Outlook for the Dominican Republic is “positive”, says Fitch

posted on: Jan 7 2011 10:48 by The Reporter. Viewed 741 times.


It’s a good start for the Dominican Republic in 2011, as Fitch, the international ratings agency uprates it outlook for the country to “positive”, from its previous position of “stable”.

According to Fitch, the Outlook revision reflects the Dominican economy’s resilience during the global financial crisis, which was supported by a Stand-by Arrangement (SBA) with the IMF, improving export prospects and structural improvements in debt management. Fitch believes these developments will support the maintenance of macroeconomic stability within an environment of robust growth of around 6% over the medium-term.

‘The Dominican Republic’s rapid recovery following the global financial crisis within the context of moderate inflation highlights the authorities’ commitment to maintaining macroeconomic stability,’ says Theresa Paiz Fredel, Senior Director in Fitch’s sovereign group.

Despite the strong economic recovery and higher commodity prices, the central bank met its inflation target of between 6% and 7% in 2010, which bodes well for enhancing monetary policy credibility. The economic recovery exceeded both Fitch’s and the market’s expectations, with growth estimated at 7.8% in 2010.

Increased domestic demand and a recovery of oil prices led to a notable deterioration in the Dominican Republic’s current account deficit and increased the island’s external financing needs in 2010. Although gross external financing requirements/reserves increased to almost 200% last year and are among the highest for sovereigns rated in the ‘B’ category, unlike prior episodes of increased financing needs, the peso remained relatively stable, while the erosion of reserves during the year was muted.

Nevertheless, Fitch expects the Dominican Republic’s external financing needs to decline over the forecast horizon with the resumption of nickel exports and the initiation of gold exports later this year.

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