Standoff over presidential race must end in July
Growth remained strong in Q1, with the IMAE estimating GDP growth at 5.7%, compared with Q1 2018. Inflation accelerated in March and April, by 0.65% and 0.53%, respectively. But at the close of Q1, accumulated 2019 inflation since January reached 0.86% q/q, and was up 1.47% y/y. These figures are still significantly below the 4% ± 1% target set by the monetary program.
The current account closed Q1 with a surplus of $241.7 million. Exports reached $2.705 billion, up 4.7% from Q1 2018; tourism revenues were $2.151 billion; remittances were $1.713 billion; and FDI was $804 million. Foreign currency revenues from those sources reached $7.8 billion, up $600 million from Q1 2018. The central government deficit reached DOP 13.4 billion, equivalent to 17.8% of the deficit planned for the year.
The short-term macroeconomic outlook will be marked by four elements: lower-than-expected global growth; limited growth in the United States, despite favorable credit conditions; fiscal policy that will continue to support aggregate demand; and looser monetary policy. GDP growth for Q2 will be about 5.2%. Projected growth should at least support the current level of employment, keeping the broad unemployment rate at 11%-11.5%. Although domestic demand will continue to drive growth, prices and the exchange rate are expected to be stable, especially if the oil price continues to run about $60 to $65 per barrel.
We project that inflation will close the year above 3%, with the currency slowly devaluing again the dollar. By the end of Q2, it should be DOP 51.10 per dollar, and DOP 52.10 toward yearend. The CAD will close at about 1.5% of GDP, up slightly from 2018.
Amid great political tension and uncertainty, voter preferences for the May 2020 presidential elections are spread among three possible presidential candidates, with a high percentage of undecideds. Tensions within the ruling PLD, with one faction led by President Danilo Medina, and the other by his rival, ex-president and would-be candidate Leonel Fernández, are running very high. The differences between the two men basically center around whether to amend the Constitution so as to allow Medina to run for a third consecutive term. The likeliest outcome is that Medina won’t attempt what would be a very unpopular run, though a Fernández candidacy would be less powerful.
Meanwhile, an embarrassing PLD-driven decision by the national electoral board to obviate (in most cases) a new law that would allow voters to directly choose their senators has drawn protests and lawsuits – threatening not only the management of the forthcoming elections, but even posing risks to Dominican democracy.
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