Private investment is driving double-digit growth
After several weeks of indecision over whether to propose a tax reform, President Luis Abinader finally chose not to move forward, and indefinitely suspended discussions over the fiscal pact. This measure was widely accepted by both business and the public, with all sectors understanding that this wasn’t the right time for a comprehensive tax reform.
The economic authorities are meanwhile pleased with the country’s economic growth results, and with the process of fiscal consolidation. The economy is projected to grow by at least 10% in 2021 from 2020, and the fiscal deficit in an extreme case would end up at -1% to -2%, though is likely to come in at less than -1% of GDP, according to projections by Minister of Economy, Planning and Development Miguel Ceara.
According to the authorities, fiscal consolidation achieved through an increase in income above expectations, and the contraction of capital spending, has helped to avoid an overheating of an economy that has maintained double-digit growth since March 2021, a rise mainly explained by the increase in private investment. The question is to what extent this fiscal consolidation can be sustained in the years to come.
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