Medina’s Victory is Undisputed, But Local Elections Look Crooked

DOMINICAN REPUBLIC - Forecast 27 May 2016 by Pavel Isa

As expected, President Danilo Medina won reelection by a landslide. In 140 of 158 municipalities where vote counting was complete early this week, Medina had won 61.7% of the vote. His challenger, the PRM’s Luis Abinader, won 35%.

Medina’s PLD and its allies are also likely to take 28 of 32 Senate seats. Though they’ll enjoy an overwhelming majority, this number still represents the loss of four seats. In the lower house, the PLD is headed for 113 of 190 seats, while Abinader’s PRM and its allies look set to get 74. The PLD and its allies also won 92 of 158 municipalities, and the PRM 23 —though the latter won Santo Domingo.

Nevertheless, to call election management a big failure is no overstatement. The entire opposition has accused both the PLD and electoral authorities of negligence, and fraudulent actions they claim have affected results in key places. Though Abinader has recognized Medina’s victory, he is calling for a manual or re-count in disputed districts. It’s not difficult to conclude that democracy has backtracked. Though the picture should eventually clear, the elections will remain a political liability for both the Central Electoral Board and the PLD. The opposition will surely use this argument to temper the PLD’s enormous power. GDP growth for Q2 and Q3 is likely to be moderately lower than in Q1, as public investment retrenches after a hectic Q1. Accumulated growth could reach 5.5%, down 0.6 pp from Q1. A preliminary Central Bank report puts March unemployment at 13.3%, its lowest level in two decades. Accumulated inflation is expected to reach 0.45% in Q2, and 2.6% for the year. The current account deficit is expected to continue to stable, due to lower imports, and stability of exports. We see the CAD at 1.8% to 2% of GDP by yearend.

Since public investment and general spending increased above normal levels in Q1, primary expenditure could close the year at 14.6%-14.8% of GDP, and the NFPS deficit at 2.6%-2.8%. Still, we expect a moderate fiscal adjustment for the rest of the year, as public investment slows.

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