Description

This study explores the Dominican Republic’s macroeconomic prospects in regards to gross domestic product (GDP) growth, monetary and fiscal policy, and national plans, while also delving into the country’s automotive industry prospects in regards to government policies, new and used vehicle imports, and the electric mobility.

The Dominican Republic is amongst the world’s fastest growing economies, although 2017 GDP growth was impacted by weather related disruptions including heavy rains by 2016 end and hurricanes Irma and Maria. GDP growth recovery is expected in 2018, with strong recovery witnessed in the last quarter of 2017 itself. Frost & Sullivan analysis finds that the country is expected to be the 13th fastest economy in globally (with the analysis restricted to economies having a 2016 GDP size of over $50 billion.)

With problems of poor power supply reliability, the government has been working on an Electricity Pact to overhaul the power sector in regards to power tariffs, functions of distribution companies, and institutional structure. Significant progress has been made on this pact, with final signing pending. The successful implementation of the pact should help improve the power situation in the Dominican Republic, while also leading to rising tariffs however, with tariffs presently being below-cost.
Another proposed pact, or the Fiscal Pact, has seen very little progress to date, and it is likely that the next government may have to work on the same with elections coming up in 2020. Such a pact would be especially important for the country in the light of the narrow tax base and expected interest bill expansion. As per the present government, a fiscal pact would focus on the review of tax exemptions, and reduction in tax evasion and government expenditure. In regards to the country’s monetary policy, the policy direction is influenced to a large extent by US key interest rate movements as well as international oil prices.
In regards to the automotive industry, the Mobility, Land Transport, Traffic, and Road Safety bill was signed into law in February 2017, with the law entailing several changes including the replacement of old public transport vehicles and the removal of junk vehicles. The government also recently reinforced a ban on the import of vehicles manufactured over 5 years prior, with the ban originally introduced in 2007.
In regards to electric mobility, high prices remain a challenge to the purchase of electric and hybrid vehicles, despite reductions in the import tariffs and value added tax (VAT) on these vehicles. South Korea’s state-owned power company has signed an MoU with the National Energy Commission of the Dominican Republic for the installation of 160 charging stations across 3 cities.

Key Questions Answered:
1.     What is the country’s medium-term GDP growth outlook?
2.     What is the 2018 outlook for the monetary policy and inflation?
3.     What are the focal areas of the 2018 budget? How is the fiscal deficit expected to evolve?
4.     What does the Electricity Pact entail?
5.     How will new and used vehicle imports evolve?
6.     What impact will the Mobility, Land Transport, Traffic, and Road Safety Law have?
7.     What is the outlook for the electric mobility market?