{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with the Dominican Republic",
  "publication": "IMF News, July 1, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/06/30/pr21204-dominican-republic-imf-executive-board-concludes-2021-article-iv-consultation",
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  "summary": "The pandemic led to a sharp economic contraction in the second quarter of 2020 due to global spillovers on tourism and exports and the lockdown’s impact on other sectors.",
  "publishDate": "2021-07-01",
  "sections": [
    {
      "heading": "Economic impact of COVID-19 and 2020 performance",
      "content": "- The pandemic led to a sharp economic contraction in the second quarter of 2020 due to global spillovers on tourism and exports and the lockdown’s impact on other sectors.\n- Policy response elements that cushioned the impact:\n  - increased social transfers and health spending\n  - tax deferrals and targeted tax relief\n  - monetary policy easing\n  - liquidity support and prudential flexibility\n- 2020 outcome:\n  - Real GDP: -6.7\n  - Inflation: increased in the second half of 2020 (largely supply shocks) but expectations remained well-anchored\n  - Continued strong access to global markets financed the higher fiscal deficit\n  - Financial sector remained resilient\n  - Current account deficit remained more than fully financed by FDI, strengthening international reserves"
    },
    {
      "heading": "Outlook, growth prospects, and risks",
      "content": "- Recovery expectations:\n  - A significant recovery is expected starting in 2021, aided by US spillovers and the swift vaccination campaign.\n  - Growth is expected to converge to potential over the medium term, progressively closing the output gap.\n  - Tourism recovery expected to be gradual; manufacturing exports, investment, consumption supported by global growth, resilient FDI, and buoyant remittances.\n  - Inflation is expected to converge to the target over the policy horizon given a remaining output gap, anchored inflation expectations, and the temporary nature of supply shocks.\n  - Public debt projected to follow a downward path with a gradual return to pre-pandemic primary balances.\n  - The current account is expected to remain more than fully financed by FDI.\n- Risks (broadly balanced but COVID-dominated):\n  - Downside: Longer-than-expected vaccine deployment or prolonged pandemic could deter growth.\n  - Upside: Faster global containment could yield positive spillovers.\n  - Other risks: tighter global financial conditions and extreme weather events."
    },
    {
      "heading": "Executive Board assessment and policy guidance",
      "content": "- Directors commended the authorities’ decisive policy response, including health expenditures, social transfers, targeted tax relief, and supportive monetary and prudential policies.\n- Fiscal policy:\n  - Directors agreed policies appropriately balance recovery support with securing debt sustainability.\n  - Envisaged fiscal consolidation protects critical social assistance and health spending through:\n    - strict controls of non-priority expenditures\n    - improved targeting of social and employment programs\n  - Emphasized need for medium-term revenue mobilization via broadening the tax base and revision of tax exemptions.\n  - Further electricity sector reforms recommended to create fiscal space to reduce debt sustainability risks while protecting investment and social spending.\n  - Welcomed progress and urged further improvements in fiscal governance and transparency, including:\n    - enhancing public financial management\n    - introducing fiscal responsibility legislation\n- Monetary and financial sector policy:\n  - Monetary policy support remains appropriate as long as inflation expectations remain well-anchored.\n  - Exchange rate flexibility recommended to provide a buffer against shocks.\n  - Financial system: resilient and well-monitored, but would benefit from:\n    - moving closer to international standards for supervision and regulation\n    - enhancing the macroprudential and crisis management toolkit\n    - recapitalizing the central bank to enhance its financial and institutional independence\n- Structural reforms and social policy:\n  - Importance of structural reforms to improve social outcomes and increase productivity:\n    - make social programs more effective and focused on increasing labor market participation and education support\n    - modernize the labor code to allow more flexible and formal work arrangements\n    - narrow labor market skills gaps\n    - address rural poverty and gender inequality\n    - enhance competitiveness and reduce the regulatory burden\n  - Adapting to and mitigating climate change risks remains a priority"
    },
    {
      "heading": "Key statistics and projections (selected)",
      "content": "- Real GDP (annual percentage change):\n  - 2017: 4.7\n  - 2018: 7.0\n  - 2019: 5.1\n  - 2020: -6.7\n  - 2021 (Projection): 5.5\n  - 2022 (Projection): 5.0\n- Contributions to growth (selected):\n  - Consumption: 2019: 3.7; 2020: -1.9; 2021: 1.3; 2022: 2.9\n  - Investment: 2019: 1.1; 2020: -4.3; 2021: 1.5\n  - Net exports: 2019: -3.2; 2020: -0.4; 2021: 0.0\n- Nominal GDP:\n  - (RD$ billion) 2019: 4,562; 2020: 4,457; 2021 (Projection): 4,911; 2022 (Projection): 5,362\n  - (US$ billion) 2019: 89.0; 2020: 78.9\n- Output gap (in percent of potential output):\n  - 2019: -4.6; 2020: -2.3; 2021 (Projection): -1.0\n- Consumer price inflation (end of period):\n  - 2019: 5.6; 2020: 4.5; 2021 (Projection): 4.0\n- Government finances (In percent of GDP):\n  - Consolidated public sector debt 2/: 2019: 53.2; 2020: 71.1; 2021 (Projection): 67.9; 2022 (Projection): 66.9\n  - Consolidated public sector overall balance 2/: 2019: -3.3; 2020: -9.0; 2021 (Projection): -4.9\n  - Consolidated public sector primary balance: 2019: 0.9; 2020: -0.1; 2021 (Projection): 0.7\n  - Central government balance: 2019: -7.9; 2020: -3.5\n  - Revenues and grants: 2019: 14.4; 2020: 14.9; 2021 (Projection): 14.1\n  - Primary spending: 2019: 13.8; 2020: 18.9; 2021 (Projection): 14.8\n  - Interest expenditure: 2019: 2.7; 2020: 3.6; 2021 (Projection): 3.4\n- Financial sector:\n  - Broad money (M3): 2019: 20.8; 2020: 11.6; 2021 (Projection): 9.5\n  - Credit to the private sector: 2019: 11.8; 2020: 5.3; 2021 (Projection): 10.2; 2022 (Projection): 9.2\n  - Policy interest rate 1/: 2020: 3.0 (Latest available)\n- Balance of payments:\n  - Current account: 2019: -1.3; 2020: -2.0; 2021 (Projection): -1.6\n  - Goods, net: 2019: -10.2; 2020: -8.6; 2021 (Projection): -10.1\n  - Services, net: 2019: 5.7; 2020: - (shown) 5.7\n  - Income, net: 2019: 2.4; 2020: 4.9\n  - Change in reserves (- increase): 2020: -2.5\n  - NIR (in millions of U.S. dollars): 2017: 6,780; 2018: 7,627; 2019: 8,781; 2020: 10,752; 2021 (Projection): 11,602; 2022 (Projection): 12,484\n  - Total external debt (in percent of GDP): 2017: 41.9; 2018: 40.2; 2019: 56.4; 2020: 55.3; 2021 (Projection): 53.7\n  - Of which: Public sector: 2017: 24.2; 2018: 25.8; 2019: 27.3; 2020: 40.3; 2021 (Projection): 38.8; 2022 (Projection): 38.2\n\nIMF Communications Department; July 1, 2021.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- IMF COVID-19 Hub\n- Policy Tracker\n- Financial Assistance\n- Questions & Answers\n- Dominican Republic and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/06/30/pr21204-dominican-republic-imf-executive-board-concludes-2021-article-iv-consultation"
    }
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    "Published: July 1, 2021",
    "The pandemic led to a sharp economic contraction in the second quarter of 2020 due to global spillovers on tourism and exports and the lockdown’s impact on other sectors.",
    "Policy response elements that cushioned the impact:",
    "2020 outcome:",
    "Recovery expectations:",
    "Risks (broadly balanced but COVID-dominated):",
    "Directors commended the authorities’ decisive policy response, including health expenditures, social transfers, targeted tax relief, and supportive monetary and prudential policies.",
    "Fiscal policy:",
    "Monetary and financial sector policy:",
    "Structural reforms and social policy:",
    "Real GDP (annual percentage change):",
    "Contributions to growth (selected):",
    "Nominal GDP:",
    "Output gap (in percent of potential output):",
    "Consumer price inflation (end of period):",
    "Government finances (In percent of GDP):",
    "Financial sector:",
    "Balance of payments:",
    "[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)",
    "[IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19)",
    "[Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19)",
    "[Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)",
    "[Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19)",
    "[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)"
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