CEPAL foresees slump in 2006

The Economic Commission for Latin American and the Caribbean (ECLAC) says that this has been a pretty good year for the Dominican Republic with its 7% growth rate, while warning that in 2006, the GDP growth will be just 5%. Added to this is a projected inflation rate of between 6% and 8%, but with the caveat of improved health in the financial sector. This information is contained in CEPAL’s preliminary report on the Latin American and Caribbean economies. The report also shows that the DR enjoyed a 7% GDP growth rate in 2005, its largest increase since 2000 and the third largest in all of Latin America, after Argentina (at 8.6%) and Venezuela (at 9%). In spite of these positive numbers, the CEPAL document also points out that unemployment was at 18.4%. The document does not spell out why the DR will lose the two percentage points of GDP growth. The report does, however, say that fiscal and monetary discipline permitted the rapid “stabilization of the Dominican economy.” This success was imposed by the fiscal reform legislation of 2004 that managed to raise government income and reduce the deficit to just 0.8% and obtain a preliminary surplus of 1% of GDP. An additional factor that has aided the recovery is the growth in income that reached 18%, due to the sharp increase in direct as well as indirect taxes and the increased economic activity.