The Economist Intelligence Unit conditions a modest
\nrecovery in the local economy in 2004 on the government?s ability to restore
\nconfidence in its management of the nation. In a Country Outlook published on 22
\nAugust, the British journal forecasts a possible contraction of the economy by
\n2.8% in 2003, as inflation (estimated at 32.2% for 2003) erodes real purchasing
\npower, and high interest rates and a loss of confidence curbs investment. The
\npublication mentions that the unemployment rate, currently at 16.1%, is at its
\nhighest level since 1996, mentioning also that the combination of rising prices
\nand more frequent power outages have provoked renewed public protests.
\nEIU forecasts ?a return to positive growth on the assumption that the government
\ntakes the necessary action to restore confidence, helping to stabilize the
\nforeign-exchange market and bring down interest rates? in 2004. It does not hold
\nmuch optimism, however, that this will happen in an electoral year. ?Given the
\nrisks of policy slippage in an election year, confidence may remain weak, which
\ncould lead to another year of negative growth or stagnation.?
\nIn its comments on the effect of the May 2004 presidential election on
\nlegislative decisions, the EIU states that the administration has put off
\nresponding to the appeals of the business community, which has called for an
\nimmediate overhaul of the tax system, until after the election. In the interim,
\nit has introduced emergency taxes to close the fiscal gap. EIU says that the
\nhigh-yielding certificates the Central Bank has issued to absorb liquidity and
\nmitigate pressures on the peso due to massive advances made to collapsed banks
\ncould in turn generate a quasi-fiscal loss of RD$8 billion, or approximately
\n1.5% of GDP in 2003.
\nRegarding the external sector, the EIU states that the present surplus in the
\ncurrent account could continue, aided by the recovery in tourism, free zone
\nexports and continued strong remittances. Also boosting the surplus is the
\ndecline in imports, which reflects the depressed demand and higher cost of goods
\nfrom abroad, due to the depreciation of the peso. Moreover, EIU states that
\ncapital flight is likely to continue until economic policymaking improves and
\nconfidence in the financial system is restored.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Economist Intelligence Unit conditions a modest recovery in the local economy in 2004 on the government?s ability to restore confidence in its management of the nation. In a Country Outlook published on 22 August, the British journal forecasts a possible contraction of the economy by 2.8% in 2003, as inflation (estimated at 32.2% for … <\/p>\n