The government is betting on total openness; timing for fiscal pact decisions tightens
With the arrival of 2 million vaccines from China, and the incorporation of the whole population over the age of 18 into the vaccination program, the government seeks to create conditions to proceed with the complete opening of the economy. In fact, in April the restriction on mobility has been reduced. But the government is aware that only a massive vaccination program can reduce the risk of infection.
The government does not want to lose the momentum toward economic recovery. For the second consecutive month, economic activity managed to overcome the situation at the beginning of the pandemic, growing 1.1% in February, and 10.6% in March, compared to the same months in 2020. Accumulated growth in Q1 2021 was 3.1%, compared to Q1 in 2020.
In April the six-month period to negotiate the fiscal pact expired, as President Luis Abinader announced on October 6th, 2020. This pact would have to contemplate the tax measures necessary to finance the 2022 budget, as well as the changes that must be introduced in public finances to address structural problems. The government has come forward to indicate that it is preparing a proposal to be submitted for discussion in the framework of the Economic and Social Council. But little is known about the content of this proposal.
Meanwhile, the government has just received the support of the IMF, which upon concluding the review of Article IV, indicated that the strength of the Dominican economy “has allowed a decisive response of economic policy to the pandemic that puts it on a recovery path in 2021,” but it also warned of the need for “a good sequence of reforms to reinforce the momentum for inclusive growth.”
On the political level, the Attorney General has, via Operation Coral, uncovered a new alleged corruption scandal that involves ex-president Danilo Medina’s former head of security, and charges of robbery and money laundering. The case highlights how difficult it is to undertake the reform of the national police promised by Abinader, given the interests at stake.
The conservatism of the Dominican political class has also once again been evidenced, with the approval on the first reading by the House of Representatives, with 146 votes in favor and 14 against, of a new penal code, excluding the three causes that would allow abortion. Final approval of the code in both the House and Senate is pending.
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