Country in a wait-and-see stance, after withdrawal of fiscal reform bill
After the government unexpectedly decided to withdraw the tax reform bill from Congress due to public opposition, Dominican society remains in a holding pattern, awaiting the government’s next steps to ease constraints on public finances. At the time of the withdrawal, the government announced that it would not present a new reform bill, and reaffirmed its commitment to upholding the Fiscal Responsibility Law.
Despite the uncertainty surrounding the tax reform proposal presented at the beginning of October 2024, economic activity maintained a growth rate of 4.7% y/y in September 2024. Although this was slightly lower than in August, it was sufficient to keep average growth for January–September 2024 at 5.1% y/y, very close to potential growth.
Inflation and exchange rate depreciation also showed relatively stable y/y figures, standing at 3.2% and 5.9%, respectively, in October 2024. That stability, however, came at a cost: the Central Bank’s net international reserves dropped by $0.9 billion, marking the second-largest reduction since 2020.
In October the banking system's lending rate began to trend downward, following the start of the monetary policy rate reduction cycle. On the fiscal front, the government continues to execute the budget cautiously, in line with the growth in tax revenues.
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