Fitch and S&P assess country will reduce debt in 2022

The Fitch firm points out favorable the decrease expected of the debt to GDP ratio up to 47.1% in 2022, which places it below the average of 54% for countries with a “BB” rating.

During December of last year 2022, the Dominican Republic received from Fitch Ratings the reaffirmation of the “BB-” rating with a stable outlook, while Standard & Poor’s raised the risk rating from “BB-” to “BB”, with a stable outlook, two favorable reviews in the same month.

According to Executive Secretariat of the Central American Monetary Council In its Country Risk Report, IV Quarter 2022, in the Fitch review the analysts are based on “the robust economic growththe diversified structure of exports, relatively high social indicators and GDP per capita, as well as better levels of governance during the last decade”.

It points favorably to 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.

It specifies that Among the challenges that the firms point out are the needs for external financingwhich depend on the placement of Eurobonds, and the losses of the electricity sector that would reach 1.4% of GDP, among others.

“The high interest burden of the government debt, as well as the proportion of foreign currency debt, implies considerable sensitivity to US interest rates and global liquidity conditions,” the Semca report indicates.

In its quarterly report, Semca indicates as another downward risk factor the fact that in 2022 high inflation would persist in the Dominican Republicamid disruptions in international supply chains and raw material prices.

However, conditions have changed and, according to the Central Bank, the Consumer Price Index (CPI) has moderated downward.

With more updated figures, the Central Bank (BCRD) indicated in December that the CPI variation was 0.96% in December 2022 with respect to November of the same year, situating the accumulated interannual inflation at the end of last year at 7.83%, a behavior that represents a reduction of 181 basic points with respect to the peak of 9.64% registered in April of the year 2022.

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Likewise, the monetary entity reported this week that it maintains its inflation projections in the target range of 4.0% ± 1.0% during the year 2023.

Also, quote other challenges of 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”.

favorable indicator
Another important factor that Semca indicates as a favorable factor is the level reached by the country in the 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 recuperation
To carry out the rating upgrade, Standard & Poor’s points to the Economic recoverywhich has allowed a return to the long-term growth trend.

They highlight the diversification of the economy and limited political polarizationwhich allows predictability of 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.

pillar of the economy
One of the pillars of the Dominican economy, says the Semca report, is tourism, which maintains positive dynamics according to data as of November 2022.

He cites private investment, construction, domestic consumption (supported by remittances) and manufacturing in free zones are part of the recovery.

 

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