Dominican Rep 2014 NFPS deficit closed at 2.5% of GDP; lower than expected

DOMINICAN REPUBLIC - In Brief 31 Mar 2015 by Pavel Isa

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Official figures from the Ministry of Finance revealed that total deficit of the Non-Financial Public Sector for 2014 was lower than programmed in the budget. The Accounting Directorate of the Ministry reported that the deficit closed at DOP 70.5 bn equivalent to 2.5% of GDP; that is DOP 7.2 bn (0.3% of GDP) lower than expected. There is no evidence that a reduction in subsidies to the electric sector has any responsibility on this performance since total current transferences remain virtually unchanged with respect to the amount budgeted (in past years transfers to the electric sector explains near 40% of total transfers). That means the reduction in oil prices registered in 2014 did not have an immediate financial impact on the State-owned distribution companies. We expect a different story in Q1 2015. The evidence provided by the report of the Ministry of Finance indicates that a reduction in public investment explains most of the reduction in the deficit compared to what it was programmed in the budget. Real direct investment ended being DOP 15.3 bn (0.55% of GDP) lower than expected and total capital expenditure was DOP 18 bn (0.7% of GDP) lower. Although current expenditure was larger than programmed by DOP 9 bn (0.32% of GDP), it did not compensate the contraction in public investment.