In its 17 November Country Risk rating report, the Economist Intelligence Unit says that if IMF support is not restored, there will be a high risk of payment difficulties in 2004. The business information arm of The Economist Group focuses on how political issues are influencing economic outlook. “Despite his growing unpopularity and fierce opposition from within his own party, Hipolito Mejia intends to run for re-election? The government will struggle to meet IMF fiscal targets. Tax collection is depressed and the government is reluctant to make cuts in public spending ahead of the election. After a contracting of 3.4% in 2003, the economy is likely to experience negative growth again in 2004 as inflation erodes real purchasing power, and high interest rates and a loss of confidence curb investment.” EIU is, however, optimistic that recovery could be a prospect for 2004, based on the assumption that “the incoming government manages to restore confidence.” According to EIU, former President Leonel Fernandez of the PLD is the favorite to win the presidency.
The IMF suspended its two-year standby agreement following the government’s surprise decision to buyback the two Union Fenosa power distributors without the IMF’s approval.