Event

On 15 May, the ruling Dominican Liberation Party (PLD) convincingly won the general vote to determine the country's president, its congress members and deputies to the Central American parliament, and its municipal councils and mayors. In the presidential ballot, popular incumbent Danilo Medina (who was allowed to run for re-election owing to a constitutional amendment approved last year), even secured 62% of the first-round vote, thus avoiding a run-off against the runner-up, Luis Abinader of the new Modern Revolutionary Party (PRM). As for the causes of the PLD success, the benign macroeconomic situation cannot be overstated. Growth has been solid, unemployment on the decrease and inflation under control. Note that all this is partly thanks to favourable external dynamics of low oil prices and consumption-led recovery in the United States (a key source of exports and remittances earnings for the Dominican Republic).

Impact on country risk

The convincing victory of the ruling PLD signals that policy continuity is highly likely in the Dominican Republic until 2020. Indeed, policy-making by the Medina government will be greatly facilitated by the broad majority it continues to enjoy in both houses of congress. As such, the expectation is for a continued pro-business stance (among other things aiming to promote foreign investment into telecommunications and tourism) combined with efforts to expand the administration's social agenda (the PLD's popularity owing much to welfare cash-transfer programmes) as well as hefty investment in education and the agriculture sector. Challenges to the new administration will come in the form of a need for fiscal consolidation (public debt is set to increase over the medium term and the tax ratio is one of the lowest in the world), continued inefficiencies in the electricity sector (infrastructure gaps and high costs imply that it remains a main bottleneck for growth) and increasing crime rates. Yet, because these are unlikely to lead to political instability or major economic imbalances, Credendo Group will leave its country risk classifications unchanged for now. Analyst: Sebastian Vanderlinden, s.vanderlinden@credendogroup.com