The firm Fitch favorably points out the expected decrease in the debt-to-GDP ratio to 47.1% in 2022, which places it below the average of 54% for countries with a “BB” rating.
During December 2022, Fitch Ratings reaffirmed its “BB-” rating for the Dominican Republic with a stable outlook, while Standard & Poor’s raised the risk rating from “BB-” to “BB”, with a stable outlook, two favorable revisions in the same month.
According to the Central American Monetary Council’s Executive Secretariat, in its IV Quarter 2022 Country Risk Report, in the Fitch review analysts are based on “robust economic growth, diversified export structure, relatively high social indicators and GDP per capita, as well as better levels of governance during the last decade”.
It favorably notes the expected decline in the debt-to-GDP ratio to 47.1% in 2022, which puts it below the average of 54% for BB-rated countries.
The report specifies that among the challenges that the firms point out are the external financing needs, which depend on the placement of Eurobonds, and losses within the electricity sector that would reach 1.4% of GDP, among others.
“The high interest burden on government debt, as well as the proportion of foreign currency debt, implies considerable sensitivity to U.S. interest rates and global liquidity conditions,” the SEMCA report said.
In its quarterly report, Semca points out another downside risk factor as the fact that in 2022 high inflation would persist in the Dominican Republic, amid disruptions in international supply chains and commodity prices.
However, conditions have changed and according to the Central Bank the Consumer Price Index (CPI) has moderated downwards.
Already with more updated figures, the Central Bank (BCRD) indicated in December that the variation of the CPI was 0.96% in December 2022 compared to November of the same year, placing the accumulated year-on-year inflation at the end of last year at 7.83%, a performance meaning a reduction of 181 basis points with respect to the peak of 9.64% registered in April 2022.
Likewise, the monetary institution reported this week that it maintains its inflation forecasts in the target range of 4.0% ± 1.0% during the year 2023.
In addition, it cites other challenges for the country in social and educational indicators, “which, despite progress, show some weakness. Also, another challenge would be the ability to approve some structural reforms that are pending.”
Another important factor
Another important factor that the Semca points out as a favorable factor is the level reached by the country in international reserves, which as of December 2022 amounted to US $ 14,440.6 million, with a growth rate compared to August 2021 of 10.0%.
The recovery
In improving its rating, Standard & Poor’s points to the economic recovery, which has allowed the return to the trend of long-term growth.
They highlight the diversification of the economy and limited political discord, which allows predictability in public policies.
It points out that as of November 2022, the Monthly Indicator of Economic Activity (IMAE) grew 2.9% compared to the same period of the previous year, influenced by the activities Hotels, Bars and Restaurants, Health, other service activities, Public Administration and Services. In 2022, the Dominican GDP closed with a growth of 4.39%, according to the BCRD.
Economic Pillar
Tourism is one of the pillars of the Dominican economy, says the SEMCA report, which upholds the positive dynamics according to data as of November 2022.
It cites private investment, construction, domestic consumption (supported by remittances) and manufacturing in free zones are part of the recovery.
Source:
Listín Diario