DomRep Addresses Fiscal Challenges

The Dominican Republic has been successful at a macro level at consolidating its fiscal position and deepening structural reforms, according to a JPMorgan report citing speakers at a seminar hosted by the bank. Growth surprised on the upside and the output gap closed considerably faster than expected, according to the report. The country is expected to adopt measures to help increase the tax ratio to 15% of GDP and lower the deficit. Electricity subsidies are being addressed, with the government moving from subsidizing all electricity to more targeted subsidies for the poor. The government still needs to make public spending more efficient, according to the report. While the government is removing monetary stimulus by hiking rates, speakers add that the government should also accumulate more reserves. The bank adds that foreign exchange reserves are expected to increase as metal exports reach new highs. Meanwhile, the bank expects the number of foreign visitors to the Dominican Republic to climb 4% to 3.66m in 2011.