Economic expectations exceeded

DOMINICAN REPUBLIC - Report 13 Dec 2021 by Magdalena Lizardo

The capacity for rapid recovery of the Dominican economy was reaffirmed in the final stretch of 2021, with y/y growth of 12.4% in January-October 2021. Higher economic growth, greater-than-expected tax revenues and containment of spending have led to a drastic reduction in the nonfinancial public sector deficit, of -0.7% of GDP as of December 3rd.

The persistence of inflation over a longer horizon than originally foreseen has led the Central Bank to raise the monetary policy rate, and a more neutral stance is in sight.

The government's decision to put aside the discussion of tax reform has not significantly impacted the confidence of the markets in the Dominican economy so far. But it can be undermined if the fiscal consolidation of 2021 cannot be sustained in 2022-2024.

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