## IMF Executive Board Concludes 2019 Article IV Consultation with the Dominican Republic

_IMF News, June 11, 2019_

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**Canonical URL:** [IMF Executive Board Concludes 2019 Article IV Consultation with the Dominican Republic](https://www.imf.org/en/news/articles/2019/06/11/pr19209-dominican-republic-imf-executive-board-concludes-2019-article-iv-consultation)

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## Bibliographic details
- Published: June 11, 2019

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### Economic performance in 2018–early 2019
- The economy rebounded to a record high growth of 7 percent in 2018.
- Growth rebound reflected:
  - strong private investment and consumption response to a timely monetary impulse after the slowdown in 2017,
  - favorable external conditions,
  - continued strengthening of labor markets.
- Strong economic performance contributed to substantial reduction in poverty and inequality and continued income convergence to advanced economy levels.
- Acceleration in activity did not put pressures on internal or external balances:
  - inflation remained subdued,
  - the external position remained strong.
- Monetary and fiscal policies moved to neutral-to-tightening stance in 2018 to guide activity toward potential levels.

### Outlook and risks
- Growth projections:
  - Growth is expected to moderate to around 5½ percent in 2019.
  - Growth is expected to be 5 percent over the medium-term.
  - Both projections are within the estimated potential range.
- Drivers of moderation:
  - slowdown in credit expansion,
  - a less supportive external environment,
  - higher oil prices.
- Inflation outlook:
  - Inflation is expected to rise gradually to the central bank’s target range of 4±1 percent with the pickup in food and oil prices.
- External position:
  - Projected to remain broadly consistent with fundamentals and more than adequately financed by FDI.
- Main risks:
  - Downside: weaker-than-expected external demand and higher energy prices.
  - Upside: domestic demand momentum in the near term could be stronger than anticipated, reflecting solid income growth.

### Executive Board assessment and priorities
- Directors commended authorities for:
  - dynamic growth,
  - low inflation,
  - stable external position,
  - improved social outcomes.
- Directors noted the favorable outlook is subject to risks and encouraged using the favorable environment to build resilience by:
  - building fiscal and reserve buffers,
  - strengthening long‑term growth and social outcomes through reforms addressing structural bottlenecks.
- Fiscal policy and debt sustainability:
  - Welcomed authorities’ commitment to improve the fiscal position, including ambitious tax administration reforms to curb evasion, mobilize revenues, and improve governance.
  - Noted public debt is trending up despite strong growth; called for further efforts to improve debt sustainability.
  - Underscored need for a front‑loaded fiscal adjustment aimed at widening the tax base and curtailing the electricity sector’s drag on the budget, while safeguarding fiscal space for growth‑enhancing public investment and social spending.
  - Supported adoption of a medium‑term fiscal framework with a clear policy anchor and fiscal responsibility elements to ensure policy credibility and limit fiscal risks.
- Monetary policy and reserves:
  - Given subdued inflation, supported maintaining the current neutral monetary policy stance, while remaining data dependent should pressures emerge.
  - Welcomed continued efforts to strengthen the monetary policy framework, including plans to recapitalize the central bank and introduce the foreign exchange trading platform to increase transparency and efficiency.
  - Encouraged continued accumulation of international reserves in light of the favorable external position.
- Financial sector and supervision:
  - Welcomed financial system stability and wide‑ranging reforms to enhance financial resilience.
  - Supported modernization of institutional framework for systemic risk oversight, strengthening of banking regulation and supervision, and cybersecurity reforms.
  - Encouraged further action to strengthen supervisory oversight of non‑bank financial institutions.
  - Welcomed recent progress in updating the AML/CFT legal framework and encouraged enhancing the effectiveness of the regime.
- Structural reforms:
  - Emphasized continued structural reforms to address impediments to higher productivity, income convergence, and social inclusion.
  - Encouraged measures to improve the business environment, remove trade and investment barriers, and continue reforms to education, health, and the pension system.
  - Reiterated need to decisively address long‑standing structural weaknesses weighing on potential growth, particularly losses in the electricity sector and inefficiencies in the product and labor markets.
  - Noted the need to broaden and strengthen the social security system, which will require additional fiscal space.

### Key statistics (Selected Economic Indicators)
- Output (Annual percentage change, unless otherwise stated)
  - Real GDP: 2016: 6.6; 2017: 4.6; 2018: 7.0; 2019: 5.5; 2020: 5.2
  - Contributions to growth:
    - Consumption: 2016: 3.8; 2017: 3.6; 2018: 4.0; 2019: 3.9; 2020: (not listed)
    - Investment: 2016: -0.6; 2017: 3.7; 2018: 1.3; 2019: (not listed)
    - Net exports: 2016: 0.2; 2017: 2.0; 2018: -0.7; 2019: -1.1; 2020: -0.4
  - Output gap (in percent of potential output): 2016: 1.0; 2017: -0.3; 2018: 0.9; 2019: 0.8; 2020: 0.6
- Unemployment and Prices (In percent)
  - Unemployment rate (period average): 2016: 7.1; 2017: 5.7
  - Consumer price inflation (end of period): 2016: 1.7; 2017: 4.2; 2018: 1.2
  - Consumer price inflation (period average): 2016: 1.6; 2017: 3.3; 2018: 2.1; 2019: 4.1
- Consolidated public sector 1/ (In percent of GDP)
  - Debt: 2016: 48.7; 2017: 51.5; 2018: 53.1; 2019: 54.3; 2020: 54.9
  - Primary balance: 2016: 0.1; 2017: 0.0; 2018: (not listed)
  - Overall balance: 2016: -4.2; 2017: -4.5; 2018: -3.8; 2019: -4.6
  - Central government balance: 2016: -3.2; 2017: -3.4; 2018: -2.4; 2019: -3.3
  - Revenues and grants: 2016: 14.5; 2017: 14.7; 2018: 14.9; 2019: 15.0; 2020: 15.1
  - Primary spending: 2016: 15.5; 2017: 14.6; 2018: 15.3; 2019: 15.2
  - Interest expenditure: 2016: 2.6; 2017: 2.7; 2018: 3.1
  - Central bank quasi-fiscal balance: 2016: -1.3; 2017: -1.2
  - Rest of NFPS: 2016: 0.3
- Financial sector
  - Broad money (M3): 2016: 9.8; 2017: 11.2; 2018: 7.6; 2019: 10.9
  - Credit to the private sector: 2016: 12.1; 2017: 10.1; 2018: 11.1; 2019: 8.2
  - Policy interest rate 2/: 2016: 5.3; 2017: …
- Balance of payments
  - Current account, of which: 2016: -0.2; 2017: -1.4; 2018: -1.5; 2019: -1.7
  - Trade balance: 2016: -3.6; 2017: -2.7; 2018: -4.0
  - Financial account, of which: 2016: -2.2; 2017: -1.8; 2018: -2.3
  - Foreign direct investment, net: 2016: -4.7; 2017: -3.1
  - NIR (in millions of U.S. dollars): 2016: 6,047; 2017: 6,780; 2018: 7,627; 2019: 8,016; 2020: 8,622
  - NIR in months of imports: 2016: 3.4
  - Total external debt (in percent of GDP): 2016: 40.7; 2017: 43.2; 2018: 41.5; 2019: 41.6; 2020: 40.1
    - of which: Public sector: 2016: 26.9; 2017: 29.2; 2018: 28.7; 2019: 29.5

*Source: IMF Executive Board Concludes 2019 Article IV Consultation with the Dominican Republic (Press Release No. 19/209), June 11, 2019.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Dominican Republic and the IMF](http://www.imf.org/external/country/DOM/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2019/06/11/pr19209-dominican-republic-imf-executive-board-concludes-2019-article-iv-consultation_