Extra Coal Plant Spending Likely to Push Deficit Over 3%
A new survey underscores the pessimistic domestic mood, and highlights crime and corruption as two big concerns. Some 74% of respondents called the economy bad or very bad; 75% predicted that toward the end of the Danilo Medina administration the economy would be the same or worse; and 52% called their own financial situation bad or very bad.
While 89% called corruption alarming or very alarming, 60% believe Dominicans don’t mind voting for corrupt candidates. Crime – namely robberies and assaults -- was the top concern, with government corruption (35%), unemployment and lack of jobs (33%), and cost of living (29%) less often identified as the top priorities.
These results show a more complex and uncertain scenario than other polls have. About half of those polled didn’t respond or know how to respond, suggesting a very fluid scenario – not unusual, 2½ years from the general elections. Some 29% see Luis Abinader as the best PRM candidate, and 22% see Medina as a PLD candidate, though under the current Constitution, he’s barred from running again. Ex president Leonel Fernández was named by 17% for the PLD, and 13% suggested ex-president Hipólito Mejía for the PRM.
Inflation in October was flat on September, with the CPI at zero. So accumulated inflation since January was still 2.42%, and annualized inflation was 3.48%, within the 4% +/- 1% target range. Despite greater monetary policy flexibility, monetary aggregates were stable, thanks to open market operations.
Efforts to boost lending to the private sector continue. The Monetary Board at the end of October authorized placing the remaining DOP 11.5 billion (from DOP 23.5 billion released due to the reduction of the legal reserve requirement in September). That kept interest rates declining.
Fiscal data to October keep show much slower spending than expected, and a very high cash flow position. The deficit barely reached 19.2% of the amount budgeted. Revenues reached 82.5% of the budgeted amount, and spending 74%. The cash position was DOP 87.9 billion, or about 2.4% of GDP! This is a huge pool of unspent money. It could mean the government is delaying invoice settlement, which wouldn’t then show up as short-term debt.
Medina asked Congress at the end of November to authorize a 2017 budget amendment to increase the debt and deficit ceiling, so he could increase financial sources by 31%, to pay for the Punta Catalina coal plants construction. This would raise the 2017 central government deficit by about 0.6% of GDP, to 3%. Congress has already approved the 2018 budget.
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