Government forced to finance a 9.3% of GDP deficit
Just two weeks after taking office, President Luis Abinader faces the urgent task of financing a public deficit that is almost four times higher than it was before the pandemic.
Due to the fall in tax revenues, and to greater pressure on spending to address the health crisis and reactivate the economy, Congress has urgently approved a second COVID-era budget amendment. Compared to pre- COVID-19 projections, public debt and the NFPS deficit are projected to increase by $6.2 billion in 2020, and 6.9% of GDP, respectively.
For the first time, local economic authorities recognize the possibility of a sharp economic contraction, and are projecting real GDP growth of -4% for 2020. The growth rate of COVID-19 cases fell slightly in August from July, but the number of deaths increased.
The government is aware that what happens in 2021 will mostly depend upon what happens in the rest of 2020. So it has begun to implement measures to contain the pandemic, to support manufacturing and to reactivate tourism and the economy in general. The state of emergency and the curfew have both been extended. Abinader has started conversations with political leaders in order to hear their ideas, and is also looking for consensus on how to the deal with the COVID-19 crisis.
At the institutional level, the government has been completing its cabinet, but feels the pressure of the PRM militancy looking for jobs in the public administration. It has also announced that audits of the former Danilo Medina administration will be carried out, and new officials have denounced alleged "irregularities" committed by past presidents. Amid this environment, the relationship between the government and the PLD may become tense. Citizen surveillance has been activated to see if there is correspondence between the promised respect for the institutional level and the decisions actually taken by the new government.
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