Central Bank braces for an election year
The ruling PLD is seen as positioned to win the majority of districts in the February 16th municipal elections, but the opposition PRM is also expected to make a strong showing, with likely victories in some of the country’s largest municipalities.
There are unfortunately few surveys available that project outcomes for some key municipalities. The PLD strategy is to secure resounding municipal victories, to help build momentum for presidential candidate Gonzalo Castillo, who is badly trailing the PRM’s Luis Abinader. But the PRM’s strategy is to ensure that its remarkable lead in the run-up to the May presidential elections will also help the party in the municipal elections.
Two well-known polls, Mark Penn/Stagwell and Gallup-Hoy, agree that Abinader has a notable 11 to 15 point advantage over Castillo, his closest rival. Mark Penn/Stagwell estimated the preference for Abinader at 42%-43%, for Castillo at 28%-31% and for the FP’s Leonel Fernández at 16%-19%.
Right now, a July runoff between the two most popular presidential candidates looks likely. Results from both polls also agree that in a runoff Abinader would defeat either Castillo or Fernández, and that Castillo would defeat Fernández. Gallup-Hoy results say that 64% of potential voters surveyed want a party other than the PLD to lead the government, and that 31% want the PLD to stay in power.
The growth recovery has consolidated, December data indicate. The IMAE for December marked a 6.7% activity increase, leading growth up to 5.8% in Q4 2019, and to 5.1% for the year.Inflation slowed, though accumulated inflation for the year continued to climb, to 3.66%, and approached the 2019 target (4.0% ± 1.0%).
Net international reserves rose to almost $8.8 billion, up 13.1% from December 2018 and a historic record. Moreover, reserves in January are likely to surpass $11 billion, as the government placed $2.5 billion in bonds in the international market. This indicates that the Central Bank is assuming an extremely cautious – and perhaps exaggerated – stance, and preparing to defend the DOP from any spending excesses in the run-up to national elections. The currency is expected to close 2020 with a y/y depreciation of 4.5%.
Tourism isn’t yet recovering, with arrivals down 49,000 in December 2019 from a year before. Still, the CAD reached the equivalent of 1.4% of GDP in 2019, close to its 2018 level. Finance Minister Donald Guerrero put the central government deficit at 2.3% of GDP. That’s higher than targeted, mainly because tax collections were lower than projected.
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