El Caribe newspaper gives prominent coverage to a report by the internationally respected authority on global economics, the Economist magazine?s Intelligence Unit. The report predicts that although the Dominican Republic?s gross domestic product may decrease by 1.4% in 2003, it is set to recover and rise 2.4% in 2004. This recovery, however, is conditioned to the government taking action to restore confidence, stabilize the foreign exchange market and bring down interest rates. The Economist speculates that these events may not occur, given that 2004 is an election year, and says: ?It is worrisome that the government has shown no willingness so far to actually reduce the state?s bloated payroll.?
\nThe EIU?s Country Risk report on the Dominican Republic for the month of July 2003 takes into account factors such as the upcoming election year and the effects of the Baninter collapse on the economy.
\nBut the report says that the Baninter failure is not the only factor behind the country?s poor economic outlook: ?The fiscal situation has been deteriorating for some time, largely because of the dramatic increase in the public-sector payroll since President Hip?lito Mej?a took office in 2000. Excessive government spending as well as new indebtedness (the government in late 2001 and then in early 2003 sold two global bond issues, totaling US$1.1 billion) were cause for concern even before the Baninter takeover.?
\nThe report does acknowledge the performance of the export sector, especially citing progress in the tourism industry and ?some revival? in the free-trade export zones. The pending IMF agreement is also mentioned, as the report estimates an average peso-dollar exchange rate for 2003 of about RD$32.75, with a possible rise to RD$41.61 in 2004.
\nThe report attributes a great part of the pressures exerted on the currency markets since last year to ?the loss of confidence in the banks and in the government?s economic management.? The analysts predict a drop in the rate over the coming weeks, once the details of the IMF agreement have been finalized.
\nThe balance of payments shows a surplus of US$666 million for this year and US$645 million for next year. Average interest rates for 2003 are estimated at 29%, falling to 27% in 2004.
\nConsumer spending is also set to fall due to the devaluation of the peso, according to The Economist. Inflation will top 25% in 2003, but is predicted to fall to 15% in 2004.
\nOn the social front, the magazine?s Intelligence Unit assesses that President Hip?lito Mej?a has failed in his 2000 election promise to improve the plight of the country?s poor. Even before the Baninter collapse, the report says, the ruling PRD party?s approval rating had fallen below 25%, lagging behind both opposition parties.
\nAs such, the President will have his work cut out for him, as his only available option to put the country on the course to economic recovery will be to apply unpopular fiscal measures, putting his re-electoral prospects in potential jeopardy.
\nThe report concludes, given the poor handling of the economy combined with the Baninter collapse, that a change of government is the most likely outcome of the 2004 election. ?However, Mr Mej?a is a formidable politician with strong support from one section of his party and knows well the clientelistic methods the PRD has traditionally employed in order to attract votes.? <\/p>\n","protected":false},"excerpt":{"rendered":"
El Caribe newspaper gives prominent coverage to a report by the internationally respected authority on global economics, the Economist magazine?s Intelligence Unit. The report predicts that although the Dominican Republic?s gross domestic product may decrease by 1.4% in 2003, it is set to recover and rise 2.4% in 2004. This recovery, however, is conditioned to … <\/p>\n