A cry for re-election?
Growth continues to be remarkable, with real GDP rising 7% in 2018. Inflation, at 1.17%, fell significantly below the lower limit of the target range, and financial institutions’ performance was robust. Although the CAD increased to the equivalent of 1.4% of GDP, reserves remained strong, and FX earnings prospects are good.
Risks notwithstanding, in 2019 the economy is expected to keeping growing robustly, though more slowly. Global expansion has weakened, and growth prospects in the United States, important to DR dynamism this year, via exports, tourist arrivals and remittances, call for caution. The main risks are associated with increases in oil prices, appreciation of the dollar and fiscal imbalances. Real GDP growth is expected to be nearly 5.5%, which could keep broad unemployment at around 12%. We don’t expect inflationary pressures to arise.
The outlook for a FX increase remains positive, considering growth in tourist arrivals and the rise in U.S. employment, as well as planned 2019 sovereign debt issuance. But the pressure on the exchange rate, especially from businesses needing to replenish inventories, could force authorities to intervene in the FX market.
Congress approved a new law for elections that fell far short of expectations. It didn’t change the framework for campaigns, and the fundamental electoral system problems for citizens and democracy persist. The law imposes ceilings on campaign expenditures, but set so high that there are no effective limits, and changed the terms for the quota of women’s nominations, so as to deliver a setback for gender equality in politics. The parties have no limits on TV, radio and written press advertising, meaning that money and candidate purchasing capacity will prevail.
In his annual address to the National Assembly last week, President Danilo Medina combined descriptions of positive economic and social performance with proposals for innovative social policy initiatives. But the most important part of his speech came toward the end, when he spoke in emotional tones of his permanent willingness to serve the country and its people: to face the difficult tasks, rather than taking the easy way out. He spoke of undertaking tasks not achievable quickly, and pledged to work tirelessly in favor of those who needed it most. Many interpreted his words as a "cry for re-election," and a way of announcing that he’ll pursue a third term. But others thought he was merely seeking to increase his support, and to consolidate power under any scenario.
The decisive moment is approaching.Primaries are in eight months, and Medina will have to decide whether to promote a constitutional amendment that will allow him to run again in 2020, or whether to simply step aside.
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