.4 M2 (% change, year on year) 6.0 5.4 8.1 10.4 8.8 14.1 17.2 15.9 Sectoral trends Tourist arrivals ('000) 2,033 1,848 1,622 n/a n/a n/a n/a n/a Balance of payments (US$ m) Exports fob 2,655.4 2,815.7 2,805.3 2,942.2 2,707.6 2,063.7 2,723.4 n/a National 1,202.6 1,226.9 1,183.7 1,341.9 1,233.8 924.4 1,086.5 n/a Free zone 1,452.8 1,588.8 1,621.6 1,600.3 1,473.8 1,139.3 1,636.9 n/a Imports fob -4,062.1 n/a 4,790.9 5,132.7 5,257.7 5,106.7 4,588.0 3,521.9 National 3,833.9 4,142.3 4,261.8 4,064.0 3,583.1 2,849.2 3,125.9 n/a Free zone 957.0 990.4 995.9 1,042.7 1,004.9 672.7 936.2 n/a Trade balance -1,338.7 n/a 2,135.5 2,317.0 2,452.4 2,164.5 1,880.4 1,458.2 Tourism receipts 2,178.7 1,907.4 1,673.4 1,708.6 1,623.3 30.1 352.4 n/a Workers' remittances 1,743.2 1,714.2 1,835.6 1,794.0 1,703.2 1,771.7 2,374.9 n/a Current-account balance 283.5 -290.9 -860.8 -336.7 -115.9 -589.5 -328.5 n/a Reserves excl gold (end-period) 7,420.1 8,776.3 7,651.6 8,843.1 9,384.2 7,228.810,608.510,810.2 Sources: Banco Central de la República Dominicana; IMF, International Financial Statistics.

Monthly data Jan Feb Mar Apr May Jun Exchange rate Ps:US$ (av) 2019 50.38 50.49 50.54 50.55 50.56 50.73 2020 53.11 53.37 53.74 54.20 55.39 57.94 2021 58.07 n/a n/a n/a n/a n/a Exchange rate Ps:US$ (end-period) 2019 50.44 50.53 50.55 50.56 50.58 50.82 2020 53.21 53.53 53.93 54.56 57.05 58.25 2021 57.97 n/a n/a n/a n/a n/a Real effective exchange rate (2010=100; CPI-based) 2019 86.79 87.04 87.27 87.57 88.07 87.36 2020 84.31 84.68 84.93 84.90 83.15 79.62 2021 n/a n/a n/a n/a n/a n/a Central government revenue (Ps bn) 2019 58.1 46.0 51.2 66.2 54.5 53.9 2020 63.6 51.2 47.2 47.1 34.2 41.1 2021 n/a n/a n/a n/a n/a n/a Central government expenditure (Ps bn) 2019 54.7 62.8 62.5 55.9 61.9 57.0 Country Report March 2021

Jul

Aug

Sep

Oct

Nov

Dec

50.92 58.35 n/a

51.18 58.48 n/a

51.66 58.47 n/a

52.75 58.49 n/a

52.87 58.45 n/a

52.91 58.32 n/a

51.03 58.47 n/a

51.30 58.47 n/a

52.40 58.47 n/a

52.85 58.47 n/a

52.89 58.36 n/a

52.96 58.33 n/a

87.06 80.07 n/a

87.60 79.68 n/a

87.23 79.24 n/a

85.37 78.93 n/a

85.25 78.92 n/a

84.88 78.66 n/a

56.6 55.0 n/a

52.4 51.4 n/a

51.2 58.3 n/a

58.6 65.3 n/a

50.5 51.6 n/a

57.5 n/a n/a

69.7

64.5

56.2

58.9

71.7

87.2

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2020 74.2 69.4 62.1 71.3 76.2 86.2 2021 n/a n/a n/a n/a n/a n/a Central government balance (Ps bn) 2019 2.5 -13.1 -6.5 4.9 -1.5 -1.9 2020 -1.1 -19.8 -11.9 -18.0 -38.1 -47.7 2021 n/a n/a n/a n/a n/a n/a Consumer prices (av; % change, year on year) 2019 36.8 37.5 1.5 1.6 1.3 0.9 2020 -23.3 -23.7 2.4 1.1 1.0 2.9 2021 6.2 n/a n/a n/a n/a n/a M1 (% change, year on year) 2019 5.1 5.9 4.8 7.1 7.9 8.7 2020 17.4 17.3 18.8 24.8 26.8 27.6 2021 33.3 n/a n/a n/a n/a n/a M2 (% change, year on year) 2019 4.8 5.2 6.0 6.3 6.5 5.4 2020 9.3 9.3 8.8 10.4 12.2 14.1 2021 17.9 n/a n/a n/a n/a n/a Deposit rate (av; %) 2019 7.8 7.0 6.7 6.6 6.9 5.6 2020 6.9 6.2 5.2 5.8 6.1 5.7 2021 3.6 n/a n/a n/a n/a n/a Lending rate (av; %) 2019 12.6 13.4 12.8 13.4 12.4 11.8 2020 12.5 12.6 13.3 10.4 10.7 11.0 2021 9.7 n/a n/a n/a n/a n/a National exports fob (US$ m) 2019 840 830 986 857 1,016 943 2020 863 965 880 555 686 823 2021 n/a n/a n/a n/a n/a n/a National imports fob (US$ m) 2019 1,630 1,464 1,697 1,601 1,912 1,620 2020 1,570 1,524 1,495 1,195 1,097 1,230 2021 n/a n/a n/a n/a n/a n/a Trade balance fob-cif (US$ m) 2019 -790 -634 -711 -744 -896 -676 2020 -707 -559 -615 -641 -411 -406 2021 n/a n/a n/a n/a n/a n/a Foreign-exchange reserves excl gold (US$ m) 2019 7,116 7,200 7,420 7,342 7,047 8,776 2020 10,468 9,922 9,384 8,701 8,095 7,229 2021 n/a n/a n/a n/a n/a n/a

106.3 n/a

80.1 n/a

63.6 n/a

74.4 n/a

87.9 n/a

n/a n/a

-14.5 -63.2 n/a

-9.5 -31.6 n/a

-4.2 -11.7 n/a

1.8 -10.6 n/a

-22.0 -27.4 n/a

-36.1 n/a n/a

1.4 4.4 n/a

1.7 4.8 n/a

2.0 5.0 n/a

2.5 5.0 n/a

3.2 5.3 n/a

3.7 5.6 n/a

10.8 26.9 n/a

11.3 31.4 n/a

14.0 31.1 n/a

14.3 34.7 n/a

16.0 31.1 n/a

20.7 28.9 n/a

7.0 14.1 n/a

7.2 17.1 n/a

8.1 17.2 n/a

7.6 18.9 n/a

7.9 17.4 n/a

10.4 15.9 n/a

6.7 5.7 n/a

5.3 5.3 n/a

6.5 4.4 n/a

5.3 3.9 n/a

7.3 3.6 n/a

7.0 3.6 n/a

12.6 11.2 n/a

12.0 10.2 n/a

12.1 10.0 n/a

12.3 10.2 n/a

11.9 9.8 n/a

12.4 9.9 n/a

985 894 n/a

919 898 n/a

901 931 n/a

960 n/a n/a

1,007 n/a n/a

975 n/a n/a

1,815 1,279 n/a

1,777 1,356 n/a

1,666 1,427 n/a

1,730 n/a n/a

1,753 n/a n/a

1,624 n/a n/a

-830 -385 n/a

-858 -458 n/a

-765 -496 n/a

-770 n/a n/a

-746 n/a n/a

-649 n/a n/a

8,279 6,746 n/a

7,960 7,075 n/a

7,652 10,609 n/a

7,554 9,931 n/a

7,208 9,962 n/a

8,843 10,810 n/a

Sources: IMF, International Financial Statistics; Haver Analytics.

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Annual trends charts

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Monthly trends charts

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Comparative economic indicators

Basic data Land area 48,511 sq km

Population 10.6m (2018, UN estimate)

Main cities/provinces Country Report March 2021

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Population in '000 (2010, census) Santo Domingo national district (capital): 965 Santo Domingo province: 2,374 Santiago province: 963 San Cristóbal province: 569 La Vega province: 394 Puerto Plata province: 322 San Pedro de Macorís province: 291

Climate Subtropical

Weather in Santo Domingo (altitude 14 metres) Hottest month, August, 23­31°C (average daily minimum and maximum); coldest month, February, 19­28°C; driest month, March, 19 mm average rainfall; wettest month, June, 185 mm average rainfall

Language Spanish

Measures Metric system, although the tarea is often used: 6.4 tareas=1 acre; 15.9 tareas=1 ha

Currency 1 peso (Ps) = 100 centavos; 2020 average exchange rate: Ps56.52:US$1; 2020 yearend exchange rate: Ps58.33:US$1

Time 4 hours behind GMT

Public holidays January 1st (New Year's Day); January 4th (Epiphany); January 21st (Our Lady of Altagracia); January 26th (Duarte's Day); February 27th (Independence Day); April 2nd (Good Friday); May 1st (Labour Day); June 3rd (Corpus Christi); August 16th (Restoration Day); September 24th (Our Lady of Las Mercedes); November 6th (Constitution Day); December 25th (Christmas Day)

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Political structure Official name Dominican Republic

Form of government Representative democracy with a US-style Congress and presidency

Head of state Luis Abinader was elected in July 2020 and began his term on August 16th

The executive The president has executive power, appoints a cabinet and holds office for four years

National legislature Bicameral Congress, with both houses directly elected for four-year terms; the Senate (the upper house) has 32 members, one for each province and one for the national district; the Chamber of Deputies (the lower house) has 190 members

Legal system There are local justices covering 72 municipalities and 18 municipal districts; each province acts as a judicial district. The 2010 constitution created a new Constitutional Court. A National Council of Magistrates appoints judges to the Constitutional Court, the Supreme Court and the Electoral Court

National elections Country Report March 2021

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The last general election was held in July 2020; municipal polls were last held in March 2020. The next general election will take place in 2024

National government The Partido Revolucionario Moderno (PRM) and its allies won 93 of 190 seats in the Chamber of Deputies and 18 of 32 seats in the Senate. The Partido de la Liberación Dominicana (PLD) heads an opposition alliance that holds an estimated 76 seats in the lower house and six seats in the upper house. Leonel Fernández's resignation from the PLD has weakened the party's position in the political landscape, as he was followed by dozens of legislators, who are now supporting the PRM

Main political organisations Government and allies: PRM; Frente Amplio (FA); Alianza por la Democracia (APD); Dominicanos por el Cambio (DXC); Partido Humanista Dominicano (PHD); Partido Revolucionario Social Demócrata (PRSD); País Posible Opposition: PLD; Fuerza del Pueblo (FP); Movimiento Democrático Alternativo; Unión Demócrata Cristiana (UDC); Partido Revolucionario Dominicano (PRD) President: Luis Abinader Vice­president: Raquel Peña

Key ministers Agriculture: Limber Cruz Defence: Carlos Luciano Díaz Morfa Economy, planning & development: Miguel Ceara Hatton Education: Roberto Fulcar Energy & mines : Antonio Almonte Environment & natural resources: Orlando Jorge Mera Finance: Jochi Vicente Foreign affairs: Roberto Álvarez Industry & commerce: Víctor "Ito" Bisonó Interior & police: Jesús Vásquez Martínez Labour: Luis Miguel De Camps Presidency: Lisandro Macarrulla Public administration: Darío Castillo Lugo Public health & social assistance: Plutarco Arias Public works & communications: Deligne Ascención Burgos Tourism: David Collado

Central bank governor Héctor Valdez Albizu

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Recent analysis Generated on March 16th 2021

The following articles have been written in response to events occurring since our most recent forecast was released, and indicate how we expect these events to affect our next forecast.

Economy Forecast updates Electricity pact finally signed after several years in limbo March 9, 2021: Policy trends

Event In late February, after six years of delay, stakeholders of the Consejo Económico y Social (CES, a council of 41 representatives from businesses, trade unions and civil society organisations) signed a "pact" for the electricity sector.

Analysis The electricity sector has long been a drag on the economy's competitiveness, as well as the public finances, owing to a combination of inefficient distribution and high subsidies costs. The pact to address the sector's shortcomings is mandated by the Estrategia Nacional de Desarrollo 2010-30 (END), a 2012 law that calls on the government to formulate deals with civil society organisations to agree on education, fiscal, energy and labour reforms. The pact has been under negotiation for years; a signing was aborted in February 2019, after the current president, Luis Abinader (then the opposition leader) warned that the plan was inadequate. In particular, that version of the pact did not include penalties for losses on state-owned transmission and distribution networks (the main shortcoming), and there was no specific provision for Punta Catalina, the largest state-owned thermoelectric complex, which came online in 2020. The new pact foresees a transition to a tariff regime that reflects the real prices of generation and distribution—a politically costly decision that successive governments have been unwilling to make, as it will require heavy public subsidies.

The signing of the long-awaited pact highlights the government's commitment to reducing losses in the distribution network and promoting the financial soundness of energy distributors, although a lack of clarity on the implementation timeline is a cause for concern. Since beginning his term as president in August 2020, Mr Abinader has made progress in improving governance in the electricity sector. In late 2020, for example, the government shut down the Corporación Dominicana de la Empresa Eléctrica (CDEE, a holding company for distributors), which had served as the de facto regulator for decades, and transferred the regulatory role to the Ministry of Energy and Mines. He has also encouraged investments in natural gas and renewable energy, consolidating an existing trend towards diversification of the energy matrix.

Impact on the forecast We will revise our policy forecasts in the light of recent developments. We previously expected progress in reforming the electricity sector to be piecemeal, but the signing of the pact demonstrates greater political will to make progress with reforms. As a result, we are now cautiously optimistic about prospects for improvements in the power sector in our 2021-25 outlook period.

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