Dominican Republic Bi-Weekly Report

Forecast 2018: The Bump of 2017 Might Be Just That

January 5, 2018BancTrust & Co. Research Team
  • DR saw lower growth rates in 2017, due to larger-than-expected cuts in public spending and the downfall in construction. However, we see 2018 as the year for the return of DR to the lead amongst the top performing economies
  • Tourism continues supporting GDP growth and it maintains its position as one of the most important hard currency sources for the country
  • We expect External Current Account to end at -1.8% of GDP this year, while better income and higher oil prices make it likely to repeat the figure in 2018
  • Inflation will end the year close to the goal of around 3.8%, while for 2018 we like BCRD’s goal of 4% – barring any abnormal spikes in oil prices
  • In the political arena, the negotiations regarding an Electrical Pact suffered enormous delays, while the Electoral and Political Parties laws are still pending. 2018 should see the approval of at least one of these

The Dominican Republic decelerated its economic growth but the total result is likely to remain a positive one and be only a bump in the high-growth road; then, next year we could be seeing again region-leading figures – although risk factors are important and could weigh heavily. Unprecedented delays on the report of official figures coming from the Central Bank (BCRD in Spanish) have made much more difficult assessing the economic performance – economic activity indicators are available as of August –, but our local color leads us to expect growth rates exceeding 5% y-o-y, translating into an improved performance through 2H17 after 1H17 showed a 4% y-o-y rate – consequence of 2Q17’s underperforming 2.9%. It is worth mentioning that we made this forecast without taking into account a (still unavailable) figure on the impact of the hurricane season in DR’s GDP.

Dominican Republic Bi-Weekly Report

Budget Highlights: Fiscal Deficit and Public Debt

December 8, 2017BancTrust & Co. Research Team
  • President Danilo Medina enacted the Budget Law for 2018 after its approval in the Senate two weeks ago. We focus on assessing fiscal deficit and public indebtedness
  • Tourism is slowly regaining its strength after the 0.8% y-o-y growth of arrivals. Meanwhile, the signature of an agreement with Jamaica for joint touristic offers could improve the prospects for next year
  • Exports in 1H17 totaled USD5bn (+6% y-o-y) and the country expects to further stimulate these with a new plan that will commence in 1Q18

President Danilo Medina enacted the Budget law for 2018, approved by the Senate two weeks ago and, even though most of it was known when it was sent to Congress back in October (we addressed it in our 06 October Bi-Weekly Report Getting Ready for 2018), we now have all the details and some updates are required, in our view. The most important of these refers to the expected evolution of fiscal deficit and public indebtedness.

Dominican Republic Bi-Weekly Report

Fitch: DR Continues Surfing the (Challenges’) Wave

November 24, 2017BancTrust & Co. Research Team
  • Fitch affirmed DR’s rating at “BB-“ and “stable” outlook. Despite general progress, public finances and external vulnerability remain the main barriers for an upgrade
  • The yields in the sovereign curve compressed this week; the price of benchmarks DOMREP’21 and DOMREP’27 advanced 0.52% and 0.33% respectively
  • Loans to the private sector and monetary aggregates responded positively to stimulus, but inflation remains under control – thanks to economic activity

Credit rating agency Fitch affirmed the rating of the Dominican Republic at “BB-“ with a “stable” outlook, the same established one year ago; and four months after Moody’s took the sovereign rating of DR to the equivalent scale of “Ba3” with an also “stable” outlook. Given the continued general macroeconomic improvement of the Dominican economy, this decision could be easily expected. Nonetheless, and even though we see that next year the country’s rating could see upgrades, Fitch highlights the same challenges that its peers have in the past, but adds its view on what will be needed for such upgrade to take place.

Dominican Republic Bi-Weekly Report

“Let’s Pick Up the Pace Again”

November 10, 2017BancTrust & Co. Research Team
  • Central Bank Governor recently reported preliminary economic figures as of 3Q17. Economic activity is picking up again, as well as most macroeconomic indicators
  • In our view, risk-reward plus macroeconomic overview make DR an attractive – even though pricy – bet among its Central America and Caribbean peers
  • We forecast better economic performance in economic activity by the end of 2017 and for 2018, based on stimulus measures for the construction and tourism sector

Hector Valdez Albizu, Governor of the Central Bank of the Dominican Republic (BCRD by its Spanish acronym), recently revealed the available economic figures as of 3Q17 that bring back the optimism to the short and mid-term outlook. While we will provide details on several variables, we believe that the spotlight should be placed on the Monthly Economic Activity Index (IMAE in Spanish). IMAE figures are available only as of August due to the report complications derived of the impact of the hurricanes, but that result was 5.1% y-o-y, enough to take back the YTD accumulate to the level of increase exhibited as of June: 4% y-o-y.

Dominican Republic Bi-Weekly Report

2017: Just a Bump in the Way of Growth

October 27, 2017BancTrust & Co. Research Team
  • Several macroeconomic indicators point to a recovery in the growth rate for the 3Q17
  • Construction sector has slowed down this year, but we see that it could bounce back based on new large public investment projects, especially in infrastructure
  • Meanwhile, and given the increasing doubts about the country’s ability to sustain the debt level, the Government is working to improve fiscal results

Despite the fact that the central bank has not published the data corresponding to economic activity since June, which generates some uncertainty regarding the performance of the economy in the last three months, several other macroeconomic indicators like inflation and the monthly manufacturing activity index – IMAM in Spanish –, elaborated by the Industrials’ Association of the Dominican Republic (AIRD in Spanish), point to a recovery in the growth rate of economic activity for 3Q17. In detail, the IMAM, which had shown a setback of 16.8% between May and June, experienced the first signs of recovery in August with an increase of 2.5%, figure that we will probably see reflected in the official data once it gets published.

  • Tuesday, January 16 2018

    Venezuela:

    - Yesterday the President Nicolas Maduro gave its yearly speech which should be something close to the state of the union and that according to the constitution should be presented in front of the National Assembly. However, this year and arguing the illegality of the National Assembly, the decision was to give his speech in front of the National Constituent Assembly. In detail, more than a state of the union this was one of the usual speech of the President with not much data to collect. Among

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  • Monday, January 15 2018

    Venezuela:

    - The dialogue meeting held in the Dominican Republic between members of the opposition and the government last weekend culminated again without any results. International mediators indicated that although some agreements were reached, several points remain pending and both parties will meet again this Thursday, January 18. In our opinion, it was expected that results would not be achieved,as we have been saying we believe that the most likely to happen is that the negotiation rounds will culmin

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  • Friday, January 12 2018

    Venezuela:

    - The National Electoral Council (CNE in Spanish) announced that it has approved the schedule for the validation of political parties that did not participate in the last municipal elections which it will take place on 27 and 28 of January. The process will be carried out to comply with the order of the National Constituent Assembly (ANC), which has as its sole purpose to be another obstacle for the opposition. We believe that at the moment the attention is focused on the negotiations in the Dom

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  • Thursday, January 11 2018

    Venezuela:

    - The situation regarding Venezuela’s debt with Brazil received yesterday two mixed updates, as the Brazilian Ministry of Finance reported that the first paid an old debt but that it is still in arrears with another payment. In detail, the ministry informed that Venezuela paid USD262.5mn – corresponding to the May-August period of 2017 – on 5 January as part of their commitments under the Reciprocal Credit and Payments Agreement (CCR), which is part of the benefits of the Latin American In

    Read More >>

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