Government with near-absolute power embraces reform
President Luis Abinader in the May 19th elections not only managed to win reelection with 57.5% of the vote, but his PRM party also achieved the necessary control in Congress to pass pending economic reforms, without the need to negotiate with the opposition -- including majority for a constitutional reform.
The government is preparing to present a broad reform program. Its agenda covers 12 reforms, in the fiscal, electrical, labor and social security areas. Abinader has indicated that the first reform proposal he will send to Congress is the constitutional one, because it would lay the foundations for the others. Although the opposition lacks the capacity to prevent the approval of these reforms, it can contribute to creating an unfavorable political environment, since some of the reforms may imply the adoption of unpopular measures. Aware of this situation, the government has indicated that it is designing a communication strategy to reach a consensus on the reforms.
Accumulated economic activity growth in January-April 2024 was 5.1% y/y. However, growth in March (1.6% y/y) and April (7.8%) was somewhat “strange,” moving away from the average, and from the growth rates exhibited in September 2023-Feb 2024 (4.4%).
Monthly inflation was negative for the second consecutive month, reaching 3.2% y/y in May 2024. In turn, the depreciation of the daily exchange rate in May 2024 reversed the appreciation observed in April 2024. The depreciation of the exchange rate from the end of the period in May 2024, compared to May 2023, was 8.24%. Although net international reserves increased in May 2024 compared to April 2024, they continue to be slightly below $14 billion. The monetary policy rate remains unchanged from December 2023, at 7% annually.
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