Medina’s Popularity Sinks Amid Corruption Scandals

DOMINICAN REPUBLIC - Forecast 03 Mar 2017 by Pavel Isa and Fabricio Gomez

The most awaited and reputable poll in the country has confirmed what many suspected: that President Danilo Medina's approval ratings have plummeted, with the public pointing fingers at the biggest political parties and several prominent political figures over corruption, and illegal enrichment of high-ranking officials.

According to the Gallup-Hoy survey, 91% of adults believe government officials from the last three presidential administrations benefited from the scheme of bribery and corruption mounted by Brazil’s Odebrecht, aimed at getting juicy public works contracts. But the ruling PLD seems to be in for the greatest blame.

Medina’s ratings have fallen from 64% to 52%. That’s a remarkable plunge. Corruption scandals are undoubtedly the most important factor in the fall in government popularity. But the constitutional amendment to allow Medina to run again, the use of state resources to support his re-election campaign, and the problems with the organization of the elections are contributing factors. Too, after almost five years in office, Medina looks exhausted. Only a bold move that put him at the head of the anti-corruption effort could stop his image from deteriorating. However, this seems difficult, for two main reasons. First, he himself is under scrutiny, over the case of the coal plants in Punta Catalina, whose main contractor is Odebrecht. Second, his PLD party is most implicated.

GDP growth was strong at the end of 2016. Inflation was low, and external accounts improved. Central Bank preliminary figures set 2016 growth at 6.6%. Accumulated inflation was 1.7%, its second lowest rate in 33 years. Preliminary figures show that the CAD closed at the equivalent of 1.5% of GDP, below the historic average, and its smallest gap in 10 years. And a preliminary report by DIGEPRES set the central government deficit at DOP 76.3 billion, very close to the nominal target.

We expect 2017 GDP growth to be about 5.5%. The combined effect of expansion in economic activity and expected increase in the oil bill could put pressure on FX and prices. Nonetheless, FX earnings are expected to increase as a result of the good performance of tourism and remittances, counteracting at least in part the demand side effect. The CAD is likely to rise, due to higher import demand, higher oil prices and stable export proceeds.

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