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.

Dominican Republic Bi-Weekly Report

Getting Ready for 2018

October 13, 2017BancTrust & Co. Research Team
  • The 2018 budget plan was presented to the National Congress to be evaluated, shows certain changes to improve fiscal results and is based on a more moderate growth rate
  • The BCRD left the benchmark interest rate unchanged at 5.25% in the latest monetary policy meeting, but decided to stimulate credit through the approval of a new version of the Asset Assessment Regulation of financial institutions
  • Tourism has been experiencing a sustained growth phase in the last five years

Last week, the executive power presented in National Congress its 2018 budget plan to be evaluated. According to the General Budget Office (DIGEPRES in Spanish), the principal macroeconomic assumptions that served as the basis for the formulation of the budget plan are: a growth of 5% for real GDP, average inflation of 4%, average exchange rate of DOP/USD50.17 and an oil price around USD/b48.6 on average.

Dominican Republic Bi-Weekly Report

Public Debt Remains the Ugly Duckling

September 29, 2017BancTrust & Co. Research Team
  • In a report elaborated by the three major credit rating agencies, the evolution of DR’s public debt is remarked in a not so positive way
  • The tourism sector is seeing new (and possible) investments this week
  • Central Bank Governor Valdez Albizu met with a group of international investors and reaffirmed DR’s economic stability in spite of the growth deceleration

This week, the Central American Monetary Council (CMCA in Spanish) published the “Country Risk Report” for the 2Q17, constructed by the three major credit rating agencies: Standard & Poor’s, Moody’s and Fitch. In this report was highlighted not only the evolution of the public debt of the Dominican Republic but also the risk factors and challenges that the current status poses for the country.

Dominican Republic Bi-Weekly Report

Growth is not taken for Granted

September 15, 2017BancTrust & Co. Research Team
  • DR grew 4% in 1H17, representing a moderation in the growth rhythm as a result of a deceleration of the internal demand in key sectors like construction
  • Nonetheless, the government and the Central Bank have joined efforts to put money inside the, starting with the BCRD diminishing the legal reserve and followed by the government disbursing DOP20bn  directed to public works and to achieve a greater growth rate
  • In a move to stabilize the economy and reduce debt balance, the Central Bank repurchased USD324.1mn in Brady bonds that allow them to reduce in 0.5% of the external debt

In late August, the Central Bank of the Dominican Republic (BCRD) released the economic results for 1H17, which even when they showed positive growth they are under the island potential and from the figures that the island is used to present. In this regard, in this period DR grew 4% y-o-y –as we have stated before based on the estimations of the Monthly Indicator of Economic Activity-  as a result of a deceleration in the internal demand, as the expectations are being less favorable with one of the main drivers of the economy, construction sector, falling 2.7% in this same period – subject that we will detail later in this report.

  • Wednesday, November 15 2017


    - Amid uncertainty after the investors meeting, the attention continues to be on the interest payments which grace period expired this week (PDV’27, VENZ’19 and VENZ’24) and the call for default for both Venezuela and PdVSA. In this sense, the ISDA which is in charge since last week of assessing a credit default decision over the PDV’17 payment (which also arrived later than the day expected) said that they will meet again on Thursday with a deadline until Friday to make any decision on

  • Tuesday, November 7 2017


    - The selloff in sovereign and quasi-sovereign curves continued yesterday, with the first leading with an average 11.47% drop – thanks mostly to the whopping correction of both VENZ’18, as the old fell 51.73% and the new decreasing 48.64%. Meanwhile, the PDVSA curve closed the day with a -4% average result. This situation is likely to continue, in our view, for as long as payments of coupons in grace period are not being made, situation aggravated by the closeness of the deadlines of each gr

  • Thursday, November 2 2017


    - After yesterday’s comments of the Depository Trust Company of Venezuela’s bond payments, confirming the transaction and extra official information about some holders that already received payment on 2020 bond, the Venezuelan bonds showed positive movements. In this sense, we can use the PDV’20 experience to expect a similar process for the funds of the PDVSA 2017N to matured today for a total amount of USD1.170mn between principal and interest, with an announcement of the payment during

  • Wednesday, November 1 2017


    - Until today 01 January 2017, will be held the process to postulate for the municipal elections, which are expected for around 10 December. However, there is no clear information on the ongoing process and the opposition response has not been clear either. In detail, seven opposition parties has decided to not participate in the next electoral process, however we do not discard that some of its member could –at the very last minute- decide that they will participate as an independent candidat


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