Three-way presidential race in 2020 likely
Three major coalitions will compete for the presidency in 2020: one led by PLD candidate Gonzalo Castillo; another by the PRM’s Luis Abinader; and a third by LFP, a new organization led by ex-president Leonel Fernández.
The correlation of forces between these coalitions will depend upon three things. First is the extent to which Fernández´s defection from the PLD will end up affecting the party. So far, PLD loyalty to him is proving stronger than expected. Second is whether Fernández manages to run. Third is the alliances that the two opposition blocs forge, especially for congressional seats. Right now the PLD is seen the party to beat, as it holds all of the advantages of being in power. That means there are significant fiscal risks, as President Danilo Medina’s group will push hard to get Castillo elected, and to preserve as much power in Congress as possible. The PRM and its allies is best positioned to challenge the PLD, with LFP emerging as the third electoral force.
Economic activity accelerated in September from August, and its now evident that a moderate recovery trend began in early Q3. GDP expansion in September was estimated at 5.1%, 0.4 ppts above the average of July and August. That puts January to September growth at 4.8% -- still 0.7 ppts below the annual average of recent years.
Inflation in September reached 0.38%; accumulated inflation since January was 2.38%; and y/y was just 2.02%, well below the 3% lower limit of 4.0% ± 1% target range.
After a sharp depreciation, the exchange rate stabilized, at DOP 52.85 per dollar as of October 31st. There could be three reasons for this: diminished political tensions since the definition of primary outcomes; Central Bank interventions with expected effects; and a receding of the effects of Q4 seasonal demand for FX.
The 2020 proposed budget contained no surprises, and is similar to budgets since 2013. Revenue growth is estimated at 11.6%, above the projected growth of nominal GDP. Tax pressure is estimated at 13.9% of GDP. As usual, it is unlikely that the target will be reached. Spending is proposed to grow by 12.5%, higher than revenue growth. The deficit is projected at DOP 110 billion, equivalent to 2.2% of GDP, 0.5 ppts above budget projections for 2019. This would be the 13th year of deficits above 2% of GDP. A major cut in electricity subsidies is also projected.
Financing will be almost $4.6 billion, or 5% of GDP; financial applications will reach $ 2.54 billion; and net financing will be $2.1 billion, or 2.2% of GDP. Central government debt will reach almost $35 billion, or 43% of GDP, 2 ppts more than in 2019.
Now read on...
Register to sample a report