Fiscal pressures mount amid external uncertainty, but economic growth remains resilient
The Dominican economy faces heightened international uncertainty, marked by rising energy prices and inflationary pressures. Nevertheless, it maintained growth of 4.5% y/y in January–August 2026, though growth slowed to 3.8% in August. Annual inflation declined to 5.13%, but remains elevated.
Financial conditions pose additional risks. Despite increased short-term liquidity, bank interest rates remain high, and private sector credit is growing by only 7.7% y/y, with particular weakness in peso and consumer lending. This could constrain economic growth in the coming months.
Signs of mounting constraints are emerging in the external sector. A higher oil import bill has widened the trade deficit, while exports have lost momentum. Although remittances, tourism and foreign investment continue to generate foreign exchange, and international reserves remain at satisfactory levels ($15.4 billion), depreciation pressures on the peso have emerged.
The fiscal position could become more challenging toward yearend. Revenue grew by 6.8%, compared with 9.1% in expenditure growth, while energy subsidies may require substantial additional resources.
The 2027 budget provides for higher public investment, but raises the deficit to 3.4% of GDP, and projects primary expenditure growth of 9.5%, above the 7.5% ceiling set by the fiscal rule.
The economy’s relatively strong performance, amid a high cost of living and persistent inflationary pressures, has not prevented a deterioration in public perceptions of government performance, or the country’s economic and social conditions. President Luis Abinader’s approval rating fell from 66% in December 2025 to 50.3% in September 2026, amid concerns over the cost of living, public safety and corruption. Nevertheless, his PRM retains the largest individual share of party preferences (34.6%).
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