A powerful rebound - and prospects for tax reform

DOMINICAN REPUBLIC - Report 12 Oct 2021 by Magdalena Lizardo

The probability that the Dominican economy will end 2021 with growth of close to 10% is increasing, given accumulated growth of 13% in January-August, compared to the same period in 2020. But not everything is rosy. Although formal employment has returned to nearly pre-pandemic levels, overall unemployment remains high. And in September inflation increased again, slightly reversing the downward trend that began in June.

We’ve revised upward our projection for 2021 Dominican GDP growth, to 10.4%. By 2022, economic growth would be around 4.5%. Average inflation in 2021 would be close to 8% and in 2022 it would converge to the inflation target. The current account deficit would close in 2021 and 2022 slightly above 2% of GDP.

The average exchange rate in 2021 would be around DOP57.5 per dollar, and in 2022 would fluctuate between DOP59.3 and DOP60.2. Although the fiscal deficit target for 2021 is -4.1% of GDP, the deficit could stand at -3.3%, given stronger economic growth, and tax collections above original projections. The NFPS debt / GDP ratio would be around 52% in 2021, and 53% in 2022 if the fiscal deficit goal of 3% of GDP in 2022 is assumed.

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